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High-Yield Dividend Stocks: Opportunities for Retirement Income

While many stocks have struggled in recent years, several high-dividend yield options present significant potential for passive income as you approach retirement.

Despite the broader S&P 500 index rising by approximately 31% over the past year, some individual stocks, like Pfizer, have faced declines of about 10%. Despite the struggles, these companies offer dividend yields exceeding 5%, positioning them as attractive choices for income-focused investors.

Understanding the Current Market Landscape

The performance of the S&P 500 may suggest a robust recovery, but it doesn't reflect the struggles of every stock. For instance, W.P. Carey, a diversified real estate investment trust (REIT), saw its shares decline amid a shift in its business model. Verizon faced challenges in equipment sales, and Pfizer's stock price fell significantly after the pandemic-related surge. However, each company continues to meet its dividend obligations, making them candidates for those seeking reliable income streams.

#1 Verizon Communications: A Telecom Leader with Strong Cash Flow

Verizon Communications continues to excel in delivering connectivity services, making it a prime candidate for investors looking to increase their passive income streams. With a robust dividend yield of 6.11%, Verizon stands out in the telecom sector.

The company recently celebrated its 18th consecutive year of dividend increases, boasting the longest streak among major U.S. 5G network operators.

Key Metrics:

• Current Price: $44.33

• Market Cap: $186 billion

• Dividend Yield: 6.11%

While Verizon has faced declining equipment sales due to longer smartphone refresh cycles, it remains a strong player in the telecommunications sector. The company reported a 3.5% year-over-year increase in wireless service revenue for Q2, totaling $19.8 billion. With $8.5 billion in free cash flow for the first half of 2024 and only $5.6 billion required to meet dividend payments, investors can anticipate another significant increase in dividends next year.

It has some other strengths such as impressive customer retention rates, often exceeding 98%, provide a stable revenue base that the company effectively converts into cash flow for shareholders.

Moreover, Verizon has also agreed to acquire Frontier Communications for $20 billion. This acquisition is expected to strengthen Verizon's fiber internet capabilities, enabling it to bundle services and potentially reduce customer churn by up to 50%.

After the deal closes in a few months, Verizon anticipates a boost in adjusted earnings, further solidifying its financial position and ability to sustain dividend growth.

#2 W.P. Carey: A Solid Real Estate Investment Trust

W.P. Carey operates a diverse portfolio of 1,291 properties under net leases, which transfer the costs of ownership to tenants. The REIT has adapted its strategy following the spinoff of its office properties, focusing more on industrial and warehouse assets.

Key Metrics:

• Current Price: $62.24

• Market Cap: $13.62 billion

• Dividend Yield: 5.59%

Despite a recent decrease in dividend payouts due to the portfolio spinoff, W.P. Carey anticipates a strong future. For 2023, management projects adjusted funds from operations (a key metric for evaluating REITs) to range between $4.63 and $4.73 per share, comfortably covering the current dividend of $3.48 per share. Additionally, the company plans to invest between $1.25 billion and $1.75 billion to expand its property portfolio, further enhancing its income-generating capabilities.

#3 Pfizer: A Comeback Story in the Pharmaceutical Sector

Despite a sharp decline in its stock price—down about 51% from its 2021 peak—Pfizer is experiencing growth beyond its pandemic-era products.

Key Metrics:

• Current Price: $29.42

• Market Cap: $166.71 billion

• Dividend Yield: 5.71%

Although the sales of its COVID-19 vaccine and antiviral treatment have dropped, Pfizer has a strong track record when it comes to dividends, having paid out consistently for 85 years without missing a payment. For the last 14 years, the company has also increased its dividend annually

In the first half of 2024 alone, Pfizer returned $4.8 billion to its shareholders through dividends. As of now, the company offers a quarterly dividend of about $0.43 per share, yielding 5.63%.

With an impressive pipeline of new drugs and recent FDA approvals, Pfizer has the potential to continue increasing its dividend payout, benefiting investors seeking consistent income.

#4 Ford Motor Company: Navigating Challenges in the Auto Industry

Ford Motor Company has long been a key player in the automotive sector, yet it has encountered several hurdles in recent years. The company has reported losses in international markets, and the growth of electric vehicles (EVs) has plateaued, impacting overall demand.

Key Metrics:

• Current Price: $10.88

• Market Cap: $43.25 billion

• Dividend Yield: 5.51%

Following a disappointing second-quarter earnings report, Ford’s shares saw a decline as the company projected a $5 billion loss in its EV division. Despite this, its traditional combustion vehicle and commercial vehicle divisions remain profitable. The company's stock trades at just four times its adjusted operating profit and five times its adjusted free cash flow, indicating it could be undervalued at current prices.

If Ford can successfully pivot towards hybrid vehicles and tap into growing markets, the stock has the potential for appreciation. For investors seeking a high-yield dividend stock, Ford's current yield of 5.6% makes it a compelling option, especially given the company’s historical resilience in the automotive industry.

#5 Dow: Down but Ready to Roar

Dow is one of the top high-yield dividend stocks currently available, trading at a 30% discount compared to its estimated fair value of $72.

Key Metrics:

• Current Price: $51.71

• Market Cap: $36.24 billion

• Dividend Yield: 5.41%

As one of the world's largest chemical manufacturers, Dow has built a modest competitive edge due to cost efficiencies in its ethylene and propylene production in North America.

The company's recent performance has been affected by weaker demand in its industrial intermediates and infrastructure sector, primarily due to a slowdown in construction. Over the past three years, Dow has consistently paid dividends of $2.80 per share, and this trend is expected to continue.

Dow Inc. currently offers a trailing 12-month dividend yield of 4.82%, which matches its forward 12-month dividend yield, suggesting steady dividend payouts are expected in the coming year. The company's 5-year yield on cost is also 4.82%, demonstrating a consistent return on initial investment. While its revenue per share and 3-year revenue growth rate highlight a solid revenue model, Dow underperforms compared to 56.38% of its global competitors.

Conclusion: Building a Passive Income Stream for Retirement

Incorporating high-yield dividend stocks like these into a diversified portfolio can create a robust passive income stream as you approach retirement. While these companies may have faced challenges recently, their ability to maintain and potentially increase dividends makes them appealing options for long-term financial security. However we suggest you look at other factors as well before making a decision.

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