The best high-yield dividend stocks for 2024

FINDING VALUE
AND RETURNS
in an uncertain
environment
THOMAS HUGHES + MARKETBEAT.COM
The best high-yield dividend stocks for 2024
Finding value and returns in
an uncertain environment

01. QUALITY DIVIDEND STOCKS NEVER GO OUT OF STYLE

02. WHAT IS A GOOD DIVIDEND YIELD?

03. THE 10 BEST HIGH-YIELD DIVIDEND STOCKS FOR 2024

04. CHEVRON: Windfall profits drive capital returns

05. EXXON MOBIL: An industry leader to help reduce volatility

06. LOWE’S COMPANIES: A stock built on a strong foundation

07. MEDTRONIC: The aging of America gives Medtronic a firm floor

08. ABBVIE: A strong value stock in a volatile sector

09. JPMORGAN CHASE: Best-in-class as interest rates rise

10. DUKE ENERGY CORPORATION: A traditional utility

packing plenty of punch

11. NEXT ERA ENERGY: Committed to clean energy

12. THE COCA-COLA COMPANY: Well-positioned for 2024

13. VERIZON: A HIGH-YIELD KING ON THE RISE

THE BEST HIGH-YIELD DIVIDEND STOCKS FOR 2024

Quality dividend stocks never go out of style

Dividend stocks are stocks issued by companies that regularly redistribute a portion of their profits to
shareholders. The dividend is usually paid in cash, although sometimes, it can be issued as additional shares of
stock. Dividends are attractive because they are a payment the company makes to you, the shareholder, and are
a source of income.

Dividends are typically issued quarterly and are a driving force for investors. Quality dividend stocks, those you
can count on for regular quarterly payments year after year, are relatively easy to find.

Generally, companies that are able and willing to pay dividends have mature business models with strong
fundamentals that start with solid balance sheets and end with cash flow. These stocks, often classified as
blue chip stocks, have reliable performance in good and bad economic conditions, and the balance sheets carry
them through when times are really bad.

The “best of breed” among these companies actively seek to increase the value of their stock and their
dividends, and they can do this through reinvestment and dividend growth. Some stocks, like the Dividend
Aristocrats and Dividend Kings, have established track records of annual dividend increases that have driven
shareholder value for decades.

Reliable dividend payers, specifically dividend growth stocks, are essential for a portfolio for another reason.
They can reduce portfolio volatility. Dividend-growing companies attract buy-and-hold investors who don’t sell
at the first sign of trouble and rarely have knee-jerk reactions to unexpected market developments.

WHY DIVIDEND STOCKS?

Although no stocks carry zero risk, dividend stocks represent a safer way for investors to invest their wealth. Unlike
bonds, dividend stocks have delivered higher (non-risk adjusted) returns during all meaningful periods because the yields
have no expiration, and there is a significant opportunity for capital appreciation. Companies that consistently grow, pay
dividends and grow their distributions tend to have upwardly trending share prices.

UNDERSTANDING DIVIDEND YIELD

A dividend yield is a company’s dividend expressed as a percentage of its stock price. Yield is significant because it is
a measure of investor return. A higher yield is usually better than a lower one, but that’s relative to the company and the
portfolio goals. To calculate dividend yield, use the following formula:

Dividend yield = Current annual dividend (per share)/Current stock price

Let’s look at a couple of examples:

The Coca-Cola Company (NYSE: KO) Assuming its stock price the day it pays its dividend
pays a total annual dividend of $1.84 per share. is $60, its dividend yield is: 1.84/60 = 0.0306 3.06%

Abbott Laboratories Inc. (NYSE: ABT) Assuming its stock price on the day it pays its dividend
pays a total annual dividend of $2.20 per share. was $110, its dividend yield is: 2.20/110 = 0.02 or 2%

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THE BEST HIGH-YIELD DIVIDEND STOCKS FOR 2024

Just as a company’s stock price fluctuates, its total annual dividend can also change, although this change
is less frequent and usually more predictable. When a company issues its quarterly earnings report (as all
dividend-paying companies are obligated to do), management will provide insight to analysts about the
company’s intention regarding the dividend payout.

Stocks with a history of dividend increases are more likely to increase their payments again. Companies like
to do this because it attracts buy-and-hold investors, can help support the stock price and reduce volatility.
Companies are reluctant to suspend or cut their distributions, even if they need to preserve capital because it
can harm the stock price.

What is a good dividend yield?

What would be considered a good dividend yield? If you look at the two examples above, it depends. If you
own the same shares in each company, you will make more dividend income from Coca-Cola because it has a
higher yield.

However, if you own more shares of Abbott than Coke, you’ll likely make more dividend income with that stock,
but these are unrelated companies; we’re comparing apples to oranges. The real question is how the dividend
compares to its industry peers and how it fits into the portfolio.

As a rule of thumb, a dividend percentage higher than the S&P 500 average is good, and it’s better if it is a safe
and reliable payment, as indicated by dividend health metrics and history. If the yield is above average compared to
peers, it is better, and if the stock presents relative value, it is even better.

Depending on the strategy, a high yield is well above the broad market or industry peers. Regarding the S&P 500,
a high yield is above 3%, and in 2024, some yields push 5% and even higher, which you can consider reliable if
not growing.

Two groups of stocks that offer safe and reliable payments are the Dividend Aristocrats and Dividend Kings. The
Dividend Aristocrats are S&P 500 stocks that have increased dividend payments for at least 25 years. The Dividend
Kings are an unofficial grouping of stocks, S&P 500 or not, that have increased theirs for at least 50 years.

Dividend Aristocrats and Kings have proven their ability to pay and increase their dividends year after year for
decades, and you can rely on most of them to continue doing so. The icing on the cake is that in 2024, a few Dividend
Kings and Aristocrats can be called “high yield” and have a robust outlook for continued distribution growth.

HOW TO AVOID YIELD TRAPS

High yield is not without its risks. There are quite a few ways that high yields can trap investors, so be cautious.
Among these are actively managed funds or other investments that return capital and companies that cannot
sustain their payments.

In the first case, you can find this information in the company’s investor information and see it in the stock
price. The stock price of these companies tends to trend lower because of the “return of capital” (ROC, not to be
confused with return on capital), which means the company is returning money it didn’t earn to shareholders. This
payment type can whittle down a business’s cash and cash value, draining equity from investor portfolios.

You should heed a high yield, but how do you know when it’s bad? The first check is to see what kind of dividend
policy is in place, along with the payout ratio. A red flag is raised if the company pays out a high percentage of
earnings or, worse, all or more than what it earns. However, there are allowances for REITs and other tax-sheltered
entities, but those carry additional burdens for investors.

The next check is the earnings and earnings outlook. Is the company earning the expected money forecasted by
guidance, analysts, and trends? The final checks are the balance sheet and the investment community. The yield
may be sustainable if the company isn’t holding excessive debt and has a good leverage and coverage ratio.

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THE BEST HIGH-YIELD DIVIDEND STOCKS FOR 2024

The 10 best high-yield dividend stocks for 2024

Investors can find dividend stocks in almost any sector of the market, even tech. Tech stocks are not typically
known for paying dividends because they are usually growth stocks, but some techs are blue-chip quality.

Microsoft Inc. (NASDAQ: MSFT) and Apple Inc. (NASDAQ: AAPL) have been long-time dividend payers, as
shown in their share prices and valuations. The point is that investors can build a dividend portfolio and even a
high-yield-focused dividend portfolio based on any sector and just about any industry. However, some sectors,
such as the energy sector, pay higher-than-average yields and others, like Utilities, are safer.

Chevron Corporation:
Robust cash flow drives capital returns for this dividend-growing company
Chevron Corporation (NYSE: CVX) is a high-yielding stock with a payout of nearly 4.25% when trading near $150.
The company also has a solid history of increases that has it on track to reach Dividend King status before many
of today’s investors retire. The payout is about 50% of the 2024 earnings outlook, a reasonable ratio for a blue-chip
company with this payment history, and there is earnings growth in the forecast.

Oil prices support the company’s cash flow. The oil price is down from its 2022 high and wallowing near a multi-
year low, but that low marks the top of the pre-pandemic range. With support at this level, oil prices are sufficient
to sustain ample cash flow for Chevron and other major oil producers long into the future. Chevron is leveraging
that fact by increasing production to help offset cuts from OPEC while demand growth remains stable.

Earnings growth is expected to return by the end of 2024. The company already resumed top-line growth but has
yet to overcome the deleveraging of oil prices and the margin contraction that came with it but it will.

The analysts’ consensus sentiment improved at the end of 2023, rising to Moderate Buy from Hold. However, the
price target declined and may present a headwind for the market in the year’s first half. The consensus target is
down but still 20% above the January 2023 consensus target, aligning with the all-time highs, suggesting a solid
rebound when it happens. The low target is consistent with a floor in the market. Assuming the floor remains in
place, shares of CVX have nowhere to go but up in 2024.

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THE BEST HIGH-YIELD DIVIDEND STOCKS FOR 2024

Exxon Mobil Corporation:

An industry leader to help reduce volatility
Exxon Mobil Corporation (NYSE: XOM) is riding high on the same trends supporting Chevron and the
remainder of the energy industry. This stock yields slightly below Chevron but still more than double the
broad market and above the energy sector average.

Among the advantages of Exxon’s dividend is that it comes with an even better payout ratio than Chevron’s.
It could sustain dividend increases for a longer period or at a higher level with more potential for share
repurchases — both companies repurchase shares.
Exxon Mobil has increased its payout since the early 1980s, is a Dividend Aristocrat and is on track to
becoming a Dividend King.

Exxon and Chevron trade with less volatility than the S&P 500. Their beta scores are in the 0.5 to 0.6 range
and are a bonus for income investors. These stocks are also cheap compared to the S&P 500, trading near
12X earnings, and Exxon is a deep value in the eyes of analysts.

Exxon’s share price was corrected in 2023 to the low end of a trading range since 2022. The bottom of the
range is a solid level of support consistent with the low end of the analysts’ target price range, suggesting
another stock with nowhere to go but up.

Lowe’s Companies Inc.:

A stock built on a strong foundation
Lowe’s Companies Inc. (NYSE: LOW) 2% yield is about half Exxon and Chevron, but it is no less attractive.
The company has a solid history of dividend increases backed up by a low payout ratio and fortress balance
sheet. The company has already increased its payments for 60 years, which is a telling statement for investors.
The best news is that distributions are only 30% of the earnings consensus, so ample cash flow is available to
continue making those increases.

Lowe’s offers some value for investors relative to the broad market and its competitor, The Home Depot. The
stock trades at 17x earnings compared to the 20x paid for the average S&P 500 stock at the start of 2024, and
Home Depot’s valuation is even higher at 24x.

Aggressive share repurchases compound Lowe’s dividend. The company’s cash flow and balance sheet allow it
to repurchase significant shares, lowering its count by more than 8% in 2023. The authorization is sufficient to
allow that pace to continue through the end of the 2024 calendar year and well into 2025. Analysts’ activity was
mixed to start the year, but the group is holding the stock, and the consensus price target is trending higher.

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THE BEST HIGH-YIELD DIVIDEND STOCKS FOR 2024

Medtronic plc:
The aging of America gives MDT stock a firm floor
Medtronic plc (NYSE: MDT) had a tough time during the pandemic’s peak, but it has proven to have what it
takes to become a Dividend King, which is important for long-term investors. The onset of COVID-19 paused
most surgical procedures and cut deeply into cash flow, but Medtronic survived.

The recovery is in full swing, driving a robust business rebound for the medical tech industry. Medical
technology industry growth in 2024 will be supported by the increasing population size, the aging population,
the penetration of services, and emerging economies.

Medtronic is a five-star rated Dividend Aristocrat by CFRA. This company pays more than 3% yield with
shares at 16x earnings and earnings growth in the outlook. The company is expected to grow earnings at a
mid-single-digit pace in 2024, sufficient to sustain the dividend and growth trajectory. The latest increases
are running in the range of 7%, a pace that will keep the payout ratio at a healthy 50%.

AbbVie Inc.:
A strong value stock in a volatile sector
AbbVie Inc. (NYSE: ABBV) shares were range-bound in 2023 but are on track to hit new highs in 2024. The
Humira patent cliff was less of a problem than forecast. The strength in sales of Skyrizi and Rinvoq and an
increasingly strong portfolio of products will more than offset the difference.

Regarding the dividend, AbbVie is as good as a Dividend King and is on track to reaching Dividend Aristocrat
equivalency soon. However, the days of AbbVie yielding 4%+ are over, but this stock still has a high yield at
3.5% and a growing distribution. The payout is 55% of earnings, and the balance sheet is solid, so dividend
increases will likely continue at a high-single-digit pace for years to come.

Earnings growth is in the outlook, but not this year. AbbVie is expected to post flat results this year, but
this is good news, considering the outlook for 2024 in early 2023 was far more dismal. Earnings growth will
return in 2025 as Humira’s patent cliff is lapped and Skrizia and Rinvoq move into their peak sales periods.

AbbVie trades at a low 15x its earnings to ice the cake, which is low for the broad market and a
pharmaceutical company with this kind of financial strength. It also has one of the lowest betas of any
quality dividend stock, making it a potential pillar for any income portfolio.

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THE BEST HIGH-YIELD DIVIDEND STOCKS FOR 2024

JPMorgan Chase & Co:

Best-in-class with interest rates driving income
Shares of JPMorgan Chase & Co. (NYSE: JPM) have rallied for nearly 18 months and are trading at new
all-time highs in 2024. The stock can set new highs because interest rates are high and drive investment
income while consumer resilience remains in the economy.

JPMorgan pays about 2.4% with shares near 11x earnings, and it is a payment you can bank on. The payout
ratio is a low 25% of the company’s earnings, and the banking industry, FOMC and other regulators closely
monitor the company’s financial health. Hence, there is little for investors to fear regarding its safety.

The company has built up its capital reserves over the past few years, but this is not a concern but a
blessing for investors. The company can sustain its capital return program while maintaining higher-than-
normal credit reserves, which puts it in a solid position no matter what happens to the economy. If there is a
recession, it has the capital to write off its bad loans. If not, JPMorgan will release the capital for dividends
and share repurchases at a future date.

Analysts rate the stock a “moderate buy” in early 2024, increasing the market with price target revisions. The
consensus target puts the market at a new all-time high, and the highest targets set in early 2024 are 20%
above that.

Duke Energy Company:

A traditional utility packing plenty of punch
The Utilities Select Sector SPDR Fund (NYSEARCA: XLU) is among the highest-yielding S&P tracking ETFs
on the market, and Duke Energy Company (NYSE: DUK) is among the highest-yielding in the group.

The stock pays about 4.45%, and sustained distribution growth is forecasted. Dividend increases won’t be
large; the CAGR in 2024 will be about 3%, but payouts and future increases are reliable.

Weaker-than-expected 2023 results have helped to improve the opportunity in 2024. The stock is down
20% from its highs and trading near the bottom of a multi-year consolidation range within a long-term
uptrend. The price action may wallow near these levels in 2024, but not much longer due to a ramp in capital
spending expected to lead to revenue and earnings. The company announced accelerated plans to grow and
modernize its systems to drive efficiency, margin and shareholder value.

Analysts rate Duke a Moderate Buy and see it advancing at least 8% in 2024. The consensus mid-point is
near $100 and firm with a chance for additional upside should results impress. Analysts forecast about 7%
earnings growth from Duke Energy and the utility sector in 2024.

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THE BEST HIGH-YIELD DIVIDEND STOCKS FOR 2024

NextEra Energy Partners LP:

Committed to clean energy
The NextEra Energy Partners LP (NYSE: NEP) name says it all. This company focuses on clean and
renewable energy, including natural gas, the stepping stone to a carbon-free world. Natural gas is the most
efficient use of carbon-based energy, crucial to many of today’s decarbonization efforts and central to
NextEra’s business.

NextEra has one of the more attractive dividends for the sector due to safety. The yield is good at 3.25%,
but this company pays out less than 60% of its earnings compared to higher rates of 70% to 75% for most
of its competitors. NextEra also generates above-average dividend growth and can be expected to produce
another double-digit increase in 2024.

NextEra is maturing into an energy stock into which buy-and-hold investors can sink their teeth. Its
consistent dividend payments and growth have helped lower its beta in recent years. The stock trades with a
beta near 0.82, down from 0.92 in 2022, and it may continue to decline as the year progresses.

The Coca-Cola Company:

Well-positioned for 2024
It’s a hard call whether The Coca-Cola Company (NYSE: KO) or PepsiCo is the better stock for the long term,
but it certainly looks like Coke is it for 2024. Its top and bottom line results outpaced its competitor in Q4, and
the guidance for the year is equally sweet.

While a snacking slowdown impacts PepsiCo’s business, beverages remain strong, and The Coca-Cola Company
is a pure beverage player and a market leader. It expects to grow by 6% to 7% this year with margin expansion to
amplify the bottom line result.

Coke’s dividend is attractive and growing. This company is a Dividend King with the power to continue
increasing its payments for years without the impact of earnings growth. The yield is also solid at 3.1%,
compounded by share repurchases.

The Coca-Cola Company is a relatively expensive stock, trading at 22x earnings, but you get a lot for what you
pay for, including substantial capital returns. However, at 22x earnings, the stock is a bargain relative to its past
performance and the analysts’ outlook. The stock trades in the 24x to 25x range, trading below the analysts’
lowest price target. They see it moving above $60 by year-end with a chance of hitting the low $70s.

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THE BEST HIGH-YIELD DIVIDEND STOCKS FOR 2024

Verizon Communications Inc.:

A high-yield king on the rise
Verizon Communications Inc. (NYSE: VZ) is among the highest-yielding Dividend Aristocrats and Kings with
a difference. Often, yields this high, over 6%, are a sign that payments will soon be cut or suspended, but not
in this case. Verizon’s business is solid; it isn’t growing robustly, but growth is expected to return in 2024,
and there is better news. The free cash flow margin is improving; FCF guidance was set above consensus at
the start of the year, making the dividend and capital outlook as safe as ever.

Verizon’s dividend is attractive for more reasons than one. The high 6.6% yield is compounded by a low 8x
price-to-earnings multiple at the low end of the historical range, suggesting significant upside potential for
long-term holders. This stock could see its multiple expand by 2x to 5x.

Regarding safety, Verizon pays about 55% of its earnings outlook and is expected to grow earnings in 2024
and 2025. The pace of growth is sluggish but enough to sustain the single-digit distribution CAGR and the
payout ratio. The balance sheet carries some debt, but leverage is low, and coverage is sufficient to keep
investors sleeping soundly at night.

Analysts’ sentiment took a turn for the better at the beginning of 2024. A series of upgrades and price target
revisions improved the consensus sentiment to “moderate buy” and the price target by 750 basis points.
The price target increase implied a 10% upside for the stock in early February and would put the market at a
multi-year high when reached.

An order of high-yield dividend stocks, please

The economic conditions don’t matter; dividend stocks pay you to own them and should be part of your
investment strategy. High-yield dividend stocks offer a better return and provide some insulation from
volatility because of the buy-and-hold nature of their investors. The combined result is better-than-average
total returns for long-term investors with less risk and worry. High-yield dividend payers are a good place to
start if you want to build a portfolio of stocks that can sustain a high-quality retirement.

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