Investors often underestimate the power of dividends. Over the years, about 69% of the S&P 500’s returns have come from reinvested dividends. Thus, companies that provide regular dividend payments are worth considering for long-term investment strategies. Focusing on companies with steady, repeat purchases in everyday life can be beneficial for recurring income and potential long-term payouts.
Here are three high-yield stocks with strong potential for your next passive income stream.
Devon Energy (DVN)
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Devon Energy (NYSE:DVN) may appear risky for high-yield dividend stocks due to the Federal Reserve’s hawkish policy. The Fed’s policies have created challenges in the energy sector, but Devon Energy can be a great long-term investment.
Although shares have experienced declines, social normalization trends like the return to the office could boost traffic volumes and benefit hydrocarbon players like DVN.
Additionally, Devon Energy’s oil production reached an all-time high of 320,000 barrels per day in Q1 2023. The company also added seven new wells and started drilling operations for 19 more. The company expects to start drilling operations for 40 wells in 2023.
Devon Energy has faced dividend cuts that upset shareholders, but it still offers a generous quarterly dividend of $1.13 per share, yielding over 8%. Despite being down nearly 10% year to date, DVN stock appears undervalued with a low P/E ratio of 5.
Investors seeking a buying opportunity and patient enough to wait for a potential share price recovery can enjoy one of the highest dividend yields available.
Realty Income (O)
Realty Income (NYSE:O) is a real estate investment trust (REIT) with a focus on triple-net leases, where tenants cover maintenance and other costs. It operates over 12,000 properties, mainly in retail sectors resistant to e-commerce challenges, like food, pharmacies, and consumer services. Additionally, the company has a strong track record of paying monthly dividends since the early 2000s. While facing challenges in the evolving retail landscape and rising interest rates, the stock’s current low price near 52-week lows offers investors an attractive 5.0% yield.
Realty Income offers strong upside potential with its dividend income yielding over 5%. Additionally, analysts see around 15% potential upside based on the average target price for O stock. While concerns exist about the commercial real estate sector, Realty Income’s stable tenants like Walgreens (NASDAQ:WBA) and 7-Eleven (OCTMKTS:SVNDY) make it a top blue-chip stock. Over the past decade, the company has outperformed the market, making it an appealing choice for long-term investors seeking explosive profitability.
Realty Income stands out with its high dividend yield, a rarity in the past decade. The company boasts a strong track record of consistently increasing dividends for over 25 years and has maintained dividend payments for more than 50 years. Their focus on diversification minimizes risks, making them an attractive option for income-seeking investors in REIT stocks.
Despite a 21% correction year-to-date, AT&T (NYSE:T) stock appears oversold with a forward P/E ratio of 6 and a 7.5% dividend yield. Encouraging Q1 2023 results showed steady revenue and EBITDA growth, especially in the mobility segment, where average revenue per user increased by 2% yearly. As 5G adoption continues to grow, ARPU is expected to remain positive, supporting cash flow growth and potentially triggering a sharp stock reversal.
A recent Wall Street Journal story about old, buried lead-lined cables has raised concerns about potential toxic lead leaching into the soil and water. AT&T and other telecoms are at risk. The cables are alleged to be the cause of the contamination, and the issue is said to have been known to AT&T management for decades, adding to concerns about the company’s ability to generate free cash flow.
AT&T has refuted the allegations, stating that the Journal’s reporting conflicts with experts’ views on lead-clad cables’ safety and their own testing. The issue may have a long-term impact on the stock, potentially requiring costly remediation. However, this presents an opportunity for long-term investors. The stock is trading at historically low valuations, with an attractive dividend yield of 7.5%. It’s currently undervalued and worth considering as an investment.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.