Investors have been focusing on growth stocks and artificial intelligence (AI)-related investments during the past year and a half. That means that dividend stocks have made for fairly underwhelming buys of late. The good news, however, is that means it's not hard to find high-yielding stocks to invest in.
If you have $35,000 that you can afford to invest in stocks, you can use that money to generate about $2,000 per year in annual divided income. Investing in just three stocks -- Bristol Myers Squibb (NYSE: BMY) , AT&T (NYSE: T) , and Realty Income (NYSE: O) -- can help you accomplish that. Here's how much you can aim to invest in each stock, and how much dividend income it may generate for you.
1. Bristol Myers Squibb: $12,000
This year has been a tough one for Bristol Myers. Its shares are down about 20%, as investors haven't been thrilled with the company's lack of growth or its high debt level (its long-term debt is about $50 billion).
Bristol Myers has been leaning on acquisitions and new products to pave the way for future growth and offset declining revenue from drugs Eliquis, Opdivo, and Revlimid as they face increasing competition in the years ahead. Through new drugs, Bristol Myers hopes to add $25 billion to its top line by the end of the decade.
The uncertainty ahead, however, is why investors haven't been buying up the stock, which otherwise would make for a slam-dunk buy. There is some risk with the healthcare stock , but with a modest payout ratio of about 60%, the dividend remains solid. And at 6%, you'll be collecting a dividend payment which is more than four times more than what you would get with the average stock on the S&P 500 , where the average yield is about 1.3%.
Investing $12,000 into this stock would generate about $720 in dividends over the course of the year. And if Bristol Myers' growth strategy pays off, you could also be sitting on some large gains from owning the stock in the future.
2. AT&T: $11,000
You can collect a similar dividend yield from AT&T, as it yields almost 6%. That means that whether you decide to invest a bit more in AT&T or Bristol Myers will likely have a negligible effect on your overall dividend income. I've allocated a bit more to Bristol Myers, simply due to the possible upside it might possess in the long run.
AT&T has faced its share of challenges over the years, but the worst may finally be behind the business, as it has been generating some encouraging results in recent quarters. Its free cash flow has been rising, and it wouldn't be all that surprising if the company were to decide to raise its dividend in the near future (the last time it increased its dividend was in 2020).
AT&T's free cash flow during the first three months of the year was $2.1 billion higher than it was in the previous year. The company also posted a 17th consecutive period where it had at least 200,000 net additions in its fiber business.
News of a recent data breach could put some downward pressure on the stock, but that's not likely to weigh it down in the long run. Breaches are, unfortunately, not uncommon these days, and stocks often recover from any short-term weaknesses due to them.
By investing $11,000 into the telecom stock, you could generate around $660 in dividends during an entire year.
3. Realty Income: $12,000
A real estate investment trust (REIT) such as Realty Income can be an ideal option for dividend investors to put into their portfolios today. Unlike many other REITs, Realty Income has some broad diversification in its portfolio, which makes it a fairly safe investment to hold. In addition to having clients in multiple countries, Realty Income's portfolio also includes tenants from 89 industries, and it has an occupancy rate of 98.6%.
One of the most attractive features about Realty Income, besides its 5.6% dividend yield, is that the stock makes monthly dividend payments. While most dividend stocks pay on a quarterly basis, investors can collect more frequent payouts from the REIT.
The stock also routinely raises its payouts multiple times a year. While the bump-ups are modest, they can add up over time. In five years, Realty Income's monthly dividend has increased by more than 16%.
In the first three months of 2024, the REIT posted funds from operations -- a key metric for REITs -- of $0.94 per share, which is higher than the $0.79 it paid in dividends per share during the three-month period, leaving plenty of room for more rate hikes in the future.
If you were to invest $12,000 into the stock, your full-year dividend income would total close to $672. When combined with the other investments on this list, that would put your total dividend income at $2,052 for an entire year.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb and Realty Income. The Motley Fool has a disclosure policy .
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