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24/7 Wall St. Insights
- Dividend stocks will outperform when the Federal Reserve starts to lower rates in September.
- Companies that pay 5% and higher dividends provide stable passive income.
- Also: 2 Dividend Legends to Hold Forever
Investors love dividend stocks because they provide dependable income, passive income streams, and a great opportunity for solid total return. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or portfolio consists of income and stock appreciation.
Let's take a closer look at the concept of total return. Imagine you purchase a stock at $20 that offers a 3% dividend. If the stock price rises to $22 within a year, your total return is 13%. This is calculated by adding the 10% increase in stock price to the 3% dividend.
With second-quarter earnings pouring in, we decided to examine some of the results and, more importantly, scan the field for stocks that either missed analysts' expectations or surpassed them but received a ho-hum response from investors. Six top blue chips, including two health care giants, that all pay 5% and higher dividends look like outstanding values at current trading levels, and all can be counted on to provide solid passive income streams for years.
With the Federal Reserve expected to start lowering rates by 25 basis points beginning in September (some are even handicapping a 50-basis-point cut now) dividend blue chips should start to become back in vogue as investors seek higher yields. Plan to also check out this free dividend legends report today.
Why do we cover dividend stocks?
Dividend stocks provide investors with reliable streams of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner's continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.
AT&T
AT&T is the world's fourth-largest telecommunications company by revenue and the largest wireless carrier in the United States.
The legacy telecommunications company has been undergoing a lengthy restructuring and delivered an outstanding second-quarter print, while still paying investors a 5.79% dividend. AT&T Inc. ( NYSE: T ) provides worldwide telecommunications, media, and technology services.
Its Communications segment offers wireless voice and data communications services.
AT&T sells through its company-owned stores, agents, and third-party retail stores:
- Handsets
- Wireless data cards
- Wireless computing devices
- Carrying cases
- Hands-free devices
AT&T also provides:
- Data
- Voice
- Security
- Cloud solutions
- Outsourcing
- Managed and professional services
- Customer premises equipment for multinational corporations, small and mid-sized businesses, and governmental and wholesale customers.
In addition, this segment offers residential customers broadband fiber and legacy telephony voice communication services.
It markets its communications services and products under:
- AT&T
- Cricket
- AT&T PREPAID
- AT&T Fiber
The company's Latin America segment provides wireless services in Mexico and video services in Latin America. This segment markets its services and products under the AT&T and Unefon brands.
Bristol-Myers Squibb
Bristol-Myers Squibb is one of the world's largest pharmaceutical companies and consistently ranks on the Fortune 500 list of the largest U.S. corporations.
This top company remains a solid pharmaceutical stock to own long-term, offering an outstanding entry point and a massive 5.37% dividend. Bristol-Myers Squibb Co. ( NYSE: BMY ) discovers, develops, licenses, manufactures, and markets pharmaceutical products worldwide.
The company offers products in:
- Hematology
- Oncology
- Cardiovascular
- Immunology therapeutic classes
Bristol-Myers Squibb products include:
- Revlimid, an oral immunomodulatory drug for the treatment of multiple myeloma
- Opdivo for anti-cancer indications
- Eliquis, an oral inhibitor indicated for the reduction in risk of stroke/systemic embolism in NVAF and for the treatment of DVT/PE
- Orencia for adult patients with active RA and psoriatic arthritis, as well as reducing signs and symptoms in pediatric patients with active polyarticular juvenile idiopathic arthritis
The company also provides:
- Sprycel for the treatment of Philadelphia chromosome-positive chronic myeloid leukemia
- Yervoy for the treatment of patients with unresectable or metastatic melanoma
- Abraxane, a protein-bound chemotherapy product
- Implicit for the treatment of multiple myeloma
- Reblozyl for the treatment of anemia in adult patients with beta-thalassemia
Pfizer
Pfizer is an American multinational pharmaceutical and biotechnology corporation headquartered at The Spiral in Manhattan.
This top pharmaceutical stock was a massive winner in the COVID-19 vaccine sweepstakes but has been crushed as many are not getting boosters. Pfizer Inc. ( NYSE: PFE ) discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide and pays a hefty 5.60% dividend, which has risen yearly for the past 14 years.
The company offers medicines and vaccines in various therapeutic areas, including:
- Cardiovascular metabolic and women's health under the Premarin family and Eliquis brands
- Biologics, small molecules, immunotherapies, and biosimilars under the Ibrance, Xtandi, Sutent, Inlyta, Retacrit, Lorbrena, and Braftovi brands
- Sterile injectable and anti-infective medicines and oral COVID-19 treatment under the Sulperazon, Medrol, Zavicefta, Zithromax, Vfend, Panzyga, and Paxlovid brands
Pfizer also provides medicines and vaccines in various therapeutic areas, such as:
- Pneumococcal disease, meningococcal disease, tick-borne encephalitis COVID-19 under the Comirnaty/BNT162b2, Nimenrix, FSME/IMMUN-TicoVac, Trumenba, and the Prevnar family brands
- Biosimilars for chronic immune and inflammatory diseases under the Xeljanz, Enbrel, Inflectra, Eucrisa/Staquis, and Cibinqo brands
- Amyloidosis, hemophilia, and endocrine diseases under the Vyndaqel/Vyndamax, BeneFIX, and Genotropin brands
Trading at its lowest split-adjusted level in thirteen years, the stock is an incredible bargain at current levels and pays a massive dividend.
Despite a stunning 44% decline in profits, the company still posted first-quarter earnings that came in above Wall Street estimates. The company reported $0.55 diluted earnings per share and $14.9 billion in first-quarter sales, trouncing analysts' estimates of $0.51 and $13.87 billion, respectively. Second-quarter results will be posted on July 30 before the market opens, and estimates have been moving higher.
While the pharmaceutical giant reported its fifth straight year of year-over-year revenue and net income declines, the numbers are still skewed somewhat from the enormous revenues posted during the pandemic. Patient investors will get paid one of the highest blue-chip dividends going, and shares trade at a reasonable 10.75 times estimated 2025 earnings.
United Parcel Service
UPS is an American multinational shipping and receiving and supply chain management company founded in 1907.
With the explosion of internet commerce, this company has enormous growth potential despite delivering less-than-stellar second-quarter results and offers a hefty 5.07% dividend. United Parcel Service Inc. ( NYSE: UPS ) is a package delivery company that provides transportation and delivery, distribution, contract logistics, ocean freight, air freight, customs brokerage, and insurance services.
It operates through two segments:
- U.S. Domestic Package
- International Package
The U.S. Domestic Package segment offers time-definite delivery of letters, documents, small packages, and palletized freight through air and ground services in the United States.
The International Package segment provides guaranteed-day and time-definite international shipping services, comprising guaranteed-time-definite express options in:
- Europe
- Asia
- the Indian subcontinent
- the Middle East
- Africa
- Canada
- Latin America
UPS is not just a package delivery company. It also provides diverse services, including international air and ocean freight forwarding, post-sales, and mail and consulting services.
Furthermore, it offers truckload brokerage services, supply chain solutions to the healthcare and life sciences industries, financial and information services, and fulfillment and transportation management services. This broad portfolio of services ensures the company's stability and potential for growth, making it an attractive investment option.
Verizon Communications
Verizon is the world's second-largest telecommunications company by revenue and its mobile network is the largest wireless carrier in the United States, with 114.8 million subscribers as of March 31, 2024.
Despite posting earnings that missed expectations for the second quarter, Verizon Communications Inc. ( NYSE: VZ ) provides communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide and pays a massive 6.71% dividend.
It operates in two segments:
- Verizon Consumer Group
- Verizon Business Group
The Consumer segment provides wireless services across the wireless networks in the United States under the Verizon and TracFone brands and through wholesale and other arrangements.
It also provides fixed wireless access (FWA) broadband through its wireless networks and related equipment and devices, such as smartphones, tablets, smartwatches, and other wireless-enabled connected devices.
The segment also offers wireline services in Mid-Atlantic, Northeastern United States, and the District of Columbia through its fiber-optic network, Verizon Fios product portfolio, and a copper-based network.
The Business segment provides wireless and wireline communications services and products, including:
- FWA broadband
- Data, video and conferencing
- Corporate networking, security
- Managed network
- Local and long-distance voice
- Network access services to deliver various IoT services and products to businesses, government customers, and wireless and wireline carriers in the United States and internationally
Whirlpool 
Whirlpool is an American multinational manufacturer and marketer of home appliances.
The potential for new home sales to increase in 2025 is a big positive for this company, which also posted second-quarter results that lagged estimates, but pays a dependable 7.33% dividend. Whirlpool Corp. ( NYSE: WHR ) manufactures and markets home appliances and related products.
It operates through four segments:
- North America
- Europe
- Middle East and Africa
- Latin America and Asia
The company's principal products include:
- Refrigerators, freezers, ice makers, and refrigerator water filters
- Laundry appliances and related laundry accessories
- Cooking and other small domestic appliances
- Dishwasher appliances and related accessories, as well as mixers
Whirlpool markets and distributes its products primarily under these brands:
- Whirlpool
- Maytag
- KitchenAid
- JennAir
- Amana
- Roper
- Admiral
- Affresh
- Gladiator
- Speed Queen
- Hotpoint
- Bauknecht
- Indesit
- Ignis
- Laden
- Privileg
- KIC
- Consul
- Brastemp
- Across
- Ariston
- Diqua
- Royalstar
6 Dividend Kings That Offer Investors a Passive Income Home Run
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