Dividend stocks are popular among investors that are seeking a steady stream of income. The continuing near-zero interest rate environment and declining Treasury yields have made the backdrop favorable for dividend investing over the past three months.
While the surging reflation trade and solid economic performance shifted investors’ focus to growth and outdoor stocks earlier this year, current market volatility has been helping dividend stocks make a strong comeback. The CBOE Volatility Index has gained 18.8% over the past month and 5% over the past five days.
Dividends paid by AT&T Inc. (T), Vale S.A. ADR (VALE), and GlaxoSmithKline plc (GSK) yield more than 5%, and these stocks possess stable financials and cash flows. So, we think they are worth buying now.
AT&T Inc. (T)
T is a provider of telecommunication, media, and technology services worldwide. The company operates through Communications, WarnerMedia, and Latin America segments.
On July 21, Grupo Werthein and T announced that Grupo Werthein would acquire T’s Vrio Corp. business unit. The CEO of AT&T Latin America expects this transaction to allow the company to further sharpen its focus on investing in connectivity for customers.
On July 20, T and JBG SMITH Properties (JBGS) agreed to deliver the first 5G Smart City at scale in National Landing, a three-neighborhood region in the center of Washington, DC. Such network infrastructure deployments should allow T to become one of the largest 5G carriers in the U.S.
T’s $2.08 annual dividend yields 7.38% at the current share price. On June 25, the company approved a $0.52 quarterly dividend, payable on August 2. T’s dividend payouts have increased at a 1.5% CAGR over the past three years. The company has a record of 37 consecutive years of dividend growth.
T’s total operating revenues increased 7.6% year-over-year to $44.05 billion in its fiscal second quarter, ended June 30. Its net income grew 22.6% from its year-ago value to $1.57 billion. The company’s EPS increased 23.5% year-over-year to $0.21.
Analysts expect T’s revenues to increase 1.5% year-over-year to $174.39 billion in the current year. In addition, T surpassed the Street’s EPS estimates in three of the trailing four quarters. Shares of T have gained 1.4% over the past five days.
T has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has a B grade for Growth and Stability. Among the 22 stocks in the Telecom – Domestic industry, T is ranked #1. To see additional T ratings for Value, Sentiment, Quality, and Momentum, click here.
Vale S.A. ADR (VALE)
VALE produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking worldwide. The company’s segments include Ferrous Minerals, Base Metals, and Coal. Vale is based in Rio de Janeiro.
On June 29, VALE announced a CAD150 million ($119.73 million) investment to extend current mining activities in Thompson, Manitoba, by 10 years. Given the emerging industrial sectors and zero-emission projects worldwide, the company’s plan to expand production should fetch significant returns over the extended period.
VALE signed an Investment Agreement with Mitsui & Co., Ltd (MITSY) on April 19 to acquire Mitsui´s stakes in the Moatize coal mine and the Nacala Logistics Corridor. The company expects this acquisition to contribute to its goal of becoming a leader in low-carbon mining.
VALE’s $1.74 annual dividend yields 7.74% at its current share price. Its dividend payouts have increased at a 61.2% CAGR over the past three years.
VALE’s net operating revenue increased 81.4% year-over-year to $12.65 billion in its fiscal first quarter ended March 31. Its operating income stood at $7.38 billion, up 276% from the same period last year. Its net income grew 3,301.9% from the year-ago value to $5.48 billion, and the company’s EPS increased 2,080% year-over-year to $1.09.
The $17.83 billion consensus revenue estimate for the fiscal third quarter (ending September 2021) indicates a 64.6% increase year-over-year. The Street expects the company’s EPS to rise 152.5% from the prior-year quarter to $1.49 in the current quarter. VALE gained 100.2% over the past year and 34.5% year-to-date.
VALE has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. In addition, VALE has an A grade for Growth and Quality, and a B for Value, Sentiment, and Momentum. Of the 42 stocks in the Industrial – Metals industry, VALE is ranked #2. Click here to view additional VALE ratings for Stability.
Note that VALE is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
GlaxoSmithKline plc (GSK)
GSK engages in creating, discovering, developing, manufacturing, and marketing pharmaceutical products, vaccines, over-the-counter medicines, and health-related consumer products. The U.K. company operates through four segments: Pharmaceuticals, Pharmaceuticals R&D, Vaccines, and Consumer Healthcare.
On July 26, GSK received FDA approval of Shingrix, which is the first shingles vaccine. This is expected to be widely demanded and improve GSK’s revenues markedly in the coming quarters.
GSK collaborated with Alector, Inc. (ALEC) this month to develop and commercialize two clinical-stage, potential first-in-class monoclonal antibodies designed to elevate progranulin (PGRN) levels. This collaboration should provide GSK access to a promising clinical program in immuno-neurology, facilitating the company’s growth in this space.
GSK’s $2.17 annual dividend yields 5.57% at its current share price. The company’s performance was impacted by stocking and pandemic disruption, which caused its gross profit to decline 16% from its year-ago value to £4.94 billion ($6.85 billion) in its fiscal first quarter ended March 31. Its operating profit decreased 16% year-over-year to £1.69 billion ($2.34 billion).
The Street expects GSK’s revenues to rise 5.7% year-over-year to $47.67 billion in the next year. The $3.09 consensus EPS estimate for the next year indicates a 14.9% improvement year-over-year. The company’s revenue is also expected to rise 6.8% in the current quarter ending September 2021. Shares of GSK have gained 6% year-to-date and 1.3% intraday.
It’s no surprise that GSK has an overall B rating, which equates to Buy in our POWR Ratings system. GSK has an A grade for Value, and a B for Stability. It is ranked #24 among the 220 stocks in the Medical – Pharmaceuticals industry. To see additional POWR Ratings for Growth, Sentiment, Momentum, and Quality, click here.
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T shares were trading at $28.03 per share on Wednesday afternoon, down $0.17 (-0.60%). Year-to-date, T has gained 2.73%, versus a 18.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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