If you are looking for high dividend stocks among members S&P500, these days it can be even harder to find a yield high enough to prompt a purchase. The average dividend stock yield in the benchmark index is a modest 1.39%.
If you only have $100 to invest, you can buy both stocks. altria group (NYSE:MO)and AT&T (New York Stock Exchange: T). These S&P 500 stocks currently yield more than 6%.
When it comes to eye-popping dividend yields, investors need to remember that they typically don't reach 6% unless the market is concerned about the company's underlying business.
The past year hasn't been easy for such a well-positioned company, but the market appears to have been too pessimistic about the company's ability to keep raising its dividend. Here's why these look like good stocks to buy now and hold for the long term.
altria group
Altria Group, the U.S. manufacturer of Marlboro cigarettes, currently has a stock yield of 9.5%.
Marlboro remains an iconic American brand, but the gradual decline in smokers we've seen for decades is accelerating. Altria Group shipped 9.9% fewer cigarettes to retailers in 2023 compared to the same period last year.
Although combustible cigarettes are on the decline, the total amount of nicotine consumed by Americans has remained relatively stable. Unfortunately, Altria Group is losing many customers to illegal e-vapor products that ignore the Food and Drug Administration's (FDA) flavor ban.
Despite strong competition from the illegal e-vapor market, Altria Group reported adjusted earnings per share growth of 2.3% in 2023. This probably isn't the fastest growing dividend in your portfolio, but it seems like a continued move in the right direction.
Altria Group has increased its dividend 58 times over the past 54 years. With the U.S. government now on Altria's side, consumers could begin to wean themselves from illegal e-vapor products that are becoming increasingly difficult to buy.
Last year, the company launched NJOY, the only pod-based e-vapor product cleared by the FDA. And authorities have stepped up enforcement of the flavor ban in recent months, sending out dozens of warning letters to retailers.
The FDA has also partnered with Customs and Border Protection to begin seizing incoming shipments of Elf bars and other flavored e-vapor products.
AT&T
If you're looking for a stock that can grow its high-yield dividend, you might be overlooking AT&T, which cut its 2022 dividend by 47% to compensate for the spinoff of its media assets. The stock offers a huge yield of 6.9% at recent prices, and has a good chance of receiving stable dividend increases in the coming years.
Since the company is technically a telecommunications business with a major network of 5G towers and fiber optic cables, its cash flows can be much more predictable. Last year, the company's mobility division added 1.7 million postpaid phone customers, increasing its mobility revenue by 4.4%.
AT&T Fiber also added 1.1 million subscribers last year and increased broadband revenue by 8.3%. The recently introduced fixed wireless service for broadband customers who don't yet have access to AT&T Fiber could lead to further growth.
While the $128.9 billion in net debt on AT&T's balance sheet at the end of 2023 is concerning, the company's efforts to reduce it are encouraging. Net debt decreased from 3.19 times adjusted EBITDA in 2022 to 2.97 times adjusted EBITDA last year. Management expects net debt to continue to decline and reach a relatively comfortable ratio of 2.5x Adjusted EBITDA. In early 2025.
The heavy investment to build AT&T's 5G network is finally winding down. Management expects capital spending to decline from $23.6 billion in 2023 to a range of $21 billion to $22 billion this year.
Increasing revenue from subscribers and reducing capital investment is a formula for increasing profits and can be used to increase AT&T's dividend. Yields are already high, so investors who buy this stock now to hold for the long term could potentially realize significant passive income.
Should you invest $1,000 in Altria Group right now?
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Cory Renauer has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
2 S&P 500 Dividend Stocks with Over 6% Yields You Can Buy for $100 was originally published by The Motley Fool.
