3 High Dividend Stocks Yielding Over 5%

The average dividend yield in the S&P 500 Index remains low at around 1.6%. As a result, income investors largely have to settle for less dividend income when buying stocks. However, there are still quality companies with high dividend yields.

These 3 stocks have leadership positions in their industries, dividend yields above 5% and secure dividend payouts.

3M Company (MMM)

3M is an industrial manufacturer that sells more than 60,000 products that are used every day in homes, hospitals, office buildings and schools around the world. It has about 95,000 employees and serves customers in more than 200 countries. 3M is now composed of four separate divisions. The Safety & Industrial division produces tapes, abrasives, adhesives and supply chain management software as well as manufactures personal protective gear and security products. 

The Healthcare segment supplies medical and surgical products as well as drug delivery systems. Transportation & Electronics division produces fibers and circuits with a goal of using renewable energy sources while reducing costs. The Consumer division sells office supplies, home improvement products, protective materials, and stationary supplies. 

On January 23rd, 2024, 3M announced fourth quarter and full year earnings results. For the quarter, revenue decreased 0.3% to $7.69 billion. Adjusted earnings-per-share of $2.42 compared to $2.28 in the prior year and was $0.11 more than expected. For 2023, revenue was lower by 4.5% to $32.7 billion while adjusted earnings-per-share of $9.24 compared to $10.10 in the prior year. 

However, comparable adjusted earnings-per-share totaled $9.88 in 2023. Adjusted organic growth fell 1.4% for the quarter. 3M provided an outlook for 2024 as well, with the company expecting adjusted earnings-per-share in a range of $9.35 to $9.75 for the year. Organic sales growth is projected to be flat to up 2%.

3M’s innovation is one of the company’s greatest competitive advantages. The company targets R&D spending equivalent to 6% of sales (~$1.8 billion in 2023) to create new products to meet consumer demand. This spending has proven to be very beneficial to the company as 30% of sales during the last fiscal year were from products that did not exist five years ago. 3M’s commitment to developing innovative products has led to a portfolio of more than 100,000 patents.

3M has increased its dividend for 65 consecutive years and currently yields 5.6%.

AT&T Inc. (T)

AT&T is a large telecommunications company serving over 100 million customers. The company generated $122 billion in revenue in 2023. On April 8th, 2022, AT&T completed the spin-off of WarnerMedia to form the new company Warner Bros. Discovery (WBD). AT&T shareholders received 0.241917 shares of WBD for every 1 share of AT&T they held. 

In late January, AT&T reported (1/24/24) financial results for the fourth quarter of fiscal 2023. The company grew its revenue 2% over the prior year’s quarter thanks to strong customer additions across its growing 5G wireless and fiber networks. AT&T is investing in the expansion of its 5G and fiber networks at a record pace. It posted 273,000 fiber net additions and thus it has posted more than 200,000 additions per quarter for 16 consecutive quarters. It also posted 526,000 postpaid phone net additions. 

Adjusted earnings-per-share dipped -11%, from $0.61 to $0.54, but free cash flow grew from $2.6 billion to $6.4 billion and thus annual free cash flow was $16.8 billion, exceeding the guidance of $16-$16.5 billion. AT&T needs excessive free cash flow to maintain its generous dividend and reduce its debt. Earnings-per-share missed the analysts’ estimates by $0.02, for the first time after 12 consecutive quarters of earnings beats. 

Now the company is focusing on its roots and has growth opportunities in the way of building out its 5G and fiber networks. We expect AT&T to grow its earnings-per-share at a 3% average annual rate over the next five years.

Management provided guidance for earnings-per-share of $2.15-$2.25 in 2024. With a dividend payout ratio of approximately 50% for 2024, the current dividend payout appears secure. T shares currently yield 6.5%.

Altria Group (MO)

Altria Group was founded by Philip Morris in 1847. Today, it is a consumer staples giant. It sells the Marlboro cigarette brand in the U.S. and a number of other non-smokeable brands, including Skoal, Copenhagen, and more. Altria also has a 10% ownership stake in global beer giant Anheuser Busch InBev, in addition to large stakes in Juul, a vaping products manufacturer and distributor, as well as cannabis company Cronos Group (CRON). 

Altria Group announced its Q4 2023 earnings on February 1, 2024. The company reported net revenues of $5.97 billion, marking a 2.2% decrease from the previous year, while adjusted EPS remained flat at $1.18, slightly outperforming analyst expectations. 

To counteract the decline in smoking in the U.S., Altria has made investments in ancillary businesses. During 2023, Altria focused on expanding its smoke-free product portfolio, including the integration of NJOY into its family of companies and launching on! PLUS internationally in Sweden. Altria has taken steps to strengthen NJOY's supply chain, close inventory gaps at retail, and expand the distribution of ACE to over 75,000 stores. 

Altria also provided an outlook for 2024, expecting adjusted diluted EPS in the range of $5 to $5.15, representing a growth rate of 1% to 4% from a $4.95 base in 2023.

Altria has pricing power and brand loyalty. In addition, tobacco companies enjoy low manufacturing and distribution costs, thanks to its economies of scale. This has fueled Altria’s tremendous dividend growth, enabling it to boast an impressive dividend growth streak of 54 years. MO yields 9.1%.