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11 Dividend Stocks that Beat the Market — Transcript

by Let's Talk Money! with Joseph Hogue, CFA · 3,304 words · 518 segments · language en · Watch on YouTube

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0:00Prices are not coming down. So the best
0:02way to beat inflation is by increasing
0:04your income. And there's no better way
0:05to do that than with dividends. We're
0:07not chasing just any high yield stocks
0:09though. I found 11 established
0:11companies, one from each sector of the
0:13economy that averaged a 7.5% price
0:16return over the last year plus a 5.6%
0:20dividend yield. That is 13.1% combined
0:23return beating the S&P 500 market index
0:26return of just 11.7%
0:28with a dividend more than five times the
0:30market average. I'm going to show you
0:32how I put this list together and why
0:33it's so important to look at it this
0:35way. But let's get started with ONEOK
0:37Inc, ticker OKE, an energy
0:39infrastructure company operating
0:41pipelines and storage up 42% over the
0:43last year and paying out a 4.6% dividend
0:47yield. Now these might not be the
0:48highest dividends you can find, but I
0:50dare you to try finding a cash flow
0:51company like this that has produced a
0:5347% total return. Energy and oil stocks
0:56have been the runaway winners over the
0:58last year up 53% and doing well even
1:00before the Iran war started in February.
1:03Going forward, the big question of
1:05course is how high oil prices stay and
1:07for how long. But I posted a video last
1:09week that showed oil explorers have not
1:11been reinvesting enough to keep
1:12production from slipping. So I still
1:14like these oil stocks at this point.
1:16ONEOK operates over 60,000 miles of
1:18pipelines along with storage and
1:20processing for energy. Now these
1:21midstream energy companies are cash flow
1:23machines because they collect fees on
1:25that volume rather than directly
1:27connected to oil prices. For ONEOK, that
1:29fee revenue is about 90% of its earnings
1:31making it predictable cash flow it can
1:33return to investors.
1:35The company has more than 30 years of
1:37dividend stability with quarterly
1:38payments dating back for decades and and
1:41has increased its annual dividend for
1:42three consecutive years including a 4%
1:45increase in 2026 to $4.28 a share.
1:48Management is targeting another 3 to 4%
1:51in annual dividend growth going forward
1:53along with $2 billion in share
1:55repurchase authorization to return even
1:57more cash to shareholders. Pfizer,
1:59ticker PFE, is up One of the world's
2:01largest drug companies with shares up
2:0323% over the year on top of that 5.6%
2:06dividend yield. Healthcare stocks are
2:08the second best group, up 28% over the
2:10last year on a recent run up in drug
2:12stocks and medical devices. Valuations
2:14are still good here and many of these
2:16like Pfizer have been very consistent
2:18cash flow that makes them cash machines.
2:20Drug stocks like Pfizer depend on their
2:22pipeline of new treatments, but the
2:23company has done a great job of filling
2:25in that queue with blockbusters like
2:27Cgen on oncology and Metsara and obesity
2:30to replace revenue on drugs coming off
2:32their patent. The company has paid a
2:33dividend for more than 85 years with 17
2:36years of consecutive increases. So this
2:38is one you can count on. And that recent
2:40dividend growth is even more impressive
2:41when you consider revenue has been under
2:43pressure this year, forecast lower by
2:45half a percent and for earnings to fall
2:47under $3 per share, but coming into
2:49value territory at just 10 times on a
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4:15better credit. Back to our dividend list
4:17with Amcor, ticker AMCR, a global
4:19packaging company. So really a key
4:21signal on the economy with the stock up
4:2320% over the year along with a 5.3%
4:26dividend yield. Material stocks have
4:28jumped 25% over the last year on higher
4:30commodity prices from strong demand for
4:32metals, chemicals, and construction. Now
4:35that construction component is important
4:36here. A lot of it from those data center
4:38build outs that look like they should
4:40continue. Amcor produces packaging for
4:42everything from food and beverage to
4:43pharmaceuticals and personal care with
4:45$23 billion in annual revenue.
4:48Now I think that business line is a
4:49little less stable than some of these
4:51others on our list because packaging is
4:53going to fluctuate with the economy. But
4:55the company's merger last year with
4:56Berry Global gave it a strong size
4:58advantage with 400 manufacturing
5:00facilities across 40 plus countries. And
5:03Amcor has increased its dividend for six
5:05consecutive years with roughly 2% annual
5:08dividend growth over the last five
5:09years, currently paying $2.60 per share
5:12annually for that 5.3% dividend. General
5:15Mills, ticker GIS, the global food giant
5:17behind Cheerios and Häagen-Dazs, really
5:19struggling against those higher food
5:20costs. The stock is down 27% over the
5:23year, though investors have offset that
5:25with a 7% dividend. Consumer staple
5:27companies like this are the classic
5:29dividend plays because these are
5:31companies that sell things we have to
5:32buy, like toilet paper and Coca-Cola. So
5:35they've got that reliable cash flow to
5:36pay out.
5:37Now the group is up 19% over the last
5:40year and what's interesting here is that
5:41it's a solid return in a bull market.
5:43But you can also count on these to hold
5:45up even if the economy crashes. Now here
5:48General Mills is the worst stock in this
5:50group, but getting very attractive on
5:51valuation. And with some of the
5:53strongest brands out there, I like this
5:54one up for a rebound. Management's
5:56fiscal 2027 outlook calls for organic
5:59net sales growth of just half a percent
6:01with adjusted operating profit expected
6:03to fall from 8 to 13%. So, there's not
6:06much earnings growth to get excited
6:07about in the near term. The opportunity
6:09here is an aggressive cost-cutting
6:11program targeting 750 million in savings
6:14in fiscal 2027 and a combined three
6:17billion in savings through 2030 from
6:18margin management and other initiatives.
6:21What makes General Mills even more
6:22interesting for dividend investors is
6:24the exceptional history of more than 125
6:27years of uninterrupted dividend
6:28payments. Although those dividend
6:30increases haven't come every year, that
6:32five-year dividend growth rate of
6:34roughly four percent annually, a yield
6:36of seven percent though, investors are
6:37getting paid to wait for a turnaround.
6:39Now, we've got seven more stocks to
6:41highlight, but you might be wondering
6:42why I'm limiting this stock list to just
6:44the S&P 500 instead of just finding the
6:46highest dividend yields in the market.
6:48Now, you can find stocks of 10, 15, even
6:5120 percent dividends, but those yields
6:53can be a warning sign rather than an
6:55opportunity. That's because remember,
6:57dividend yield rises when a stock price
6:59falls. So, an unusually high yield might
7:02just mean investors are expecting a
7:03dividend cut or a serious problem with
7:05the business.
7:06A 15 percent dividend doesn't do you
7:08much good if the company cuts that
7:10payment in half and the stock plunges
7:12another 30 percent. Now, that's why I
7:14like starting with the S&P 500
7:15companies. Now, these are the largest
7:17500 companies in the US, established
7:19businesses with proven operations and
7:21access to capital and the financial
7:23flexibility to survive economic
7:25downturns while still continuing to pay
7:27shareholders.
7:28Being in the index, it doesn't guarantee
7:30a safe dividend, but does give us a
7:31stronger starting point for building
7:33reliable income. HP Inc., ticker HPQ,
7:36isn't like a lot of the other big
7:37headline tech stocks since it's more in
7:39personal computers, printers, and
7:40suppliers versus the AI theme, but with
7:43a dividend yield of 4.2 percent and
7:45shares up four percent over the last
7:46year, that's a decent total return for a
7:48company that has struggled with higher
7:50component costs. Just a month ago, tech
7:52stocks were the second best sector in
7:54the market, but have slipped to a still
7:56good 16 percent return.
7:58Earnings over the last week look like
7:59they're helping to bring investors back
8:01and I think we still have at least three
8:03to six months left in this bull market
8:04for what is arguably one of the weaker
8:06sectors for dividend investors. But here
8:08with HP, you get one of the world's
8:10largest manufacturers of personal
8:12computers, printers, and related
8:13products, with its PC business
8:15benefiting from stronger consumer and
8:17enterprise demand, including a growing
8:19market for an AI-enabled computers.
8:21Now, third quarter 2026 revenue jumped
8:2312 and 1/2% to 15 billion, although its
8:26non-GAAP operating margin, so that
8:28profitability did slip a little bit to 6
8:30and 1/2% from a year ago, showing that
8:32those higher costs are putting pressure
8:33on profitability despite the stronger
8:36sales.
8:37Management expects as much as 3.2
8:38billion in free cash flow for fiscal
8:402026, supporting an aggressive
8:43shareholder return program. It's already
8:44returned 825 million through dividends
8:47and another 725 million through a share
8:50repurchase in that first 9 months. HP
8:52has increased its dividend for nine
8:54consecutive years with the latest
8:55increase of 3.7 % bringing the quarterly
8:58payment to 30 cents a share or $1.20
9:00annually. T. Rowe Price, ticker TROW, is
9:03an investment manager with mutual funds
9:05and retirement accounts earning fees on
9:07those assets.
9:08Now, it has underperformed with a lot of
9:10the other financials this year with
9:11shares up about 4 % on top of that 4.9 %
9:15dividend yield over the last year. In
9:16the sector, financial stocks have fought
9:18those interest rates all year with a 10
9:20% return over the last 12 months. While
9:22higher rates do help insurance companies
9:24and some lending, they also hit the
9:26banks that have to pay out more interest
9:27on their deposits. At T. Rowe Price is
9:29one of the largest investment management
9:31firms in the country, managing nearly 2
9:33trillion in client assets and generating
9:35revenue primarily from the fees on those
9:37investments. What makes this one
9:39attractive for a dividend portfolio is
9:40its 40 consecutive years of dividend
9:42increases, including a 2.4 % increase
9:45this year with dividend growth averaging
9:477 % annually over the last 5 years. I'll
9:50get right back to that list, but another
9:51important part of this strategy is
9:53choosing one stock from each of the 11
9:55sectors rather than just loading up on
9:57the highest dividend-paying stocks. If
9:59we were just looking for the highest
10:00yields, even among the S&P 500
10:02companies, we'd end up with a portfolio
10:04heavily concentrated in in just a few
10:06sectors like utilities, energy, and real
10:08estate, but then exposed to those
10:10sectors when those sectors struggle.
10:12Nation, understand different sectors
10:13perform better at different points in
10:15the economic cycle, shown here with this
10:17research by Fidelity. Consumer
10:18discretionary, industrials, and tech
10:21stocks might do well as that business
10:22cycle and economy start growing, but for
10:25a truly diversified portfolio, you want
10:27stocks like energy and consumer staples
10:29that are going to do well later in the
10:31cycle as well. So by investing equally
10:33across all 11 sectors, we're going to be
10:34spreading our risk across different
10:36industries, different economic
10:37conditions, rather than just betting
10:39everything on a few high-yield sectors.
10:41It won't eliminate risk totally, but
10:43does give us a more balanced portfolio
10:45with a potential for both reliable
10:47dividend income and long-term growth.
10:49Next here, I'm actually surprised that
10:51UPS is up over 15% over the last year
10:54with fuel costs as high as they are.
10:55That is a strong showing on top of a 6%
10:58dividend yield.
10:59Defense and aerospace stocks are the big
11:01drivers in this industrial sectors right
11:03now, with the sector up 9% over the
11:05year.
11:06AI infrastructure and manufacturing
11:07reshoring is also helping so like the
11:10industrials going forward and the
11:11logistics in UPS. Now this company is
11:14one of the world's largest packaging,
11:15delivery, and logistics companies with a
11:17strong dividend history of uninterrupted
11:19annual payments since going public in
11:211999 and 16 years of consecutive
11:24increases, although dividend growth has
11:26slowed to almost nothing recently. Now
11:28the stock does offer an attractive 6%
11:30yield, but I got to be honest, this is
11:31probably one of my least favorite stocks
11:33in the portfolio right now because of
11:34that the higher fuel costs, limited
11:36long-term revenue growth, and and a
11:38relatively expensive valuation leave a
11:40lot of room for disappointment.
11:42With a dividend payout ratio of about
11:43120% of reported earnings and that free
11:46cash flow barely covering the dividend,
11:48I am highlighting it here because it's
11:50the highest yield of its sector, but I'd
11:52use this position to swap in one of your
11:54other favorite dividend names instead.
11:56Another one I do like though is Vici
11:57Properties, ticker VICI, a real estate
12:00investment trust I've recommended on the
12:01channel before. Their shares are down
12:0318% on weakness across real estate this
12:06year, especially on those higher
12:07interest rates. I still like it though
12:09with a 7.4% dividend yield and enough to
12:12have me holding on for a rebound. Now
12:14this broader real estate sector is a
12:15group I've been waiting on to turn for
12:17so long, like years now, and this 7%
12:19return over the last year just isn't it.
12:22Higher interest rates aren't helping
12:23much and it's likely to be another year
12:25before this group really does much, but
12:27these are still good individual stocks
12:29within it and valuations are getting
12:30really cheap for that eventual rebound.
12:33Now VICI Properties is one of the
12:34largest gaming and entertainment real
12:36estate companies, owning iconic
12:38properties like Caesar's Palace, MGM
12:40Grand, and the Venetian in Las Vegas
12:42with long-term leases that provide
12:43predictable rental income. The company
12:45has paid dividends every year since
12:47going public in 2018 with nine
12:49consecutive years of dividend increases,
12:51averaging approximately 6% annual growth
12:53since its IPO, including a 2.2% increase
12:57this year.
12:58With a 7.4% dividend yield, growing
13:00adjusted funds from operations, and
13:02those long-term leases that help protect
13:04its cash flow, VICI is one of my
13:06favorite stocks for adding real estate
13:07exposure and those dependable income to
13:09this 11-sector portfolio. Shares of Ford
13:12Motor Company, ticker F, are kind of a
13:14wash here with a 4.8% dividend yield
13:16against a 5% drop in the price.
13:19Consumer discretionary is the first of
13:20our stocks in the red over the last year
13:22with a 1.5% loss and could get worse
13:25before it gets better
13:26even as the overall economy grows
13:28because of that enormous AI tech
13:30spending. Inflation is kicking the
13:32consumer's ass and they're pulling back
13:33on stuff like cars and clothes. Ford has
13:36paid a dividend consistently since
13:37reinstating them back in 2021, but
13:40unlike some of these other stocks, Ford
13:41has no consecutive annual dividend
13:43increases, keeping its regular payment
13:45at 15 cents a share since 2022.
13:48Now it pays an occasional special
13:49dividend, but isn't really the kind of
13:51dividend star we see in some of these.
13:53Their shares are at an attractive
13:54valuation though, so I still like it for
13:56that sector diversification, but it's
13:58the history of suspending dividends
14:00along with the slow growth and high 64%
14:02payout ratio makes this one less
14:04dependable than some of the others.
14:06We've got a stock with a 20% total
14:08return coming up, but one more thing to
14:09remember is that just because these
14:11companies are in the S&P 500 and we're
14:13diversifying across 11 sectors doesn't
14:16mean these dividends or returns are
14:17guaranteed.
14:19Even some of the largest, most
14:20established companies have been forced
14:22to cut their dividends at times when the
14:23economy crashes. That's why we still
14:25need to look deeper at each of these
14:26companies, its earnings growth, free
14:28cash flow, its debt levels, and how much
14:30of that cash it's paying out in its
14:32dividends.
14:33Now, high yield means nothing if the
14:34company can't sustain it. So, doing that
14:36fundamental analysis is just as
14:38important as the diversification we're
14:40doing here. Next here, Edison
14:41International, ticker EIX, is a
14:43regulated electric utility in Southern
14:45California. So, normally very slow
14:47growth, stable earnings, but with a
14:49strong 9% increase over the last year on
14:51top of its 5.9% dividend yield. The
14:54utility sector is an interesting group
14:56here because they're down 2% now, but
14:58were star performers earlier in the year
15:00on that AI boom.
15:01Higher interest rates do hurt these
15:03stocks because they draw investors out
15:05and into bonds, but the longer-term
15:07demand to electrification, I'm starting
15:09to like these stocks in this group on
15:10that cash flow reliability and the
15:12dividends. Edison International is one
15:14of the largest electric utilities in the
15:16country, serving 15 million people
15:18across Southern California with
15:19regulated operations that provide that
15:21relatively predictable earnings and cash
15:24flow. The company has increased its
15:25dividend for 22 consecutive years,
15:27averaging 7% annual dividend growth
15:29since 2004.
15:31With a dividend yield near 5.9% and
15:33expected earnings growth of 5 to 7%
15:35annually through 2030, Edison is a
15:38strong candidate for a utility sector
15:40income, although the California wildfire
15:42liabilities do remain a significant
15:44risk. Verizon, ticker VZ, is one of the
15:46largest telecoms in the US with the
15:48industry coming off fears of competition
15:50from SpaceX, but fighting back with
15:52shares up 14% over the year plus that
15:546.3% dividend yield. The communication
15:57services sector, which includes telecom
15:58carriers and the internet names, is a
16:00big surprise here, down almost 13% on
16:03weakness in both those groups.
16:05Stocks like Meta Platforms down 6%, AT&T
16:07down 13, Netflix crashing 44%, but I
16:11think a lot of these are touching bottom
16:13and oversold on fears with Verizon and
16:15the telecoms. Verizon has paid a
16:17dividend consistently for decades and
16:19increased its payout for 20 consecutive
16:21years. Although the dividend growth has
16:22averaged only about 2% a year recently.
16:25With a dividend above 6%, strong cash
16:27flow, and a $25 billion share buyback
16:29program, Verizon is a great choice among
16:31the telecoms, though that substantial
16:33debt and the slow growth is probably
16:34going to moderate that strong total
16:36return that we've seen over the last
16:38year. Look for that link to kick off and
16:40get 80% off your first month and take
16:42that first step to building better
16:43credit or check out the video on the
16:45right for more stocks to buy.

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