3 Dividend Stocks With Yields Better Than Fixed-Income Investments

If there’s one silver lining to higher interest rates, it’s the clarity they bring in defining what qualifies as a high-yield dividend stock. When monetary policy kept interest rates close to zero percent, it was tough for savers who had limited options besides investing in stocks to get any kind of return. 

That scenario changed with rising interest rates. As rates went up, so did the yield on Treasury bills. A turning point came in March 2020 when the interest rate on 2-year Treasury bills surpassed 5%. Fixed income investments, like Treasury bills, offer a risk-free rate of return. Suddenly, investors saw this as a secure spot to stash some of their portfolio. 

This move towards fixed income revealed some dividend stocks that were just okay but could pass off as high-yield options. It didn’t take much to outdo the rate on the 2-year Treasury note, which had a yield of under 2% as recently as March 2022. 

Here are three stocks currently boasting dividend yields higher than what you can get from a 2-year Treasury bill. 

A Sin Stock That Offers More Than Just A Nice Dividend 

Philip Morris (NYSE:PM) ranks among the world’s largest cigarette makers. However, it also has an impressive business in smoke-free products. In 2024, the company saw a revenue increase of about 11% year-over-year. However, this growth didn’t reflect much in the bottom line, which only rose by less than 1%. Despite this, analysts maintain a positive outlook on PM stock, projecting earnings to rise by just under 10% over the next 12 months. 

As of April 19, 2024, PM stock boasted a dividend yield of 5.58% and has been consistently raising its dividend for 16 consecutive years. The current payout stands at $5.20, which might raise some concerns considering the consensus estimate for 2024 earnings sits at $6.45. 

Nevertheless, the company managed to deliver earnings of $6.01 in 2023, a slight increase of less than 1% year-over-year, while still managing to increase its dividend. Going by the company’s track record, investors may need to wait a quarter or two before any potential dividend hike. However, for the time being, the dividend appears to be secure. 

An Undervalued Pharmaceutical Play 

Pfizer (NYSE:PFE) has witnessed a decline in revenue and earnings as the business returns to normalcy after benefiting from strong pandemic tailwinds. Investors have reacted by selling off the stock, with PFE stock dropping by 36% over the last 12 months and 10% in 2024. One major concern is the looming patent cliff that will affect many of its commercially approved drugs. 

However, what investors might be overlooking is the company’s pipeline, which includes several oncology drugs and its ongoing expansion into customizable medicine. In 2023, Pfizer announced plans to have up to 19 new drugs approved within 18 months. While time is ticking, if the company succeeds with even half of that total, PFE stock could see significant growth. 

One aspect that remains unchanged for Pfizer is its commitment to maintaining its dividend. The company has done so for 15 consecutive years. Currently, PFE stock offers a dividend yield of 6.47% and an annual payout per share of $1.68. While this payout appears high compared to the company’s trailing twelve-month earnings, it is supported by anticipated earnings growth of over 20%. 

Proof That Boring Business Models Can Still Be Beautiful 

Verizon Communications (NYSE:VZ) stands as one of the world’s leading wireless carriers, characterized by steady and predictable revenue and earnings, often seen as unexciting. However, for those seeking high-yield dividend stocks, Verizon remains an appealing choice for investors. 

Currently, VZ stock offers a yield of 6.55% and pays out $2.66 per share annually. This amounts to about 56% of next year’s earnings, but only around 29% of the company’s cash flow. Consequently, investors can reasonably anticipate Verizon reaching its 20th consecutive year of dividend increases at some point in 2024. 

Moreover, following a three-year downturn in VZ stock, there’s now an upward trend that investors anticipate will continue to gain momentum in the coming year.