After the rush of this year – driven by the fear of a recession – to buy safe, income-producing stocks, there are currently not many attractive, high-yielding opportunities available on the market. But one segment is always open if you want to record higher returns to boost your retirement income.
Companies that are in the middle of a reversal usually fall into this category. This part of the market undoubtedly offers tempting returns, but it is also riskier. In a typical turnaround, companies are trying to reduce their huge debts or are dealing with a situation where disruptive factors jeopardize their market share.
For investors who want to try their luck in this part of the market, here are our three top choices:
1. Ford Motor Co.
One of America & # 39; s largest automakers – Ford Motor Company (NYSE 🙂 – has become attractive for investors looking for returns. The stock, traded at $ 8.90 at the end of yesterday, offers a dividend yield of 6.6%. This is a huge premium if you compare it with the average yield of just 1.9%.
They have been tough for Ford. After many years of increasing sales, helped by the robust global economy and consumer demand, the car manufacturer is now facing strong headwinds: it is undergoing a restructuring of $ 11 billion after its net income fell by more than half last year as demand to his sedan cars & # 39; s delayed. The reversal includes scrapping thousands of paid jobs, closing factories abroad and building capacity to produce electric cars & drivers without drivers.
While Ford is undergoing this massive restructuring to improve profitability and get ready for this new era, its stock is likely to remain under pressure. Since mid-July, shares have been traded under $ 10 due to concerns about the sustainability of the generous quarterly dividend of $ 0.15 per share.
Analysts have built in a potential scenario where Ford's creditworthiness could soon be lowered and the dividends could be lowered if the company's turnaround plan fails to deliver. If the US economy ends up in a recession or faces a sharp slowdown, the demand for gas-wasting SUVs will erode. But for those with the stomach to stay invested in the automaker through the ups and downs, Ford could be a very lucrative bet.
2. AT & T
The largest telecom operator in America, AT&T Inc (NYSE :), is another promising, albeit potentially high-risk bet for retirees. With an annual dividend yield of 5.5%, it offers one of the best returns available from a blue chip share with a long track record in paying dividends. The shares have risen 31% since the beginning of the year and close at $ 37.41 yesterday.
But with this return comes considerable uncertainty about this iconic brand as its core business, and the company is building a huge load of debt. The bleak performance of AT&T over the past five years is now under scrutiny, prompting its largest investors to openly question the plan of CEO Randall Stephenson to transform the company into a modern media giant by large companies over to take.
Although this strategy has made headlines and made investment bankers rich, it has also saddled AT&T with $ 186 billion in debt, making it the largest non-financial debt company in the world.
Last week, Elliott Management Corp., a hedge fund with an activist agenda and a $ 3.2 billion stake in AT&T, criticized Stephenson for his blockbuster acquisitions, including the $ 85 billion deal last year Time Purchase Warner assets. In a letter to the board, the hedge fund proposed a number of corrective measures to put the company on a sustainable growth path.
They include the sale of the loss-making DirecTV unit and the company's wireless activities in Mexico to keep Stephenson's team more responsible and to avoid major mergers and acquisitions.
For investors, the decision right now is whether AT&T will successfully transform its business and be able to compete with such entertainment industry disruptors as Netflix Inc. (NASDAQ :), and whether such & # 39; n success are $ Would save 0.51 per quarter.
3. Exxon Mobil
After cars & cell phones, energy is something that long-term investors should focus on to achieve a stable and growing return. One of America & # 39; s & # 39; super majors & # 39 ;, Exxon Mobil Corp (NYSE 🙂 certainly fits the bill.
The company has an impressive scale in everything from drilling to refining to the American shale region. And while the share is unlikely to generate huge gains for investors, it remains a top choice for energy bulls in the long run. Shares, which have only risen 1% since early 2019, closed yesterday's session for $ 68.95.
The multinational and giant is investing billions of dollars to improve its growth, unlike other major producers who are trying to stabilize their shares by cutting back on large spending.
Exxon CEO, Darren Woods, believes that the oil industry needs a significant injection of new investments to meet the new challenges and has launched a $ 230 billion plan to revitalize the company, focusing on drilling opportunities around the world.
XOM pays a quarterly dividend of $ 0.87 per share, with a return of 5%. But buying the stock means you are guessing that the future of major oil companies is safe and that Exxon will continue to produce enough cash to cover its payouts.
Investing in turnaround situations can yield huge returns over time. But these companies certainly bear more risk, so investors have to be very careful when deciding which high-yielding stocks to select.