Demand for fixed-income equities has been high of late, on expectations that US Treasury yields will remain subdued in the second half of the year, amid fresh signs that the economic recovery from the pandemic could slow down.
That has prompted investors to enter companies whose dividend payments are better than those on US Treasuries.
Indeed, the ProShares S&P 500 Dividend Aristocrats ETF (NYSE:) — a measure of companies that have increased their dividends annually for the past 25 years or more — is up 13.5% this year, trading just below its all-time high ever.
With that in mind, we looked at the three stocks below, which may offer some of the best long-term growth opportunities available today and are worth considering given their high dividend yields and strong earnings growth.
1. Philip Morris International
Dividend yield: 4.79%
Market Capitalization: $153.7 billion
Performance to date: +19.1%
Philip Morris International (NYSE:), which was spun off from in 2008 Altria (NYSE:), is an American-Swiss multinational cigarette and tobacco manufacturer. The most recognized and best-selling product, sold in more than 180 countries around the world, is the Marlboro brand.
The New York City-based company has benefited from its recent shift to reduced-risk tobacco products, most notably its iQOS smoke-free heated tobacco device, which releases nicotine by heating rather than burning tobacco.
PM shares — up about 19% so far — closed at $98.65 Tuesday, ahead of a recent three-year high of $100.94 reached on June 16. At its current level, the Big Tobacco company has a market value of $153.7 billion.
Good quality blue chip dividend stocks typically perform well in a low bond yield environment. The tobacco company currently offers a quarterly dividend of $1.20 per share, which equates to an annualized dividend of $4.80 per share, with a yield of 4.79%.
By comparison, the return on the US benchmark was about 1.36% at the end of Tuesday.
Philip Morris, who posted last quarter and raised his full-year outlook, is expected to report next profit before the US market opens on July 20.
Consensus calls for second-quarter EPS of $1.55, an improvement from earnings per share of $1.29 in the same period a year ago. Revenue is expected to grow approximately 15% year-over-year to $7.68 billion, driven by the continued strength of IQOS, as well as further progress in cutting operating costs.
In addition, shareholders will pay close attention to PM's plans to return more money to investors. The company approved a new share repurchase plan of up to $7 billion in the last quarter.
2. Kinder Morgan
Dividend yield : 5.82%
Market Capitalization: $41.7 billion
Performance to date: +34.9%
Kinder Morgan (NYSE:) is one of the largest energy infrastructure companies in North America. The company's core activities include the transportation of , , and related products through its extensive network of pipelines and terminals.
The Houston, Texas-based petroleum company — which operates approximately 85,000 miles of pipeline and 152 terminals — is the largest U.S. independent carrier of refined petroleum products and carbon dioxide.
KMI shares, which are up about 35% in 2021, ended yesterday at $18.44, not far from the recent 13-month high of $19.29 reached on June 11. At current levels, the energy pipeline giant has a market cap of $41.7 billion.
High dividend stocks typically respond well in a low interest rate environment as the pursuit of yield intensifies. Kinder Morgan increased its quarterly dividend in April by 3% to $0.27 per share. This represents an annualized dividend of $1.08 and a yield of 5.82%, one of the highest in the midstream energy sector.
In addition, lower rates usually lead to a weaker , which in turn increases the value of dollar-denominated oil futures contracts as this "black gold" makes it cheaper for buyers in other currencies. This tends to help stocks of energy-related companies.
Kinder, which reported and had sales that easily exceeded expectations in the previous quarter, reports the following financial results after the US market closes on July 21.
Analysts are calling for second quarter EPS of $0.18 on revenue of $2.87 billion. Aside from the top and bottom-line numbers, investors will be eager to hear whether the pipeline company plans to return more cash to shareholders in the form of higher dividend payments and share buybacks.
3. Real estate income
Dividend yield: 4.19%
Market Capitalization: $26.5 billion
Performance to date: +9.8%
Realty Income (NYSE:) is a real estate investment trust (REIT) specializing in detached retail and commercial real estate in the US, Puerto Rico and the UK.
The company, which owns 6,662 properties totaling more than 115 million rentable square feet, focuses on businesses less threatened by e-commerce or recession, such as convenience stores such as Walgreens Boots Alliance (NASDAQ:) and 7- Eleven, as well as discount stores, such as Dollar Tree (NASDAQ:) and Dollar General (NYSE:).
It also focuses on non-discretionary companies with a service component, such as fitness centers and movie theaters, such as LA Fitness and AMC Entertainment Holdings (NYSE:).
Up about 10% to date, O shares ended Tuesday's session at $68.25, giving the San Diego, California-based REIT a valuation of $26.5 billion.
The company's substantial dividend payments and attractive returns make Realty Income a likely candidate to outperform in the coming months as government bond yields languish near multi-month lows.
Realty is one of the few REITs that pays monthly rather than quarterly dividends, and has the term "The Monthly Dividend Company" used as an official nickname.
The real estate company – which has increased its dividend for 94 consecutive quarters – currently offers a monthly payout of $0.235 per share. This represents an annualized dividend of $2.82 per share and a yield of 4.19%, making it an extremely attractive game in the current environment of declining interest rates.
