This year could prove to be a tricky one for investors. The economy appears to be on a firmer footing than it was previously presumed to be. As a result of that surprising strength, however, the Federal Reserve may not be cutting interest rates as soon or as aggressively as hoped. Political turmoil and uncertainty as to who will be the next president of the United States further complicates matters.
As a result, this may be a time to worry less about finding the right growth stocks — or even the right value stocks — and instead just pocketing as much cash as you can while you can.
With that as the backdrop, here’s a rundown of three high-yield dividend stocks to consider scooping up before the calendar moves further into 2024.
1. British American Tobacco
A tobacco company? In this environment? What about the worldwide smoking cessation movement?
There’s no denying efforts to get people to stop smoking are getting traction — but it’s not getting nearly as much traction as you might expect. Numbers from The Tobacco Atlas indicate the worldwide prevalence of regular smokers has fallen from nearly 23% of the population in 2007 to around 17% now; sheer population growth has kept the absolute number of smokers steady during that time.
Moreover, forecasts from the World Health Organization suggest the global number of tobacco users is only apt to be 4% less in 2025 than it was in 2015. That’s modest progress, at best.
For income-minded investors, though, it’s an opportunity.
Enter British American Tobacco (NYSE: BTI), parent to familiar cigarette brands like Camel, Pall Mall, and Lucky Strike.The total number of cigarettes it sells has actually held surprisingly steady in recent years, and any contraction it’s experienced on the cigarette front has been offset by growth from its vaping and tobacco-heating brands like Vuse and Glo (respectively).
Even British American Tobacco knows its cigarette business is living on borrowed time. The company plainly states, “our purpose is to build ‘A Better Tomorrow’ by reducing the health impact of our business through offering a greater choice of enjoyable and less risky products for our consumers.” Its foray into heated tobacco and vaping is part of that plan.
Even the relative safety of such products remains in question, though. The odds of its products remaining marketable into the distant futures seem low. That’s why British American Tobacco can’t be viewed as a true “forever” holding. The clock is ticking.
Its eventual end is arguably years and years down the road, however. You can plug into what’s still a robust cash-creating operation in the meantime, stepping in while the stock’s dividend yield is a similarly robust 9.7%.
2. Annaly Capital Management
Unlike British American Tobacco, Annaly Capital Management (NYSE: NLY) is a high-yield dividend stock you could hold on to indefinitely — maybe even for a lifetime. Better yet, today’s buyer will be getting in at an incredible yield of 13.5%. Not bad. Even if its payout never grows again or the underlying stock never makes gains again, that’s still better than the stock market’s average annual gain.
Realistically speaking, though, neither of those possibilities is a serious risk.
Annaly Capital Management isn’t a conventional company. It’s actually a real estate investment trust, or REIT, for short. That usually means the organization owns rent-bearing or revenue-bearing properties like apartment buildings, office buildings, or hotels. In Annaly Capital’s case, however, it also means holding bundles of mortgage loans or even owning access to mortgage-servicing rights.
The key to success in the business? Earning more interest than you’re paying out on money you’ve borrowed to buy assets, and collecting more in rent than a property costs you own.
That’s been easier said than done of late. Interest rates on short-term borrowing have been greater than interest rates on long-term loans since the middle of 2022 (you may have recently heard this relatively rare phenomenon described as an inverted yield curve), throwing a wrench in the normal operating mechanics of REITs. Indeed, Annaly Capital’s dividend has actually been regularly reduced since 2010, thanks to the abnormally low interest rates that have been in place since 2009.
The thing is, interest rates are now back near long-term norms, and likely to remain there for the foreseeable future. The yield curve is also inching its way back toward being un-inverted, restoring real estate investment trusts’ usual profitability. It’s conceivable that Annaly’s dividend will finally go from being pressured by crimped cash flow to being expanded by wider margins. At the very least, the bulk of any dividend cuts are now in the past.
3. Realty Income
Last but not least, add real estate investment trust Realty Income (NYSE: O) to your list of ultra-high-yield dividend stocks to own if safe income is a priority for you in 2024.
OK, it may not be ultra-high-yield. While its dividend yield of 5.7% is certainly respectable — and above the overall market’s average yield — that doesn’t hold a candle to the kind of payouts British American Tobacco and Annaly Capital Management shareholders are seeing on their investments. It’s still an attractive yield, though, given the relatively low degree of risk shareholders are taking on with Realty Income.
Like Annaly Capital Management, Realty Income is a REIT. But it’s a very different kind of REIT. Realty Income’s focus is retail real estate. Its top tenants are Walgreens, Dollar General, and Dollar Tree, although it’s also landlord to names like Walmart and Starbucks.
At first blush, this niche seems risky. Brick-and-mortar retailing is a relatively cyclical business after all, and the industry as a whole is competing with e-commerce’s growth.
Dig deeper, though: While retailing as a whole may be under fire, the bulk of Realty Income’s tenants tend to be consumer staples retailers and essential service providers like gas stations. In fact, the REIT’s management estimates that 91% of its total rent flow comes from tenants that are “resilient to economic downturns and/or isolated from e-commerce pressures.” These tenants also tend to remain in place once a store has been established, as they’ve already invested so much money in setting up shop in a particular location.
This is why Realty Income’s been able to not just fund 643 consecutive monthly (yes, monthly) dividend payments, but raise its payout for 105 consecutive quarters. You won’t find a much better track record than that — especially with a stock yielding as much as Realty Income is right now.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income, Starbucks, and Walmart. The Motley Fool recommends British American Tobacco P.l.c. and recommends the following options: long January 2026 $40 calls on British American Tobacco P.l.c. and short January 2026 $40 puts on British American Tobacco P.l.c. The Motley Fool has a disclosure policy.
Want Super-Safe Dividend Income in 2024? Invest in the Following 3 Ultra-High-Yield Stocks. was originally published by The Motley Fool