3 Dividend Stocks with 4%+ Yields for Income Investors

Disappointing stock market performance is negative, which is that dividend yields are rising across the market. Many stocks that had low dividend yields due to rising stock prices have seen their dividend yields rise. Even quality companies with solid business models are seeing their dividend yields reach multi-year highs.

The following three large-cap stocks have strong business models, industry leaders, and have high dividend yields of over 4%.

Intel Corp.

Intel (INTC) is the largest manufacturer of personal computer microprocessors, shipping about 85% of the world’s microprocessors. Intel also makes products such as servers and storage devices used in cloud computing. Intel employs more than 120,000 people worldwide and has a current market capitalization of $149 billion. The company generates approximately $67 billion in annual sales.

On July 28, Intel reported second-quarter results for the period ending June 30, 2022. Revenue fell 22% to $15.3 billion and was $2.6 billion below estimates. On an adjusted basis, revenue was down 17%. Adjusted earnings per share of $0.29 compared to $1.24 last year and were $0.41 less than expected.

Revenue for the PC-Centric business fell 25% to $7.7 billion for the quarter, largely due to component shortages as well as modem declines. The Datacenter and AI Group was down 16% at $4.6 billion. Network and Edge Group rose 11% to $2.3 billion on continued recovery from Covid-19. Mobileye and Accelerated Computing Systems and Graphics Group rose 41% and 5%, respectively. Intel Foundry Services fell 54%.

Intel now expects to see revenue of $65 billion to $68 billion for the year, below the consensus of $74.4 billion. The company is now forecast to earn $2.60 per share in 2022, down from $4.16 and $3.79 previously.

Even though Intel’s earnings are down this year, the company is generating more than enough cash flow to keep raising its dividend. On January 26, 2022, Intel increased its dividend by 5%. Intel generated $11.3 billion in free cash flow in 2021 and returned $8 billion to shareholders last year. While Intel stopped raising its dividend in 2014, the company has raised it every year since. Overall, the dividend has a CAGR of 5.3% since 2012. The stock currently yields 4.8%.

3M Co.

3M ( MMM ) sells more than 60,000 products used every day in homes, hospitals, office buildings and schools around the world. It has approximately 95,000 employees and serves customers in more than 200 countries.

On February 8, 3M announced that it raised its quarterly dividend by 0.7% to $1.49, extending the company’s dividend hike streak to 64 consecutive years.

3M is facing several lawsuits, including nearly 300,000 claims that its earplugs used by US combat troops and produced by a subsidiary were defective. On July 26, 3M announced that Aearo Technologies had filed for bankruptcy as it tries to settle lawsuits related to the combat earmuffs.

Meanwhile, the company continues to show strong profitability. In the second quarter, revenue fell 2.8% to $8.7 billion, but was in line with expectations. Adjusted EPS of $2.48 compared to $2.59 last year, but was $0.04 above estimates. Organic growth for the quarter was 1% as a stronger US dollar offset gains. The company also announced that it will spin off its Healthcare division into a standalone entity, which would have revenue of $8.6 billion in 2021. The transaction is expected to close by the end of 2023.

3M provided an updated outlook for 2022, with the company now expecting adjusted EPS of $10.30 to $10.80 for the year. With an annual dividend payment of $5.96 per share, 3M’s dividend is adequately covered by EPS. 3M isn’t recession-proof, but the company has proven itself resilient through the tough times of the economic cycle. While dividend growth has outpaced earnings growth in recent years, 3M’s dividend history is virtually unmatched. When the next recession hits, growth is likely to slow, although we don’t feel the dividend is in danger of being cut.

Shares currently yield 4.9%.

Kraft Heinz

Kraft Heinz (KHC) is a processed food and beverage company with a product portfolio that includes food products such as condiments, sauces, cheeses and dairy, frozen and chilled meals, and nutrition and infant nutrition. The company was created in 2015 in a merger between Kraft Food Group and HJ Heinz Company, orchestrated by Warren Buffett’s ( BRK.B ) Berkshire Hathaway ( BRK.B ) and 3G Capital.

Kraft Heinz announced its second quarter earnings results on July 27. The company’s revenue came in at $6.6 billion during the quarter, which was down 1% from what it generated in the year-ago period. This was slightly better than what the analyst community had expected.

Kraft Heinz’s organic sales rose 10%. Organic sales growth was driven by price increases, while volumes declined slightly. Currency headwinds and mergers and acquisitions were responsible for the decline in reported revenue.

The company generated EPS of $0.70 during the second quarter, which slightly beat the consensus estimate. EPS was down 10% compared to the prior-year quarter, impacted by a difficult comparison and unfavorable currency fluctuations. Kraft Heinz management said they see organic net sales growing at a high single-digit rate in 2022 and forecast EBITDA to be between $5.8 billion and $6.0 billion this year.

Kraft Heinz’s brands are strong and recognized by most consumers, and demand for food is not cyclical or dependent on economic conditions. Therefore, the company should be able to remain profitable in an economic downturn, just like most consumer staples companies. Kraft Heinz brands act as a competitive advantage.

The company does not have a long history of dividends. The dividend looks sustainable at the current level, with a payout ratio of 60%.

Shares currently yield 4.3%.

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