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Investing in dividend stocks can provide a robust solution for those navigating market uncertainty. The appeal of receiving regular cash deposits from financially sound companies can be a compelling draw. Currently, the S&P 500 (^GSPC 0.13%) boasts an average dividend yield of 1.40%, but savvy investors can discover individual companies offering much more attractive yields.
Here are two high-dividend stocks worth considering now.
1. AT&T
The stock of AT&T (T 0.37%) has seen an impressive increase of 68% over the last year. This telecommunications titan is taking strategic steps to reduce its debt by selling off its remaining stake in DirecTV and concentrating on expanding its 5G wireless service along with fiber internet offerings. These initiatives are aimed at ensuring a steady free cash flow, crucial for sustaining its high dividend payouts.
With millions around the globe continuously paying their monthly phone and internet bills, AT&T stands out as a prime candidate for dividend investments. The company projects it will generate $16 billion in free cash flow by 2025, while its current dividends account for less than half of that amount, translating to a quarterly dividend of $0.2775.
After a dividend cut in 2022, AT&T has managed to decrease its debt levels, alleviating prior pressures on its stock. The reduced debt has enabled management to pivot towards growth, particularly within its fiber internet initiatives. As of the end of 2024, AT&T had expanded to 29 million fiber locations, with a goal of hitting 50 million by 2029.
Additionally, AT&T’s wireless postpaid business is thriving. The company has experienced a drop in customer cancellations, attributing this success to improved service quality. In the previous year, it added 1.7 million postpaid subscribers, leading to an increase in free cash flow that may allow for future dividend hikes.
Given these developments, AT&T presents a compelling case as an investment for stable income in 2025 and beyond, offering a forward dividend yield exceeding 4% even after its recent stock climb, along with the prospect of further price appreciation.
2. Hershey
Hershey (HSY 1.33%) has witnessed a reduction in its stock value due to soaring cocoa prices, diminishing consumer spending, and intensified competition in the chocolate sector. Despite these challenges, this iconic 130-year-old brand maintains a robust track record, having paid 380 consecutive dividends, with current yields reaching levels not seen in 15 years.
While high cocoa costs have affected Hershey’s stock performance, historical patterns suggest that commodity price spikes typically self-correct. Elevated prices often motivate more producers to increase output and stabilize supply over time.
In response to market conditions, Hershey is actively refining its supply chain and investing in growth avenues. The company aims to realize $350 million in cost savings in the coming years while also focusing on high-return investment opportunities. Notably, demand for salty snacks is strong, with brands like SkinnyPop and Dot’s Pretzels gaining traction. Hershey has also announced plans to acquire the organic snack company LesserEvil, which could enhance its growth prospects and alleviate challenges in the chocolate segment.
Despite the downturn in candy sales, Hershey is weathering the storm fairly well. In its fourth quarter, sales rose by 9% year over year, and company forecasts predict at least a 2% increase in sales for 2025, even as cocoa prices strain earnings in the short term.
Analysts predict that Hershey’s adjusted earnings for 2025 will decline to $6.10, down from $9.37 in 2024. This level of earnings still suffices to support a quarterly dividend of $1.37.
Currently, Hershey’s forward dividend yield stands at 3.22%. The decline in cocoa prices since the beginning of the year has led to a recovery in Hershey’s stock, and investors may find further growth potential as they look beyond current challenges towards the company’s long-term outlook.
Source
www.fool.com