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6 Dividend Stocks With Yields Higher Than the 10-Year Treasury – Barron's

It’s been a tough year for high-dividend stocks, but not all have struggled.

It’s no secret that high interest rates are a headwind for high-dividend stocks. During years of low to near-zero interest rates since the 2007-2009 recession, yield-hungry investors had little choice but to seek dividends.

But now, with virtually risk-free 10-year U.S. Treasuries yielding nearly 4.4%, it makes sense for investors to put their money into Treasuries rather than stocks, which are more likely to lose value. This is especially true because some very high stock yields are the result of large stock declines, and the two are opposite movements and a red flag for investors.

Additionally, at least some (though certainly not all) dividend stocks, even defensive companies, tend to be more stable. This holds little appeal for many investors today, as a resilient economy has supported continued market gains, including record closes for all three major indexes on Wednesday.of


Dow Jones Industrial Average,

of


S&P500,

And that


Nasdaq Composite

In 2024 alone, they hit new highs of $18, $23, and $8, respectively, and on Thursday, the Dow exceeded the $40,000 mark for the first time.

All these factors mean high dividend payers face an uphill battle. In fact, of the 42 S&P 500 stocks with dividend yields higher than the 10-year T-Note (as of Wednesday’s closing price), nearly all are lower than the index. Almost half of the companies, 18 companies, are in the red since the beginning of the year. That’s a grim number considering both the S&P 500 and Nasdaq are up more than 11% so far in 2024.

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Still, investors shouldn’t completely abandon the group, especially if interest rates start to fall. And even in today’s challenging environment, some companies are thriving. Five companies outperformed the S&P 500 index, and six companies were roughly in line with the index.

Tobacco giant Altria has the highest dividend yield in the S&P 500 at 8.55% and is up 13.7% since the beginning of the year through Wednesday’s close. This is notable because no other stock with a dividend above 5% outperformed the S&P 500’s 2024 gain of about 11%.

It also marks the end of a long period of devastation for Artoria. Altria suffered a series of blows in 2023 related to factors such as disappointing financial results, guidance, illegal e-cigarettes and brand equity concerns. Nevertheless, the company has taken several positive steps to boost investor confidence, including the sale of its Anheuser-Busch InBev stock and recent $1 billion share buyback plan.

Dominion Energy is next on the list, with a dividend yield of 5.02% and a year-to-date return of 13.2%. This too was a struggle for most of 2023. Many peers—As growth slows and dividends become higher couldn’t compete Due to rising government bond yields and market rebound. However, the sector’s recent gains could be at risk as the macroeconomic backdrop remains largely the same.

Pipeline operator Oneoku

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The company ranks third, with a 4.85% yield and 16.2% year-to-date profit in 2024. The company completed its split acquisition of Magellan Midstream Partners in September. The merger perplexed many investors, but it made the company one of the few players with natural gas pipeline capabilities. increasingly valuable goods recently.

This goes a long way to explaining how energy infrastructure company Williams has jumped to fourth place with a 16.2% increase, along with a 4.69% yield. This is how 2023 ended contract to buy Natural gas storage assets on the Gulf Coast. As U.S. natural gas production and demand continues to grow faster than natural gas storage and transportation capacity, midstream companies in bottleneck niches are likely to command higher rates. be.

Hasbro has the lowest dividend rate of 4.62% among the five companies, but its performance in 2024 was the best with an increase of 18.5%. This is a sharp departure from the company’s trajectory in late 2023 and early this year, when earnings and prospects disappointed expectations, sluggish sales led to layoffs, and there were concerns that the company would be forced to cut its dividend. . Investors may want more evidence before jumping on the bandwagon, although recent results in late April provided encouraging evidence that the turnaround is working.

Honorable mention goes to Citizen Financial Group
,

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It yields 4.56% and is up 11.2% year-to-date, just slightly below the S&P 500. This local bank is in the midst of an effort. Toward a stronger balance sheet and higher income. Investors may be wary of the sector following last year’s failures at Silicon Valley Bank and Signature Bank, and recent concerns over New York Community Bank, but investors believe Citizen is a safer bet. It is pointed out that it is one.

Email Teresa Rivas at teresa.rivas@barrons.com.

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