Even though interest rates have plunged back to the levels seen six and seven years ago, the reality is that we are in some of the lowest rate levels in over a generation. With the possibility that the Federal Reserve will continue to lower rates this fall, the 30-year Treasury bond has fallen to a paltry 2.10% coupon. Pretty small for committing capital to an investment for 30 years.
The problem for many income investors is they need higher yields but can’t risk buying junk bonds or highly leveraged closed-end and exchange-traded funds. The answer may be to look back to blue chip income stocks, as some of the top stocks that have paid consistent, dependable long-term dividends have been hammered.
We screened our 24/7 Wall St. research database and found five companies that all pay at least a 6% dividend and offer a reasonable degree of safety. While not intended to replace guaranteed issues like Treasury bonds or certificates of deposit, they make sense for those who have a slightly higher risk tolerance.
This is one of the top pharmaceutical stock picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.
One of the biggest concerns with AbbVie is what might eventually happen with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so in June it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth.
AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.
AbbVie shareholders receive a rich 6.50% dividend. The Wall Street consensus price target for the shares is $85.25. The stock closed trading on Friday at $65.97.
This maker of tobacco products offers value investors a great entry point now, and it took a hit recently as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro, one of the most valuable brands in the world.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. In December 2018, the company acquired 35% of Juul Labs. The company also has purchased a 45% stake in cannabis company Cronus for $1.8 billion.
In addition, the company raised its dividend last week for the stunning 54th time in the past 50 years.
Shareholders of Altria now receive an outstanding 7.24% dividend. The consensus price target is $57.67, and the stock was last seen trading at $46.84.
This venerable automotive giant remains a solid value play now, and demand could jump with a trade deal with China paving the way. Ford Motor Co. (NYSE: F) is one of the world’s largest vehicle producers, with over 6 million units manufactured and sold globally. The company has made significant progress executing on its One Ford plan and delivering best-in-class vehicles.