3 Safe Stocks to Buy Before October Ends for an Instant 7.4% Yield
Tobacco and pipeline giants rarely share the spotlight, but three companies spanning both sectors are quietly raising their payouts while most investors chase growth stocks that pay nothing at all.
Tobacco and midstream energy remain two of the most reliable cash sources an income investor can own, and these three names back their payouts with solid cash-flow coverage. Using each company’s annualized forward payout and the latest closing prices, Altria (NYSE:MO | MO Price Prediction), Enterprise Products Partners (NYSE:EPD) and British American Tobacco (NYSE:BTI) blend to an ultra-high forward yield of roughly 6.1%. Each of the three raised its payout within the past year.
Altria: A Fresh Raise Backed by Growing Earnings
Altria’s trailing yield is 5.94%, but the latest raise to $1.11 per quarter lifts the forward yield to about 6.2% at a $71.66 share price.
Dividend safety: The new annual rate represents roughly 79% of the low end of full-year adjusted EPS guidance of $5.61 to $5.72, which management narrowed while raising the bottom end. This is high but standard for a mature tobacco business. The quarterly payout has risen every year from $0.80 in 2019 to the current level. Altria returned roughly $3.9 billion to shareholders in the first half via dividends and repurchases. Years of buybacks have left equity negative at $2.618 billion, and the company holds $2.367 billion in cash.
Bull case: Shares trade at about 12 times forward earnings with a beta of 0.461, so this income stream comes with low volatility. Shares are up 30.31% year to date.
Risk: Marlboro’s retail share fell 1.5 points to 39.5% while domestic cigarette volume declined 5%.
Enterprise Products Partners: 1.9x Coverage Leads the Group
Enterprise’s trailing yield is 6.0%. Its $2.24 annualized forward distribution works out to a yield of about 6.2% at a share price of $35.91. The $0.56 distribution has an ex-date of October 30.
Dividend safety: Operational distributable cash flow reached $2.3 billion last quarter, covering the distribution 1.9x. Over the trailing 12 months, distributions plus buybacks used just 56% of adjusted operating cash flow. Leverage is at the partnership’s 3.0 net target, about 97% of debt is fixed-rate, and liquidity is around $5 billion. Enterprise has paid quarterly distributions without interruption since 1999, and the payout has grown from $0.225 back then.
Bull case: Adjusted EBITDA hit a record $2.83 billion, up 17%, and $6.5 billion of organic projects are under construction. Those projects lay the foundation for future raises. CNBC’s Jim Cramer recently called it “a really well-run company.”
Risk: Management warned that new export capacity arriving over the next 12 to 18 months could bring “just overall lower rates” on terminal fees.
British American Tobacco: Biggest Raise at the Lowest Multiple
British American Tobacco’s ADR has a trailing yield of 6.02%. Its annualized forward payout of $3.339404 comes to about 6.0% at $55.62.
Dividend safety: The quarterly ADR payment rose to $0.834851 from $0.749068 a year earlier and $0.743059 before that. The trailing dividend uses about 63% of earnings, the most comfortable payout ratio in this group. Operating cash flow of $6.342 billion far exceeded capex of $551 million. Management targets leverage of 2.0x to 2.5x adjusted net debt to EBITDA by year-end and has committed to a £1.3 billion buyback.
Bull case: At about 11 times forward earnings, British American Tobacco is the cheapest of the three. Modern Oral segment revenue rose 47.4% to $1.165 billion, and guidance calls for 5% to 8% adjusted diluted EPS growth.
Risk: Because the dividend is declared in British pence, currency fluctuations affect what U.S. holders actually receive. Management expects an approximately 3% translational foreign-exchange drag this year.
Three Covered Payouts Near a 6% Floor
Enterprise has the best payout coverage, British American Tobacco has the lowest payout ratio and valuation, and Altria has the steadiest record of annual raises. Together, they produce a forward yield of approximately 6.1%, and every payout is backed by real cash flow. Enterprise’s next ex-date falls in late October.
Contact [email protected] for any questions or corrections.
Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad, diverse career, including a stint as creative services director at an NBC affiliate in Austin, Texas, gives him unique insight into the financial industry.
Lee Jackson's journey in the financial industry spans more than 30 years, including nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career spanned pivotal sell-side Wall Street events, from the dot-com rise and bubble to the Long-Term Capital Management debacle, 9/11, and the Great Recession of 2008. This reflects his resilience and adaptability amid market volatility.
Lee Jackson’s practical financial industry experience, gained through a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing across various platforms. This unique combination allows him to shed light on the intricacies of Wall Street in a way only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.
Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.
