This is a guest contribution by Bob Ciura of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth portfolios for the long run.
The average dividend yield in the S&P 500 Index remains low at around 1.3%. As a result, many stocks have lower dividend yields than they did several years ago, due to rising share prices.
However, there are still quality dividend stocks with high dividend yields.
Importantly, the best high dividend stocks can maintain their dividends over time, even during recessions.
These 3 dividend stocks have yields above 5%, and have secure dividend payouts.
Franklin Resources (BEN)
Franklin Resources, Inc., commonly known as Franklin Templeton, is a global investment management organization founded in 1947 and headquartered in San Mateo, California. The company offers various investment solutions, including mutual funds, ETFs, and other specialized strategies, catering to individual and institutional investors worldwide.
BEN is off to a good start to 2024, driven mainly by the strong performance of the stock market. In the 2024 first quarter, Franklin Resources grew ending assets under management (AUM) by 13.0% from the prior quarter to $1.64 trillion, and by 15.7% from the prior year. This growth was largely driven by the acquisition of Putnam Investments, favorable market conditions, and net inflows. Average AUM also saw a substantial rise of 11.4% from the prior year to $1.58 trillion.
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For the quarter, operating revenue totaled $2.153 billion, up 12% year-over-year. On an adjusted basis, net income equaled $307 million or $0.56 per share compared to $317 million or $0.61 per share in Q2 2023. During Q2, Franklin repurchased 0.4 million shares of stock for $11.7 million.
The company has invested in ETFs to adapt to the trend away from traditional mutual funds. Franklin’s ETFs ended the first quarter with $24 billion in AUM and generated $1.6 billion in net inflows, marking the 10th consecutive quarter of positive flows.
Recent acquisitions, such as Legg Mason, significantly boosted Franklin’s product offerings and AUM. It also gave Franklin Resources a stronger presence in high-growth emerging markets, particularly in Asia and Europe. It also closed its acquisition of Putnam Investments on January 1, 2024. At the time, Putnam had $148 billion in AUM.
Franklin Resources has several competitive advantages that give it a strong position within the investment management industry. One of its key strengths is its global diversification, with a presence in over 30 countries and a broad array of investment products, including equities, fixed income, alternatives, and multi-asset strategies.
The company’s steady growth has rewarded shareholders with consistent dividend increases. BEN has increased its dividend for 44 consecutive years. It is on the exclusive list of Dividend Aristocrats. Shares of BEN currently yield 5.4%.
Kinder Morgan Inc. (KMI)
Kinder Morgan is among the largest energy companies in the U.S. It is engaged in storage and transportation of oil and gas, and other products. It owns an interest in or operates approximately 83,000 miles of pipelines and 144 terminals. Its pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide (CO2) and more.
Kinder Morgan’s transportation assets operate like a toll road, whereby the company receives a fee for its services, which generally avoids commodity price risk. Approximately 90% of Kinder Morgan’s cash flow is fee-based.
Kinder Morgan has significant network and economies of scale competitive advantages as one of the largest energy companies in the U.S. and the largest natural gas transporter, moving approximately 40% of the natural gas used in the U.S. It is also the largest independent transporter of petroleum products and carbon dioxide, and the largest independent terminals operator.
The company announced first quarter earnings per share (EPS) of $0.33 and distributable cash flow (DCF) per share of $0.64, marking a 10% and 5% increase, respectively, compared to the first quarter of 2023. Net income attributable to KMI reached $746 million, up from $679 million in the same quarter last year, while DCF amounted to $1,422 million, compared to $1,374 million in the first quarter of 2023.
Kinder Morgan’s biggest growth catalysts for the future are new pipeline and terminals projects. Natural gas is a compelling growth catalyst and continued to drive growth in the first half of this year. Natural gas is rapidly replacing coal, which gives Kinder Morgan a major advantage. The company plans to continue investing in growth projects in 2024 and expects to fully fund it with internally generated cash flow without the need to access capital markets.
For 2024, we expect Kinder Morgan to generate DCF per share of approximately $2.25. This provides sufficient coverage of the annual dividend payout of $1.15 per share. With a dividend payout ratio of 50%, the current payout appears secure, with room for modest increases each year. KMI stock currently yields 5.4%.
Pfizer Inc. (PFE)
Pfizer Inc. is a global pharmaceutical company focusing on prescription drugs and vaccines. Its top seven products are Eliquis, Ibrance, Prevnar family, Vyndaqel family, Abrysvo, Xeljanz, and Comirnaty. The company had revenue of $58.5 billion in 2023.
Pfizer reported Q1 2024 results on May 1st, 2024. Company-wide revenue fell (-19%) to $14.6 billion, and adjusted diluted earnings per share declined 33% to $0.82 versus $1.23 on a year-over-year basis, mostly due to declining COVID-19 related sales.
The company saw strong sales growth across multiple legacy and new products. For example, sales of Eliquis rose 10%, while Xtandi increased 23%. Higher-growth products include Vyndaqel/ Vyndamax, which generated 66% year-over-year sales growth.
Pfizer kept revenue guidance at $58.5 billion to $61.5 billion and raised adjusted diluted EPS guidance to $2.15 – $2.35 for 2024. As expected, sales of Pfizer’s COVID-19 vaccine (Comirnaty) and the anti-viral drug (Paxlovid) continue to trend downward as the coronavirus pandemic has ended. Since 2021, the company has invested in its pipeline and in acquisitions to fuel future growth.
Recent acquisitions include Trillium for its cancer drug candidates, Arena for its autoimmune candidate, ReViral for its RSV programs, Biohaven for its CGRP assets (migraines), GBT for its sickle cell disease treatments, and Seagen for its ADC technology.
Pfizer is one of the largest pharmaceutical companies in the world. As such, it has scale in R&D, manufacturing, regulatory affairs, distribution, and marketing around the world.
Pfizer currently pays a quarterly dividend of $0.42, for an annualized rate of $1.68 per share. This equates to a current dividend yield of 5.6% for Pfizer stock. Pfizer has increased its dividend for 15 consecutive years, although annual hikes have been in the 2%-3% range for several years.
Based on expected EPS of $2.25 per share for 2024, Pfizer should have a dividend payout ratio near 75% for the year. This is a high payout ratio, but the dividend appears secure at the current earnings level.
Disclosure: No positions in any stocks mentioned
