Investors value dividends for many reasons. First, companies that pay them are generally more stable, because unhealthy companies are unable to return value to shareholders in the form of dividends.
Even during economic downturns or recession, dividend stocks have historically shown growth, and long-term reinvestment of dividends is one of the best ways to build wealth in a portfolio.
As questions about the U.S. economy mount, here are three high-yielding dividend stocks that investors can buy and hold indefinitely: Ford Motor Company (NYSE: F), AT&T (NYSE: T)And Kraft-Heinz (NASDAQ: KHC).
A thriving business enterprise
Let’s start by addressing the sore point with Ford and the current economic uncertainty. The automaker’s balance sheet is in a great position to withstand a potential economic downturn, with nearly $27 billion in cash and about $45 billion in liquid assets at the end of the second quarter.
Ford is also addressing a major quality control issue after leading the U.S. auto industry in recalls for three straight years, which drove up warranty costs by $800 million in the second quarter. J.D. Power recently reported that the company jumped 14 spots to No. 9 in its 2024 U.S. Initial Quality Study. It will take more than a year for that improvement to offset warranty costs, but things are moving in the right direction.
Right now, a hot topic for Ford investors is its Pro division, the commercial van and truck segment that has seen its business soar. In the first half of 2024, Ford Pro generated $5.57 billion in earnings before interest and taxes (EBIT) with Operating result (EBIT) Margins reached nearly 16%. These results significantly outperformed those of the Blue segment, with its traditional gasoline vehicles, which generated $2 billion of EBIT on margins of 4.3%.
In the short term, Ford should continue to improve the quality of its vehicles, grow its Pro business, and limit losses in its electric vehicle division, Model-e. As the company moves forward, long-term investors can reap the benefits of its dividend yield, which is approaching 6%.
No more cuts
Some investors may be hesitant to buy AT&T stock for its dividend right now. That’s because the company cut its quarterly dividend in 2022 to pay down some of its debt.
In addition to paying down some of that debt, the company also generated $8.5 billion in free cash flow in the first half of 2024 and had more than enough cash on hand to pay $4.1 billion in dividends. The payout now appears safe from further cuts.
AT&T also showed strong signs of growth in the second quarter. The company added 419,000 new postpaid phone subscribers, well above the 285,000 estimated, and added 239,000 new AT&T fiber subscribers, making it the 18th consecutive quarter of more than 200,000 new subscribers.
Mobility services revenue increased 3.4% year-on-year, while consumer broadband revenue increased 7%.
Potential catalysts could come from a phone upgrade cycle, as new devices with artificial intelligence (AI) capabilities…
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