The average stock on the S&P 500 yields just 1.3%. That’s a modest return on your money, but that’s only the average. There are many dividend stocks that pay you much more than that. While you don’t necessarily want to go for double-digit yields (which involve stocks that tend to be extremely risky), you can find plenty of safe, high-yielding stocks to own and hang on to for the long haul.
Three high-yielding stocks with strong financials that you may want to consider adding to your portfolio today are UnitedHealth Group (NYSE: UNH), Restaurant Brands International (NYSE: QSR), and AT&T (NYSE: T).
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Health insurance giant UnitedHealth is the type of stock that can make for an excellent long-term holding in your portfolio. This year, it has been struggling and facing a lot of adversity due to question marks around its billing practices, and rising costs have caused it to underperform expectations recently. That has pushed the healthcare stock to multi-year lows.
But over the long term, the business can and should recover. Insurance companies can be polarizing and controversial, but they’re also necessary to help keep costs down for patients and industries. UnitedHealth’s current problems may seem daunting, but years from now, they may be resolved and no longer weigh on its share price.
UnitedHealth is massive, with the company reporting more than $400 billion in sales last year and a profit of $14 billion. Its payout ratio is still fairly modest at just 35% of earnings, so it’s in a good position to continue making regular payments for the foreseeable future.
Although the stock is trading down 40% so far this year (as of June 24), UnitedHealth can be an underrated income-generating investment to buy and hold.
You can collect even more dividend income from Restaurant Brands International. The restaurant company owns iconic and popular brands such as Burger King, Tim Hortons, Popeyes, and Firehouse Subs. It has grown via acquisitions and by expanding into new markets.
Fast-food restaurants are facing challenges amid rising prices and consumers using GLP-1 weight loss drugs, which can curb appetites. But fast food still offers consumers a fairly low-cost option for eating out, and with top brands in its portfolio, Restaurant Brands can be among the better fast-food stocks to own over the long haul.
Last year, it earned $1.4 billion in profit on sales of $8.4 billion, for a solid profit margin of 17%. Its payout ratio is around 80%, which is a bit high but suggests the dividend is sustainable nonetheless. The company’s free cash flow has totaled $1.2 billion over the past four quarters, which is more than the $1 billion it has paid out in dividends over that time frame, and it further demonstrates the safety of its payout.
AT&T is the highest-yielding stock on this list, and it wasn’t all that long ago that its yield was even higher. Investors have been bullish on AT&T with its share price rising more than 53% over the past 12 months. The company has proven that its operations are safer than they appeared to be even a few years ago when it was still involved in streaming.
Last year, it announced it was selling its stake in DirecTV as it focuses solely on its telecom operations. The company is effectively sacrificing some diversification and growth opportunities in exchange for greater stability and better overall financials. But that’s not to say it isn’t still planning on growing. It recently announced it will be acquiring nearly all of Lumen‘s mass-market fiber business, which will help it grow its fiber locations — AT&T plans to double its reach and hit 60 million locations by the end of 2030.
AT&T expects to generate at least $16 billion in free cash flow this year, which puts it in an excellent position to continue paying its dividend, which costs it about $8.3 billion per year. By simplifying its business and being a pure-play telecom investment, it’s a much more attractive stock for income investors to buy and hold.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Restaurant Brands International and UnitedHealth Group. The Motley Fool has a disclosure policy.
