3 dividend stocks with 4%+ yields for income investors

The disappointing performance of the stock market has a silver lining, which is that dividend yields are rising across the market. Many stocks that had low dividend yields due to skyrocketing stock prices saw their dividend yields rise. Even quality companies with solid business models are seeing their dividend yields hit multi-year highs.

The following three large-cap stocks have strong business models, industry leadership, and high dividend yields of over 4%.

Intel Corp.

Intel (INTC) is the largest manufacturer of personal computer microprocessors, supplying about 85% of the world’s microprocessors. Intel also makes products such as servers and storage devices that are used in cloud computing. Intel employs more than 120,000 people worldwide and has a current market capitalization of $149 billion. The company generates about $67 billion in annual sales.

On July 28, Intel reported second-quarter results for the period ending June 30, 2022. Revenue fell 22% to $15.3 billion, and was $2.6 billion below estimates. On an adjusted basis, revenue fell 17%. Adjusted earnings per share of $0.29 compared to $1.24 in the prior year and were $0.41 less than expected.

Revenue for the PC-Centric business fell 25% to $7.7 billion for the quarter, mainly due to component shortages as well as modem cuts. Datacenter and AI Group was down 16% to $4.6 billion. Network and Edge Group grew 11% to $2.3 billion due to continued recovery from Covid-19. Mobileye and Accelerated Computing Systems and Graphics Group saw growth of 41% and 5%, respectively. Intel Foundry Services fell 54%.

Intel now expects revenue of $65 billion to $68 billion for the year, below consensus of $74.4 billion. The company is now expected to earn $2.60 per share in 2022, down from $4.16 and $3.79 previously.

Although Intel’s earnings have declined this year, the company is generating more than enough cash flow to continue increasing its dividend. On January 26, 2022, Intel increased its dividend by 5%. Intel generated $11.3 billion in free cash flow in 2021 and returned $8 billion to shareholders last year. While Intel stopped growing its dividend in 2014, the company has increased it every year since. Overall, the dividend has a CAGR of 5.3% since 2012. The stock currently yields 4.8%.

3M Co.

3M (Mmm) sells more than 60,000 products that are used every day in homes, hospitals, office buildings and schools around the world. It has approximately 95,000 employees and serves customers in more than 200 countries.

On February 8, 3M announced it was raising its quarterly dividend by 0.7% to $1.49, extending the company’s dividend growth streak to 64 consecutive years.

3M has faced several lawsuits, including nearly 300,000 claims that its earplugs, used by U.S. combat units and manufactured by a subsidiary, were defective. On July 26, 3M announced that Aearo Technologies had filed for bankruptcy as it looked to end lawsuits related to its combat earplugs.

Meanwhile, the company continues to report strong profitability. In the second quarter, revenue fell 2.8% to $8.7 billion, but was in line with expectations. Adjusted EPS of $2.48 compared to $2.59 in the prior year, but was $0.04 above estimates. Organic growth for the quarter was 1% as a stronger US dollar offset gains. The company also announced that it would spin off its healthcare segment into a standalone entity that would have $8.6 billion in revenue in 2021. The transaction is expected to close by the end of 2023.

3M provided an updated outlook for 2022, with the company now expecting adjusted earnings per share of $10.30 to $10.80 for the year. With an annual dividend payout of $5.96 per share, 3M’s dividend is amply covered by EPS. 3M isn’t recession-proof, but the company has proven resilient during the tough times of the economic cycle. While dividend growth has outpaced earnings growth in recent years, 3M’s dividend performance has been virtually unmatched. When the next recession hits, growth is likely to slow, although we don’t think the dividend is in danger of being cut.

The stock is currently yielding 4.9%.

Kraft Heinz

Kraft Heinz (KHC) is a processed food and beverage company that owns a product portfolio that includes food products such as condiments, sauces, cheeses and dairy products, frozen and chilled meals, and diet and infant nutrition. The company was formed in 2015 in a merger between Kraft Food Group and HJ Heinz Company, orchestrated by Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) and 3G Capital.

Kraft Heinz reported its second-quarter results on July 27. The company’s revenue came in at $6.6 billion in the quarter, a 1% drop from what it generated in the year-ago period. This was still slightly better than what the analyst community had expected.

Kraft Heinz’s organic sales rose 10%. Organic sales growth was driven by price increases, while volumes declined slightly. Headwinds in the Forex market and mergers and acquisitions were responsible for the decline in reported revenue.

The company generated earnings per share of $0.70 in the second quarter, which slightly beat the consensus estimate. EPS fell 10% from the prior-year quarter, impacted by a difficult comparison and unfavorable currency movements. Kraft Heinz management said it sees organic net sales growing at a high single-digit rate in 2022 and forecasts EBITDA to reach between $5.8 billion and $6.0 billion in the current year.

Kraft Heinz’s brands are strong and recognized by most consumers, and food demand is not cyclical or dependent on economic conditions. Therefore, the company should be able to remain profitable during economic downturns, as most consumer goods companies do. Kraft Heinz brands function as a competitive advantage.

The company does not have a long history of dividends. The dividend looks sustainable at the current level, with a payout ratio of 60%.

The stock is currently yielding 4.3%.

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