Part of the riddle to building a successful investing portfolio is finding stocks that appreciate in value over the years. A second, and just as important aspect to a successful investing strategy, is putting your money to work in stocks that generate income.
Dividends are huge part of investing. Whether you use the dividend income in a reinvestment program, or use the payments to supplement your income, dividends can greatly increase your stock portfolio’s power.
This is especially true in today’s market. There remains a lot of volatility in the market and dividend stocks are often used as defensive investments when the overall market conditions are unclear. We are also in a period of rising interest rates. Higher rates ultimately result in a money transfer away from stocks and into fixed income assets that are suddenly producing higher yields. Rates remain low, so high-yielding dividend stocks are partially protected from this sort of money transfer which is why we want to take a look at a few stocks with high yields that you can use to boost your overall income.
PNC Financial (PNC)
PNC Financial (PNC) is a regional U.S. bank. PNC stock showed weakness during the second half of 2018, but shares have started to recover, and analysts see a lot of upside in the stock after last year’s decline. The stock hit a 52-week low of $108.45 in December but has since risen to $122.85 and analysts have an average price target of $141.00. The stock is currently yielding 3.1% and is trading at just 10 times forward earnings. Analysts see consistent earnings growth and forecast profits to rise 8.3% per annum over the next five years as higher interest rates give the financial sector a boost. The company reported slightly weaker than expected numbers in mid-January, but shares avoided a selloff, partially due to the stock’s low valuation and expectations of at least two more interest rate hikes in 2019 which will help drive the bottom line. PNC has increased its dividend eight straight years.
United Parcel Service (UPS)
United Parcel Service (UPS) has an attractive yield of 3.3%. The stock is currently trending higher, fueled in part by a positive earnings beat at the end of January. The stock sold off in December with the rest of the market, but shares have already recovered the majority of their recent losses and will look to break through a critical level of resistance at $115. UPS is now trading at $110.90, and analysts have set an average price target of $121.50 which is approaching the stock’s all-time high. With the current earnings season behind it, UPS should continue to build on its recent gains barring another overall market correction. Consumer sentiment is strong, and the overall economic landscape remains upbeat, both of which should continue to drive demand and keep UPS shares rising. UPS has a nine-year streak of dividend increases.
Leggett & Platt (LEG)
Home furnishings maker Leggett & Platt (LEG) traded down to a 52-week low of $33.48 in December, but the stock has been a strong performer so far in 2019 and rallied all the way back to $44.25. The stock has traded higher in sympathy to the overall market recovery and was helped by strong quarterly report at the start of February that topped estimates on both the top and bottom line with earnings up 5% year over year. LEG has a dividend yield of 3.4%, and is trading at less than 17 times future earnings. Analysts continue to see upside in the stock with an average price target of $46.00. LEG is a dividend aristocrat with a 47-year streak of dividend increases.
Telecom giant Verizon (VZ) has always been a high yielding stock, and VZ currently offers shareholders a nice 4.4% dividend yield. Verizon is in a very competitive market, but the huge barriers of entry into the telecom sector allow for strong pricing power for the few companies that have managed to rise to the top of the sector. The U.S. market is saturated at this point, but Verizon has consistently been able to show earnings growth with profits up 6.9% per annum over the last five years and expected to grow at an annual average rate of 9.5% over the next five years. The stock has a very low valuation, with shares trading at just 11.4 times future earnings. The company posted mixed quarterly numbers in January, with profits topping estimates and rising 30% year over year. Revenues fell short but were up a modest 1% versus the same period last year. VZ is in a sideways trend and trading at $54.51. Analysts have an average price target $59.63. Verizon has a 12-year streak of dividend increases.
Kimberly-Clark (KMB) is a dividend aristocrat with a long 46-year streak of growing its dividend which currently sits at 3.5%. The stock is currently trading just shy of its 52-week high at $116.15 and analysts have an average price target of $109.20. The company reported earnings towards the end of January with mixed results. Profits fell a bit short of the consensus while revenues were higher than expected. The stock initially fell on the earnings miss, but the selloff was short-lived and KMB is back to where it was ahead of the report. Overall economic conditions remain favorable which should keep strength in the consumer goods sector. KMB has enjoyed modest earnings growth of 2.7% over the last five years, and analysts see much of the same moving forward with forecast average annual earnings growth of 2.9% for the next five years.