Collecting an above-average dividend payment often comes with inherent risks. High-yielding stocks, for instance, can face cuts in their payouts if a company's underlying financials are weak. However, this doesn't imply that all such stocks are perilous investments. Let's explore two exemplary stocks - Pfizer and Verizon Communications - that offer yields exceeding 6% and can be ideal long-term choices for retirees.
Uncover the Hidden Gems in High-Yielding Stocks
Pfizer - A Healthcare Giant with Stable Dividends
This year, Pfizer's stock price has plummeted by more than 10% due to a bearish outlook, despite a generally strong market. Currently, it trades around its 52-week low, with an astonishing yield of around 6.8%. CEO Albert Bourla views the dividend as a "sacred cow," emphasizing its significance for investors relying on regular payments. Pfizer has an unbroken streak of 344 consecutive quarterly dividend payments and is one of the most stable income stocks in the healthcare industry.The company recently raised its 2024 guidance based on strong earnings. Nevertheless, investors remain concerned about the future, particularly regarding its operations under a new U.S. administration and the potential impact of changing regulations. However, the need for continuous innovation in healthcare remains constant. Pfizer's acquisition of oncology company Seagen last year showcased its aggressive growth strategy, costing $43 billion. It has also been acquiring smaller companies over the years to enhance its pipeline and growth prospects.Regarding patent cliffs, a concern for all healthcare companies with top drugs, Pfizer is well-prepared. By expanding and diversifying its operations, it is in a strong position to overcome these challenges. Bourla previously stated that by 2030, the company may generate up to $25 billion in revenue from new drugs and acquisitions, offsetting losses due to generics. Despite choppy earnings due to write-downs and COVID-19-related sales fluctuations, last quarter, Pfizer generated $6.1 billion in free cash flow, more than twice its dividend payment of $2.4 billion. The business is in better shape than some bearish investors might believe.Verizon Communications - A Telecom Giant with Steady Dividend Growth
Verizon offers retirees a tempting yield of 6.5% and has been increasing its dividend for 18 consecutive years. The most recent increase, by 1.9% in September, demonstrates the company's commitment to growing the payout. Although the business isn't growing rapidly this year, with a projected growth rate of 2% to 3.5% in its core wireless service business, there is potential for further expansion in the long run.Earlier this year, Verizon announced plans to acquire Frontier Communications for $20 billion, which will expand its fiber footprint to more markets. This deal is expected to be accretive to both the top and bottom lines and is expected to close in early 2026. As rates continue to decline and investors seek safety, Verizon's shares may soon start to rally. Despite not trading at its year-low, the stock is an incredibly cheap buy, with a price-to-earnings ratio of less than 9 times next year's estimated profits based on analyst expectations.In conclusion, both Pfizer and Verizon Communications present unique opportunities in the world of high-yielding stocks. While they come with their own set of challenges, their stability and growth potential make them worthy considerations for investors looking for reliable income streams.