Meme Stock Mania Returns: Should You Dive In or Stay with Dividend Stocks?

Meme stocks are gaining momentum again, bringing back the social media trend that gained traction in 2021. While the social media frenzy has died down over the past three years, influential financial investor Keith Gill, going by the pseudonym Roaring Gill, has again brought the limelight to these speculative stocks. 

Gill made a fortune by buying meme stocks in 2021 and was one of the pioneers behind the original meme stock rally three years ago. In fact, GameStop's legendary ascent in early 2021, driven by a short squeeze, turned Gill into an online hero. 

The retired insurance analyst quit his job at MassMutual at the height of the meme stock rally, indicating significant profits he had reaped. 

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Gill has managed to bring back the meme stock trend once again. A few months ago, he posted a picture on the social media platform X, driving GameStop Corporation's GME shares up by over 75% in one day. Today, his endorsement still holds immense sway among retail investors. So far this year, GME shares have popped by over 23%. 

AMC Entertainment Holdings Inc. AMC, another popular meme stock, has risen by over 55% over the past three months, signaling renewed interest in meme stocks among retail investors. 

Dwindling Prospects 

The hype around meme stocks has a worrying familiarity. While millions of retail investors pocketed significant profits during the meme stock rally of 2021, many who couldn't comprehend the risks involved or keep up with the instantaneous changes in market trends incurred substantial losses. 

As the intrinsic value of popular meme stocks like GameStop and AMC Entertainment is the same, experts think it is only a matter of time before the current hype dies down. Meme stocks have been notoriously volatile historically – prices can plummet just as quickly as they rise. Companies with shaky finances or no clear growth plan are particularly vulnerable to sudden downturns once the social media enthusiasm tamps down.

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Dividend Stocks: The Safe Bet 

While the new age of finance and cheap zero-commission platforms like Robinhood has made it easy for investors to give in to the market hype without assessing the inherent risk factors, broader market indexes, on the other hand, have delivered stable returns throughout. While meme stocks were mostly in the red in the last two years, the S&P 500 index has risen by over 44% over the past two years. 

Altria 

Altria Group Inc. MO, one of the largest tobacco companies in the U.S., is a stalwart in the consumer staples sector. Altria currently pays $3.92 in dividends annually, yielding 7.84% on the current price, making it one of the highest-yielding stocks in the S&P 500.

The company is in the coveted Dividend Kings list, having raised its dividend payouts for 54 consecutive years as of 2023. In fact, Altria has raised dividends 58 times over the last 54 years. 

AT&T 

AT&T Inc. T, one of the largest telecommunications companies in the world, is popular among investors as a dependable income stock. While the company cut its dividend payouts by nearly 50% in 2022, it still pays $1.11 in dividends annually yielding 5.7% on the current price. AT&T's four-year average dividend yield stands at 7.16%. 

Over the past few years, the telecom powerhouse has focused on strengthening its core telecom business and expanding its 5G infrastructure. The divestiture of WarnerMedia and the merger with Discovery Inc. have streamlined AT&T's operations, allowing the company to concentrate on its strengths in connectivity and communication services.

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