The timeless adage "buy low, sell high" has attracted countless people to the stock market. But as many discover the hard way, the strategy is easier said than done.
Stocks don't always go up. Even though the S&P 500 is up 17% in 2023, it's still down compared to where it was at the end of 2021.
The good news? You don't have to actively trade stocks to make money. You can also collect dividends.
With the right dividend stocks, investors can bypass the stress and uncertainty associated with attempting to time the market while benefiting from a steady stream of passive income.
Business magnate John D. Rockefeller once said, "Do you know the only thing that gives me pleasure? It's to see my dividends coming in."
But most companies don't pay much these days. The average dividend yield of S&P 500 companies is just 1.5% at the moment.
But some companies pay much more. Here's a look at two companies Wall Street finds particularly attractive — they yield up to 7.9%.
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- Passive income investments are one of the most trusted methods for riding out a recession so it's no surprise that people are turning to high-yield notes that pay a fixed 7.5% to 9%.
- A REIT you've probably never heard of is up 36% over the past two years. Here's how its unique model is crushing the market.
Plains All American Pipeline PAA
With oil prices surging again, many oil producers are back in the spotlight. But if you are looking for dividends, you might also want to consider midstream operators.
For instance, Plains All American Pipeline owns an extensive network of pipeline gathering and transportation systems serving key production basins, transportation corridors and major market hubs and export outlets in the U.S. and Canada.
The partnership has a quarterly distribution rate of 26.75 cents per unit. With the stock trading at $14.72 per unit, that comes out to an annual yield of 7.3%.
In the second quarter of 2023, Plains generated $371 million in implied distributable cash flow available to common unit holders. Considering that it paid $187 million in common unit cash distributions for the quarter, it had a distribution coverage ratio of 1.98 times and excess distributable cash flow of $184 million.
Plains stock has climbed 27% year to date, and Morgan Stanley analyst Robert Kad sees further upside on the horizon. Kad has an Overweight rating on the partnership and a price target of $18 — roughly 22% above where the stock currently sits.
Verizon Communications Inc. VZ
Telecommunications is an essential service, meaning demand remains relatively consistent regardless of economic conditions.
Verizon is one of the biggest players in the telecom arena, generating $136.8 billion in revenue in 2022. The company also has a track record of paying dividends consistently and increasing them over time.
In the first half of 2023, Verizon paid about $5.5 billion in dividends to shareholders.
Last week, the company's board of directors declared a quarterly cash dividend of 66.5 cents per share, representing a 1.9% increase from its previous payout. This marked Verizon's 17th consecutive annual dividend hike.
At the current share price, the new dividend rate translates to an annual yield of 7.9%.
Citigroup analyst Michael Rollins has a Buy rating on Verizon and a price target of $40. Considering that shares traded at $33.90 today, the price target implies a potential upside of 18%.
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