Investors truly starving for cash probably aren’t going to be investing in stocks at all. Investors looking for the best income-producing stocks to buy are more likely to be willing to accept a bit more risk for the potential upside return. They’re going to be looking for yields above 5%, indicating higher risk, but unwilling to invest in shares with dividends yielding 10% to 20% or higher: Those shares are simply too susceptible to sharp reductions in price and dividend yields.
Instead, the stocks listed below are in something of a goldilocks zone: They include dividends with yields above 5%, ranging as high as 8%, and upside based on their respective target stock prices.
These shares benefit from a reasonable expectation of capital preservation and appreciation. Their prices are unlikely to decline substantially. They have the added benefit of dividends greater than 5%.
|LNC||Lincoln National Corp.||$32.80|
Altria (NYSE:MO) stock boasts the highest dividend yield of the shares listed in this article, at 8.44%. That’s well above the 5% yield that generally delineates a riskier dividend strategy. However, the fact that Altria hasn’t reduced its dividend since 2009 serves as some assurance to investors.
The analysts currently covering Altria have given it a consensus target price of $49.20. Let’s assume that it reaches that price in a year while continuing to pay the same 94-cent dividend it now pays for the next 4 quarters. That would mean that an investor who purchases shares at their current $44.89 price would see their total value increase to $52.96 (49.20 target price + $3.76 in four quarterly 94-cent dividends). That equates to a 17.98% annual return which is higher than the average annual return of the S&P 500 over its lifetime.
The company is pivoting toward a smokeless future, and while it does, it continues to reward shareholders that adhere to its vision through a generous dividend policy.
Enbridge (NYSE:ENB) stock represents equity investment in traditional energy. The Alberta-based firm operates in the pipeline transportation sector. Its stock includes a dividend yielding 6.27% which hasn’t been reduced since 2003.
Although Enbridge stock only has a few dollars until it is fully priced, the overall sector outlook is strong. Allied Market Research anticipates a compound annual growth rate of 7.7% for the industry in the period between 2022 to 2031.
Enbridge benefited from high oil prices during 2022. Through the first nine months of the year, its adjusted EBITDA increased 13% to $11.62 billion. The firm’s distributable cash flow increased by 10% during the same period, reaching $8.32 billion.
Distributable cash flow is akin to discretionary income, meaning that it is money left over after all other obligations are met. Enbridge clearly has enough cash to continue to reward investors through dividends in addition to a history of doing so.
Investors should expect the company to continue to invest in decarbonization efforts like wind, hydrogen, and renewable natural gas while maintaining its dividend.
Lincoln National Corp. (LNC)
Lincoln National Corp. (NYSE:LNC) stock represents the insurance and retirement business which also includes a 6.01% dividend. Analysts believe it has a few dollars of upside above its current $29 price, so it’s probably best to consider Lincoln National Corp for dividend income alone as well as a place to park and preserve your capital.
That said, Gurufocus believes LNC stock is seriously undervalued and warrants a price more than double its current price based on the value of its future cash flows.
The company is coming off of a quarter in which it lost $2.6 billion. However, a large majority of that loss resulted from a $2.0 billion charge for unfavorable reserve items. Lincoln National essentially had to ensure that its risk-based capital requirements were being met, leading to the charges. The company has put a new management team in place and meanwhile continues to pay a dividend that has not been reduced since 2009.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.