Verizon, Walgreens, 3M: 3 High-Yield Dow Stocks to Buy Now?

Verizon Communications Inc. New York Stock Exchange: VZWalgreens Boots Alliance Inc. NASDAQ: WBA and 3M New York Stock Exchange: MMM they are among the highest-performing components of the Dow Jones Industrial Average.

Are these the stocks investors should consider now to generate income?

High-yield stocks, known for attractive dividends, offer investors both risk and reward.

The good thing is that many of these stocks provide a steady income stream, making them attractive to income-oriented investors.

When dividends indicate financial strength

Companies with a history of high dividends tend to be financially stable, well-established in their industries, and their shares are generally not very volatile. This means the stocks typically don’t offer the roller-coaster ride often found with younger growth stocks.

For example, blue chip stocks like Johnson & Johnson NYSE:JNJ and Procter & Gamble Co. NYSE: PAGE they have increased their dividends for 66 and 68 years, respectively.

The Johnson & Johnson dividend yield is 3.04%; Procter & Gamble’s dividend yield is 2.38%.

Both are higher than the average return for all Dow Jones stocks, which is about 2%.

However, in some cases, high returns come with inherent risks.

Stocks that offer unusually high dividends, relative to their industries, may face difficulty sustaining such dividends during economic downturns or business disruptions.

High-yielding dividend stocks can indicate undervaluation or signal financial distress for a company.

Here’s a look at three of the Dow’s top dividend payers and whether these stocks are worth buying right now or best avoided due to risk.

The high costs hurt Verizon’s stock price

Verizon’s dividend yield is currently 6.31%, and the company has a 19-year track record of increasing shareholder payouts.

The yield has increased significantly since late 2019, when it was at 4%, and Verizon’s chart shows why that happened: The stock has been on a long-term downtrend, although it has rallied as the market has moved higher. wide from the end of October.

High 5G network construction costs, high debt levels and declining revenue in 2023 have negatively impacted the company’s stock price. Whenever you see a company with high debt, keep in mind that rising interest rates will negatively impact earnings, and that’s exactly what happened.

Verizon’s earnings declined in 2022 and 2023, and analysts expect that trend to continue this year.

Earnings are expected to rebound in 2025, and revenue has stabilized as new customers arrive. For investors looking for yield, Verizon is expected to remain profitable and growth is returning, although investors may need some patience.

Walgreens Boots Alliance is no longer a dividend aristocrat

Walgreens’ dividend yield is 8.48%, which is an immediate clue that something is wrong.

The Walgreens chart also points to a pretty big problem. The stock has been on a long downtrend that began way back in 2015. It is down 34.87% over the past year and the bleeding has continued into 2024, even as the Dow was advancing.

Walgreens recently lost its place on the list of dividend aristocrats, or companies that have increased dividend payments consecutively for at least 25 years.

After profitability fell sharply in 2023 and another decline is expected this year, the company cut its dividend to $1 per share from $1.92 per share.

The stock may be no longer long for the Dow. It has the lowest price in the price-weighted index and the smallest market capitalization at $19.52 billion.

Since joining Dow in June 2018, replacing stalwart General Electric NYSE:GEWalgreens Boots Alliance shares fell 66%.

The stock may look attractive to investors looking for yield, but it has been among the worst performers among consumer staples, even as the broader sector has recovered since the start of the year. In other words, investors have better choices.

Analysts see 3-month earnings rising

3M’s dividend yield is 6.32%, and the company has a 66-year history of increasing dividend payments to shareholders.

The 3M chart shows the decline starting in 2018; the stock is down nearly 9% over the past five years. Falling prices play a big role in 3M’s extraordinarily high return. 3M shares fall 13.22% in 2024.

So what’s behind this price drop? Year-over-year revenue declined in 2022 and 2023; the revenue growth rate in the three-year period is -1%.

Like many tech stocks, 3M is suffering from a post-pandemic hangover. The company had a contract with the federal government to sell respirators; earnings increased in 2021, but declined over the next two years.

A $6 billion legal settlement related to earplugs for the U.S. military didn’t help earnings.

There may be a silver lining, as analysts expect earnings growth of 4% this year and another 7% in 2025.

Forecasts from 3M analysts show that Wall Street is still not optimistic about the stock’s prospects, despite expected earnings increases.

As the stock remains profitable and the company is committed to continuing to raise its dividend, 3M could be a more stable yield pick than stocks of companies whose underlying financials are weaker.

Before you consider General Electric, you’ll want to hear this.

MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and General Electric wasn’t on the list.

While General Electric currently has a “Moderate Buy” rating among analysts, top analysts believe these five stocks are better buys.

View the five stocks here