Dividend stocks offer a lot of advantages to investors. For example, companies that pay a dividend are often times profitable on a recurring basis and also time-tested. Additionally, many income stocks have a long history of handily performing better than non-dividend-paying stocks.
If this recent sell-off turns into a full-blown stock market crash, the following two high-yield dividend stocks could be your saviors.
AT&T: 8.3% yield
If you want stability, telecom stocks such as AT&T are a good place to start. AT&T has two main catalysts that could deliver modest organic growth during the next five years, all while the business parses out a higher than average payout.
For starters, continuous upgrades to the 5G wireless infrastructure will be a bigger deal than most realize. Even though the investments that AT&T is putting into wireless infrastructure are large, businesses and consumers have been waiting years for an upgrade to their wireless download speeds. The rollout of 5G speeds throughout the U.S. should encourage companies and consumers to trade in their devices. Since data drives AT&T’s great wireless margins, quicker download speeds could increase the wireless segment growth rates.
Another growth catalyst for the company is the expected spinoff of the content arm WarnerMedia, which will merge with Discovery. This new media entity will provide a larger content library more than 85 million pro forma subscribers and should see at least $3 billion in yearly cost synergies. Most importantly, AT&T will be cable of modestly reducing its dividend following the spinoff and focus more on reducing its debt. Even after the dividend cut, AT&T should still provide a hearty yield of about 5%.
Enterprise Products Partners: 7.9% yield
With the economic chaos the pandemic has caused that’s still fresh in many investors’ minds, the idea of an oil stock offering “safety” to a portfolio during a crash may be laughable. But most oil and gas businesses cannot compete with Enterprise Products Partners and its almost 8% yield.
When demand for crude oil experienced a historic low in 2020, most upstream businesses (drillers and explorers) were slammed. Enterprise Products Partners is a midstream firm. It owns about 50,000 miles of oil and gas transmission pipelines, 19 natural gas processing units, and has around 14 billion cubic feet of storage space for natural gas.
The beauty of this operating model could be seen in the way the business structures its contracts with drillers. With price and volume commitments in place far in advance, Enterprise Products Partners has a great bead on how much cash flow it will be producing looking out into multiple quarters. This cash flow predictability is key to creating new infrastructure projects without having to compromise its profitability.
It is also worth noting that at no point during the crash in crude oil value in 2020 was Enterprise Products Partners’ dividend in danger of being cut.