3 High-Quality Dividend Stocks to Buy and Hold Forever

High-yield dividend stocks offer reliable income and stability, especially during downturns. Their strong financials help manage volatility, making them a solid choice for steady returns and long-term growth. Therefore, dividend stocks Merck & Co., Inc. (MRK), Verizon Communications Inc. (VZ), and Altria Group, Inc. (MO) might be worthy additions.

The U.S. economy continues to face challenges with high prices and elevated interest rates. However, the core PCE, which excludes food and energy, saw a 2.6% increase year-over-year in July. Although this rate is higher than the target, it remains relatively stable. If inflation keeps slowing, the Federal Reserve might consider a rate cut in September.

The Federal Reserve appears set to start slashing interest rates this fall. The inflation rate has declined significantly. This suggests that the U.S. economy is losing steam. This makes it a good time to pick up dividend stocks. As interest rates on risk-free assets decrease, the value of dividend stocks will likely rise in comparison. 

With this in mind, let's explore the fundamentals of three high-quality dividend stocks.

Merck & Co., Inc. (MRK)

MRK is a global healthcare company offering health solutions through its prescription medicines, including biological therapies, vaccines, and animal health products. It operates through two segments: Pharmaceutical and Animal Health.

On August 26, MRK received European Commission (EC) approval for WINREVAIR™ (sotatercept) in combination with other pulmonary arterial hypertension (PAH) therapies. This approval covers the treatment of PAH in adult patients with World Health Organization (WHO) Functional Class (FC) II to III to improve exercise capacity.

WINREVAIR™ is the first therapy targeting the activin signaling pathway for PAH patients and also the only activin signaling inhibitor therapy approved across all 27 EU member states.

On August 9, MRK agreed to acquire CN201 from Curon Biopharmaceutical, a privately held biotech company. CN201 is a clinical-stage bispecific antibody being investigated for treating B-cell malignancies. The company plans to leverage this acquisition to advance treatments for B-cell diseases and explore its potential as a scalable option for autoimmune diseases.

In terms of the trailing-12-month gross profit margin, MRK’s 75.79% is 31.5% higher than the 57.64% industry average. Likewise, its 31.64% trailing-12-month EBIT margin is significantly higher than the industry average of 2.41%.

MRK pays a $3.08 per share dividend annually, translating to a 2.60% yield on the current share price. Its four-year dividend yield is 2.90%.

MRK’s sales for the second quarter ended June 30, 2024, increased 7.2% year-over-year to $16.11 billion, while its KEYTRUDA product sales improved by 15.9% from the year-ago value to $7.27 billion.

The company’s non-GAAP net income stood at $5.81 billion compared to the prior-year quarter’s loss of $5.22 billion, while its non-GAAP EPS came in at $2.28 versus a loss of $2.06 per share last year.

According to the full-year 2024 guidance, MRK forecasts worldwide sales to range from $63.40 billion to $64.40 billion, an increase from the previous guidance of $63.10 billion to $64.30 billion. The company also expects non-GAAP EPS to be between $7.94 and $8.04.

Analysts expect MRK’s revenue for the fourth quarter (ending December 2024) to increase 7.3% year-over-year to $15.69 billion, while its EPS for the same period is expected to grow significantly from the prior year to $1.93. Moreover, the company topped the consensus revenue estimates in each of the trailing four quarters

MRK gained 12.7% over the past nine months to close its last trading session at $116.58.

MRK’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.   

MRK has an A grade for Quality and a B for Value and Stability. It is ranked #5 out of 158 stocks in the Medical - Pharmaceuticals industry.

For additional MRK’s Growth, Momentum, and Sentiment ratings, click here.

Verizon Communications Inc. (VZ)

VZ delivers a wide range of communication, technology, information, and entertainment solutions to consumers, businesses, and government organizations around the globe. It operates in two segments: Verizon Consumer Group and Verizon Business Group.

On August 13, VZ announced its partnership with State Farm Arena and the Atlanta Hawks. VZ aims to market its products and services to Hawks fans and to enrich the fan experience at State Farm Arena by making use of its advanced network capabilities to enhance connectivity during games and events.

The company could benefit significantly from this partnership in terms of gaining mass popularity in the state and enhancing its growth even further.

On August 12, VZ announced its new Enterprise Infrastructure Solutions (EIS) contract with the National Labor Relations Board (NLRB), an independent federal agency, for a work order of $4 million to re-configure and upgrade NLRB’s Software-Defined Wide Area Network (SD-WAN) at all 48 branch offices.

Such government contracts could enhance VZ’s foothold in the public sector, potentially securing future income streams and boosting the company’s reputation.

In terms of the trailing-12-month gross profit margin, VZ’s 59.85% is 17.5% higher than the 50.93% industry average. Likewise, its 22.54% trailing-12-month EBIT margin is 138.7% higher than the industry average of 9.44%.

VZ pays a $2.66 per share dividend annually, translating to a 6.4% yield on the current share price. Its four-year dividend yield is 5.80%.

For the fiscal 2024 second quarter that ended June 30, 2024, VZ’s total operating revenues increased marginally year-over-year to $32.80 billion. Its operating income came in at $7.82 billion, increasing 8.3% from the previous year’s quarter. The company’s consolidated adjusted EBITDA increased 2.8% year-over-year to $12.30 billion.

As of June 30, 2024, VZ’s cash and cash equivalents stood at $2.43 billion compared to $2.07 billion on December 31. 2023.

For the fiscal fourth quarter ending December 2024, VZ’s revenue is expected to increase 1.2% year-over-year to $35.54 billion. Its EPS for the next quarter is expected to be $1.10, increasing 2% year-over-year.

Shares of VZ have surged 11.3% over the past nine months and 24.3% over the past year to close the last trading session at $42.93.

VZ has an overall B rating, equating to a Buy in our proprietary rating system. ZP also has a B grade for Stability. It is ranked #6 out of 18 stocks in the Telecom - Domestic industry. 

To see additional POWR Ratings for Momentum, Sentiment, Value, Quality, and Growth, click here.

Altria Group, Inc. (MO)

MO manufactures and sells smokeable and oral tobacco products. The company provides cigarettes mainly under the Marlboro brand, large cigars, and pipe tobacco under the Black & Mild brand, moist smokeless tobacco, and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands.

On August 22, MO’s Board of Directors announced an increase in its regular quarterly dividend by 4.1% to $1.02 per share versus the previous rate of $0.98 per share. The quarterly dividend is payable on October 10, 2024, to shareholders of record as of September 16, 2024.

In terms of the trailing-12-month gross profit margin, MO’s 69.56% is 95% higher than the 35.68% industry average. Likewise, its 58.61% trailing-12-month EBIT margin is 520% higher than the industry average of 9.46%.

MO pays an annual dividend of $4.08, which translates to a yield of 7.59% at the current share price. Its four-year average dividend yield is 8.04%. Moreover, the company’s dividend payouts have increased at a CAGR of 4.1% over the past five years. MO has raised its dividends for 54 consecutive years.

On June 21, MO announced that the FDA issued marketing orders for NJOY ACE Pod Menthol 2.4%, NJOY ACE Pod Menthol 5%, NJOY DAILY Menthol 4.5%, and NJOY DAILY Extra Menthol 6%. The authorizations follow the FDA review of the Premarket Tobacco Product Applications submitted by NJOY, LLC in March 2020.

As the company receives more FDA approvals for new products, MO’s market presence and popularity might increase and enhance its growth prospects.

For the fiscal 2024 second quarter ended June 30, 2024, MO posted net revenues of $6.21 billion. The company’s gross profit was $3.68 billion, and operating income was $2.53 billion for the quarter. Its adjusted net earnings came in at $2.26 billion, while its adjusted EPS came in at $1.31.

Analysts expect MO’s revenue for the fiscal third quarter (ending September 2024) to increase 1.2% year-over-year to $5.34 billion, while its EPS is expected to grow 5.4% year-over-year to $1.35 for the same period.

The stock has gained 22.6% over the past year to close the last trading session at $54.07.

MO’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has an A grade for Quality. Within the A-rated Tobacco industry, MO is ranked #5 out of 10 stocks.

Click here to access additional MO ratings for Sentiment, Value, Momentum, Growth, and Stability.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

MRK shares were trading at $115.01 per share on Wednesday afternoon, down $1.57 (-1.35%). Year-to-date, MRK has gained 6.80%, versus a 16.82% rise in the benchmark S&P 500 index during the same period.

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

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