The major market indexes have been correcting of late due to the Fed’s hawkish stance and tensions between the U.S. and Russia over Ukraine. Despite the stomach-churning volatility, high-yield dividend stocks Philip Morris International Inc. (PM) and Telefónica, S.A. (TEF) have managed to weather the wild price swings. These two stocks have delivered positive returns year-to-date.
Investing in dividend stocks is widely considered an efficient way of hedging one’s portfolio against volatility. Not only do these stocks provide high dividend yields, they also offer capital appreciation.
Given this backdrop, we think it could be wise to bet on these two fundamentally strong, high-yield dividend stocks.
Philip Morris International Inc. (PM)
New York City-based PM manufactures and sells cigarettes, other nicotine-containing products, smoke-free products, and related electronic devices and accessories. The company offers IQOS smoke-free products, including heated tobacco and nicotine-containing vapor products under the HEETS, HEETS Creations, HEETS Dimensions, HEETS Marlboro, and other brands. It also sells its products under the Marlboro, Parliament, Bond Street, Chesterfield, L&M, Lark, and Phillip Morris brands.
On Oct. 27, 2021, PM announced its plan to achieve carbon neutrality in its direct operations by 2025 and achieve carbon neutrality across its entire value chain by 2040. Jennifer Motles, Chief Sustainability Officer, said, “By presenting our low-carbon transformation strategy, we hope to encourage change and foster engagement with investors and other stakeholders who will be able to evaluate whether our company is appropriately adapting its business model for success in a net-zero carbon economy.”
Over the last three years, PM’s dividend payout has grown at a 3% CAGR. Its four-year average dividend yield is 5.5%, and its current payout translates to a 4.6% yield.
PM’s net revenues increased 8.8% year-over-year to $8.10 billion for the fourth quarter, ended Dec. 31, 2021. The company’s adjusted operating income increased 4.5% year-over-year to $2.99 billion. Also, its adjusted EPS came in at $1.35, representing a 7.1% increase year-over-year.
Analysts expect PM’s EPS and revenue for its fiscal year 2023 to increase 12.1% and 7%, respectively, year-over-year to $7.06 and $34.56 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters.
PM’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B grade for Stability. It is ranked #5 out of 12 stocks in the B-rated Tobacco industry. Click here to see the other ratings of PM for Growth, Value, Momentum, and Sentiment.
Telefónica, S.A. (TEF)
Headquartered in Madrid, Spain, TEF is an integrated and diversified telecommunications group operating in Europe and Latin America. The company’s services and products include mobile business, fixed-line telephony business, and digital services. Its segments include Telefonica Spain, Telefonica Brazil, Telefonica Germany, Telefonica United Kingdom and Telefonica Hispanoamerica.
TEF’s four-year average dividend yield is 7.9%. Its current dividend yield translates to an 8.5% yield.
For its fiscal year 2021, TEF’s other income increased 698.5% year-over-year to €12.67 billion ($14.35 billion). Its operating income before D&A (OIBDA) increased 62.9% year-over-year to €21.98 billion ($24.89 billion). And its net income increased 414.3% year-over-year to €8.13 billion ($9.21 billion).
Analysts expect TEF’s EPS to increase 15.9% in the next five years.
TEF’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Stability and Sentiment. Within the A-rated Telecom – Foreign industry, it is ranked #20 out of 49 stocks. To see the other ratings of TEF for Growth, Momentum, and Quality, click here.
PM shares were trading at $105.50 per share on Friday morning, up $2.71 (+2.64%). Year-to-date, PM has gained 11.05%, versus a -8.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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