Sunday, April 21, 2024

2 Dividend Stocks to Buy with $100 and Hold Forever

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For investors hungry to build a steadily rising tide of passive income, few things are as deliciously satisfying as plump dividend payments rolling into your brokerage account quarter after quarter. If you’ve been sitting on the sidelines thinking you can’t afford to invest, here’s a secret – with trading fees now kicked to the curb, even a crisp $100 bill is enough to get you Started Collecting quarterly payments from a pair of true dividend aristocrats.

At today’s bargain prices, tobacco titan Altria Group (NYSE: MO) and pharmaceutical powerhouse Pfizer (NYSE: PFE) are dishing out dividend yields of a lofty 9.1% and 6.1% respectively. For context, that utterly dwarfs the paltry 1.35% average yield investors are “rewarded” with from the S&P 500 these days.

So what gives? Why are Mr. Market’s dim pessimistic views allowing such incredibly juicy yields from these stalwart stocks? Well, let’s explore the tantalizing details behind each high-yield opportunity:

Altria – The Marlboro Empire Strikes Back With its Mighty 9.1% Dividend

Altria Group, the makers of America’s top-selling Marlboro cancer sticks, last hiked its dividend payout by 4.3% this past August – marking the 58th dividend increase for the tobacco titan over the last 54 years. Consistent as an atomic clock, management has laid out plans to keep raising that lucrative dividend payment by mid-single digit percentages annually.

Yet despite Altria’s clear commitment to steadily growing that income stream, the stock has taken a beating lately, allowing its plump 9.1% yield to blossom. Investors are clearly worried about far more than just dwindling combustible cigarette volumes (Marlboro shipments fell 8.8% last year). They’re also fretting over the rising popularity of sketchy illicit e-vapor products flooding the market – undercutting Altria’s FDA-approved vape offerings.

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To be fair, Altria can’t seem to overcome those shrinking cigarette volumes, with revenue net of taxes dropping nearly 1% in 2023. But crucially, through diligent cost controls and opportunistic share buybacks, the company managed to boost adjusted earnings per share by 2.3% last year regardless.

More importantly, Altria fired a shot across the bow of those shady vapor market disruptors by acquiring NJOY – one of the only three FDA-approved e-vapor products legally allowed on shelves. With the FDA finally cracking down on enforcing their flavor ban for nicotine products, Altria seems poised to regain pricing power in the e-cig market during 2024.

Pfizer’s 6.1% Dividend Looks Like Just The Tip of The Iceberg

While Altria represents a high-yield bond-like cash cow, Pfizer (NYSE: PFE) and its 6.1% yield could offer substantially more upside from here. You see, after slimming down by shedding its portfolio of older drugs in 2020, Pfizer now owns the pharmaceutical industry’s largest and most attractive stable of patent-protected innovative blockbuster products.

Despite boasting this formidable product pipeline, overly pessimistic investors have pummeled Pfizer’s stock price nearly 40% lower since early 2023, allowing that succulent 6.1% yield to blossom. Their big concern? Fading Covid-related sales after the firm’s vaccine and treatment brought in tens of billions during the height of the pandemic.

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Fair enough, Covid’s windfall decline was steep – but stripping out those lumpy Covid revenues, Pfizer’s “real” operations powering commercialized drugs and its development pipeline grew at a very healthy 7% clip last year. Already, rising sales of future cash cows like the $3.3 billion heart drug Vyndaqel are more than offsetting softness in mature offerings like Xeljanz’s $1.7 billion in sales.

But oh baby, just wait until you see what Pfizer has in store next! Despite the apocalyptic stock price action, the FDA was working overtime last year – approving an incredible 9 novel drugs for the pharmaceutical juggernaut, setting a new record. Talk about having an extremely target-rich pipeline to keep pumping out future share-gaining blockbusters!

The Power of Reinvesting Juicy Dividend Streams

For long-term investors able to appreciate these two high-yield stocks’ underlying fundamentals, there’s an added bonus opportunity for truly explosive returns over time – reinvesting those mouth-watering dividend payments!

Think about it – an initial $5,000 investment into Altria at today’s bargain prices would conveniently yield $411 annually just from that first year’s dividend payments alone. By instructing your broker to automatically reinvest those payouts into additional shares, you’d be supercharging your income stream and leveraging the power of compounding to turbocharge your long-term returns.

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Similarly, a $5,000 stake in Pfizer at current levels would pay out $232 annually to start – no matter whether the share price zigs or zags from here. Automatically funneling those dividends back into more shares could allow you to radically amplify your position’s dividend stream and long-term gains over many years.

Bottom Line: For Serious Passive Income Potency, Consider These Contrarian High-Yielders

Make no mistake, both Altria and Pfizer face their share of challenges and controversy in their respective industries. Altria’s traditional cigarette wares continue being culturally shunned, while any new health scares or litigation setbacks for Pfizer’s key products could derail their outlook.

But by taking a long-term view, dividend growth investors willing to zig when other skittish traders zag might just find these high-yield cash gushers offer tantalizing return prospects from here. With trading costs now eliminated, even small investors can periodically reinvest those fatter dividend streams to compound their wealth over time.

So for contrarian income-seekers looking to turn steady quarterly payments into a raging river of passive cashflow, this daring pair of high-yield payers could prove exceptionally potent portfolio picks for the patient and disciplined. Just don’t go chasing obscure penny stocks’ too-good-to-be-true yields – stick to the dividend aristocrats with well-established track records like Altria and Pfizer.

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Mezhar Alee
Mezhar Alee
Mezhar Alee is a prolific author who provides commentary and analysis on business, finance, politics, sports, and current events on his website Opportuneist. With over a decade of experience in journalism and blogging, Mezhar aims to deliver well-researched insights and thought-provoking perspectives on important local and global issues in society.

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