Top 5 High Dividend Stocks To Buy Now

Below we present the list of top 5 high dividend stocks to buy now. For our methodology and a more comprehensive list please see 10 Best High Dividend Stocks To Buy Now.

5. Chevron Corporation (CVX)

We know that investors are excited about Tesla and electric vehicles. This doesn’t change the fact even today electric vehicle sales account for only 3% of global car sales. That means ninety seven percent of cars that are bought in 2020 will probably still need to run on gas in 2030 or 2035. The demand for oil will surely decline as electric vehicles capture more market share, but this is happening slower than what investors perceive. Another reason for the depressed oil prices is the coronavirus pandemic. Believe it or not, this is just temporary. Once a reliable vaccine is produced, the demand for travel come back and energy companies’ values will start to increase. That’s probably why hedge funds with a long-term focus are interested in CVX shares. In its Q1 investor letter Diamond Hill said the following:

“Integrated oil and gas company Chevron Corp. shares meaningfully declined during the quarter as OPEC+ failed to reach a deal, allowing us to establish a position in this lower risk, more diversified company at a sufficient discount to our estimate of intrinsic value.”

CVX shares offer an annualized dividend yield of 7.7% in its ultra-low interest rate environment. There were a total of 50 hedge funds with bullish CVX positions at the end of June.

4. Exxon Mobil Corporation (XOM)

Exxon Mobil is another major oil producer that found a spot in our list of best dividend stocks to buy. Exxon shares were trading above $70 at the beginning of this year and today you can get your hands on them for under $33. As a result of the sharp decline in oil prices and Exxon’s share price, XOM shares offer an annualized dividend yield of 11%. That’s not a typo. This isn’t a triple leveraged mortgage backed security. It is one of the biggest oil companies in the world. Sure, Exxon failed to increase its dividend for the first time in 38 years, but at least it didn’t cut it sharply. Broyhill Asset Management said the following about Exxon in its Q1 investor letter:

“As if a global pandemic wasn’t enough, during the quarter OPEC and Russia decided to add an oil crisis to the list of things for investors to panic about. After oil’s largest one-day decline in history, we established a small position in Exxon Mobile (XOM) and British Petroleum (BP)—two of the largest, best managed, and well capitalized companies in the industry.

We don’t have a short-term view on oil, but we do know that the best cure for low oil prices is low oil prices. And with the sector trading at its lowest level relative to the market in history, we are willing to bet that the current extremes in negative sentiment will revert to more normal levels—and more normal oil prices—at some point. In the interim, we are being paid 10% annually to wait.”

There were a total of 53 hedge funds with bullish XOM bets at the end of June.

3. Philip Morris International (PM)

Philip Morris is another tobacco stock in our list of best dividend stocks to buy, offering an annualized dividend yield of 6.85%. PM’s forward P/E ratio is less than 13 according to Yahoo Finance. First Eagle Investment Management said the following about this tobacco giant in its Q2 investor letter:

“Philip Morris was able to recover some of the ground lost during the first quarter selloff but remains well below its early-year highs. Tobacco industry volumes were hurt by Covid-19, as lockdowns and other social-distancing restrictions in certain key markets hurt demand. Duty-free sales also suffered given the lack of global travel during the period. Given its pricing power, cost discipline and robust balance sheet, we believe Philip Morris appears well positioned to navigate the ongoing transition from traditional combustible tobacco products to “heat not burn” alternatives.”

There were a total of 53 hedge funds with bullish PM bets, an increase of 5 since the end of March. The largest hedge fund stake in Philip Morris International Inc. (NYSE:PM) was held by Cedar Rock Capital, which reported holding $686 million worth of stock at the end of September. It was followed by Gardner Russo & Gardner with a $578 million position.

2. AT&T Inc (T)

AT&T shares declined sharply this year but insiders are buying. The stock currently trades under $27 and offers an annualized dividend yield of 7.85%. Activist Elliott Management went activist against AT&T last year and reached a deal with the company. Here is what Elliott said a year ago about its agreement with T:

“We have closely evaluated the company’s three-year plan and support the steps toward a faster-growing, more profitable, focused and shareholder-friendly company. The combination of AT&T’s improving business performance, consistent and faster revenue growth, significant margin expansion and enhanced capital return will generate meaningful earnings and cash flow growth over the next three years. In addition, AT&T will continue to refresh its Board as it executes on its plan to realize the $4.50 – $4.80 of EPS by 2022, a figure that is readily achievable and one which excludes the benefit of any portfolio actions. Altogether, we are confident this will yield significant share price upside at AT&T.”

There were a total of 57 hedge funds with bullish AT&T positions at the end of June. We have yet to see AT&T make progress on earnings front, but hedge funds seem confident. If AT&T can indeed turn the business around and deliver $4.50 per share in earnings, its shares should more than double.

1. Verizon Communications Inc. (VZ)

Verizon is the more successful version of AT&T as Verizon shares returned 27% over the last 5 years on top of offering a current annualized dividend yield of 4.5%. Verizon is also one of the 10 most profitable companies in the US. At the beginning of this year Mott Capital said the following about Verizon:

“Verizon (VZ) rose by 1.7% in the fourth quarter and by 9.2% for the year. Verizon is another company that should benefit as wireless subscribers upgrade their data plans from 4G to 5G. Additionally, the roll-out of 5G and the technology changes that it is likely to usher in will make having wireless data connections in the future more important than today. Again, Verizon appears to be a critical player in 5G and will continue to hold a place in the portfolio.”

As you can see Verizon is considered to be a 5G play and given its successful track record it is the #1 high dividend stock among hedge funds. There were a total of 68 hedge funds with bullish Verizon positions at the end of June.

If you are in the mood to take some more risk for potentially much higher returns, you can read our article about the top 10 cloud computing stocks to buy.

Disclosure: None