3 high-dividend stocks to buy and hold

In the world of equity investing, there is capital appreciation and then there is income. The former is a fancier term for the growth component of an equity investment. The latter refers to the dividend payments that some companies pay out to shareholders.

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Wouldn’t it be great to have your cake and eat it too?

Enter dividend stocks. These investments are designed to provide the best of both worlds: regular income distributions and price appreciation.

However, not all dividend stocks are created equal. Some have low dividend yields and others have high dividend yields.

High-dividend-yielding stocks may seem like the obvious choice, but there are caveats. Sometimes high yield is associated with a dividend that is not sustainable or is the result of a compromised financial situation.

Other times, what you see is what you get: a well-run company that pays a large dividend and has solid long-term growth potential.

These are three high-yielding stocks that tick the boxes for dividend stability and attractive growth prospects.

Does Gilead Sciences pay a dividend?

Gilead Sciences, Inc. (NASDAQ: GILD) develops treatments for hepatitis, HIV and various types of cancer. Recently, it has become better known as the maker of the first US-approved Covid-19 treatment, remdesivir.

As a growth-oriented biopharmaceutical company, the dividend is not the first thing that comes to mind at Gilead. Yet it has paid a quarterly dividend in each of the past seven years. Even better, the dividend has been increased in each of these years.

Gilead’s quarterly distribution of $0.73 per share equates to $2.92 on an annual basis. This means that the stock currently has a forward dividend of 4.7% which far exceeds that of the broader healthcare sector (1.6%).

And with less than half of the company’s profits returning to shareholders in the form of dividends, the likelihood of further increases is good. Debt makes up approximately 57% of Gilead’s capital structure, implying low financial risk. This, combined with strong revenue growth prospects from additional remdesivir approvals, should support cash flow and maintain the generous dividends ahead.

What is Dow’s dividend yield?

Dow, Inc. (NYSE:DOW) the forward dividend yield of 4.5% is nearly double that of the materials sector. The company has paid out a dividend itself every quarter since it spun off from DowDuPont in April 2019. And with a 42% payout ratio, an even bigger chunk of Dow’s bottom line could eventually hit the books. shareholders.

With Dow, the growth part of the investment should come from the overall strength of the business. Last month, it announced that all three segments – Performance Materials & Coatings, Industrial Intermediates & Infrastructure, and Packaging & Specialty Plastics – saw higher sales in the fourth quarter. Even better, sales increased in all geographies. It is this kind of well-balanced growth that should reassure investors about the stability of the company and the dividend.

In the near term, Dow should benefit from higher commodity prices which translate into higher selling prices for its diverse set of chemicals and materials. In the longer term, the business will benefit from demand from North America and China and grow alongside these key markets. With exposure to the consumer and infrastructure markets, cash flows should remain robust over the next few years and support the high dividend.

Is Ethan Allen Interiors Stock a Buy?

In the small cap space, Ethan Allen Interiors, Inc. (NYSE:ETD) is an underrated growth and income game. The furniture maker is currently offering a forward dividend yield of 4.6%, as its stock has fallen more than 20% from its peak in May 2021.

The pullback presented a great buying opportunity for investors looking to adorn their portfolio with a small cap dividend name. There isn’t a consumer cyclical company in the S&P 600 that offers yield. Additionally, less than 40% of profits are distributed as dividends, so there is plenty of room for expansion.

Ethan Allen is building on a bumper 2021 where revenue grew 16% to $685 million. In both quarters of the current fiscal year, sales growth accelerated to 18%, largely due to an improved e-commerce presence.

The company connects well with young buyers who buy new lines of beds, sofas, tables and other decorations to spruce up their homes. These consumers have embraced Ethan Allen’s virtual reality design software that allows them to see how the furniture will fit into their homes and apartments. Management called the technology a “game changer” that can drive higher sales with fewer salespeople.

Concerns about supply chain risks come to mind for furniture companies, but Ethan Allen is less exposed. Indeed, three-quarters of its products are made in North America, while many competitors rely heavily on Chinese and foreign manufacturers.

With a P/E ratio of 8x and a dividend yield of 4.6%, there is perhaps no small cap value stock as attractive as Ethan Allen.

About Warren Dockery

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