Three Exceptionally High-Dividend Shares That Signal Outstanding Purchases in 2025
In the closing bell of 2024, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite celebrated substantial returns of 13%, 23%, and 29% respectively. Among the masses of publicly traded companies, the consistent outperformance of dividend stocks remains unmatched.
Research published in 'The Power of Dividends: Past, Present, and Future' reveals that, over a 50-year period, dividend stocks outperformed their non-paying counterparts dramatically. The study reveals an average return of 9.17% for dividend stocks, contrasted with just 4.27% for non-payers, while showing less volatility than the benchmark S&P 500. These findings align with the notion that companies that consistently pay dividends are typically profitable and capable of thriving in challenging economic circumstances.
So, how do you navigate the minefield of high-yielding dividend stocks to maximize income while minimizing risk? It comes down to finding securities with reliable, sustainable yields and avoiding those with unsustainable payouts due to declining share prices.
For the following three stocks, yields of 7.93% or more are the cherry on top, coupled with attractive valuations making them compelling investment options for 2025.
Ford Motor Company: 6.06% yield
With a tempting yield of 6.06%, Ford Motor Company (F) is the perfect place to start in your hunt for income stocks. The iconic automaker has faced its fair share of challenges, including deteriorating profitability due to a rise in warranty expenses and slowing demand for electric vehicles. Yet, the company boasts promising catalysts indicating an auspicious year ahead.
Improvements in Ford's quality control efforts have substantially reduced the number of issues in its vehicles, as indicated by J.D. Power's 2024 U.S. Initial Quality Study. Jim Farley, the company's CEO since October 2020, has made significant strides in improving its production process, ensuring lower warranty costs down the road.
Another contributing factor to Ford's potential success is the strength of its truck sales, exemplified by the endless success of the F-Series. Trucks not only provide substantial margins compared to other vehicles, but also generate consistent demand, regardless of economic conditions.
Moreover, Ford's forward price-to-earnings (P/E) ratio of 5.5 exists at an all-time low for the decade, indicating a remarkable value. With a discounted price-to-book ratio of 11% (excepting the COVID-19 crash), Ford is a bargain you shouldn't miss.
PennantPark Floating Rate Capital: 11.25% yield
If you're looking for an ultra-high-yield dividend stock with consistent performance, Business Development Company (BDC) PennantPark Floating Rate Capital (PFLT) should be a major consideration. The company's yield skyrockets to 11.25% when accounting for its monthly dividend payments.
At its core, PennantPark capitalizes on the limited financial services available to unproven, middle-market companies. Due to the portfolio's primary focus on debt securities, showing an 88% investment in debt, the company takes advantage of the premium yields offered to these companies.
Moreover, 100% of the debt portfolio is variable rate, meaning it is continually adjusted to reflect changing market conditions. PennantPark's debt portfolio has held up impressively following the steepest rate-hiking cycle in four decades, resulting in interest earnings that are more than attractive.
The company's exceptional portfolio management has enabled it to mitigate the risks associated with bad loans, ensuring that less than 0.4% of its portfolio at cost was delinquent on payments. Consequently, the stock is easily obtainable for as much as a 4% discount to its book value and a multiple of just 8.7 times its projected earnings for 2025.
Pfizer: 6.48% yield
The pharmaceutical giant Pfizer (PFE) shares in a pronounced 6.48% dividend yield and boasts an impressive track record of success despite market downturns. The company has experienced tumultuous years due to its extraordinary success in fighting COVID-19, leading to a significant drop in sales from its vaccines and treatments.
However, Pfizer hasn't let its COVID-19 achievements detract from its overall success. The company has maintained steady organic growth in its specialty care and oncology divisions, and its acquisition of Seagen for $43 billion increases its high-margin oncology pipeline, bolsters sales by $3 billion, and delivers substantial cost savings.
In the ever-changing healthcare sector, Pfizer provides investors with a rare level of stability and security. Regardless of economic upheavals, people will continue to need medical care and prescription drugs, making Pfizer's consistent and dependable income a valuable investment choice with minimal market fluctuations.
Currently offering a low forward P/E ratio of 9 and having approached an all-time high yield, Pfizer retains a compelling price at a value for 2025.
- In the context of 2025 investments, Ford Motor Company's 6.06% yield makes it an attractive income stock, especially with its improved quality control, promising CEO leadership, and strong truck sales.
- PennantPark Floating Rate Capital, a Business Development Company, stands out for its 11.25% yield, leveraging the premium yields offered to middle-market companies and boasting a robust debt portfolio that has weathered market changes.
- Pfizer, the pharmaceutical giant, continues to deliver a 6.48% dividend yield despite its COVID-19 successes and market fluctuations, offering investors a stable and dependable income choice with its consistent medical and prescription drug sales.
- As part of diversifying an investment portfolio, considering high-yielding dividend stocks like Ford, PennantPark, and Pfizer can help investors navigate the market, maximizing income while minimizing risks, as suggested in 'The Power of Dividends: Past, Present, and Future.'
