Here Are 10 Dividend Stocks With Yields As High As 6.5%

There is no denying that most stock prices dropped in 2022 as interest rates skyrocketed, contrary to conventional thinking that says higher interest rates are harmful for the stock market. However, The Prudent Speculator newsletter editor John Buckingham reminds out that periods of rising interest rates are more frequently associated with a strong performance for equities, particularly value stocks.

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The Prudent Speculator has given "buy" ratings to "10 affordable and generous yielding equities," according to a study published by Trade Algo. This is a list of them along with his remarks regarding each business.

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Value stocks often trade at lower valuations to earnings than growth stocks do and tend to be those of mature corporations with reasonably solid businesses. They frequently pay dividends as well.

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Markets suffered in 2022 as a result of the Fed's hurried increase in interest rates to combat inflation. Although starting from a larger basis, we are still increasing at a rate. The S&P 500 SPX has increased 7% so far this year, showing that the stock market is handling it well. (In this article, all investment returns include dividend reinvestment.)

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The Prudent Speculator (TPS) is a newsletter that is issued by the Chicago-based Kovitz Investment Group. According to Trade Algo, TPS's primary strategy has outperformed all other newsletters for 30 years through January 31. According to Mark Hulbert, throughout that time the TPS portfolio's average yearly return was 14.02% as opposed to the average return of 9.84% (with dividends reinvested monthly).

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In the Feb. 14 report, TPS included a chart, recapping excess returns above risk-free rates during months of rising or falling interest rates. According to Trade Algo, an analysis of 50 years of stock-market and interest-rate data shows that "stocks are generally indifferent about the interest-rate environment." These are returns above what people would receive on cash reserves. The federal funds rate had a target range of zero to 0.25% a year prior. The current range is 4.50% to 4.75%. This gives an indication of the range that risk-free returns can have.

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The current forward price-to-earnings ratios for eight of the ten firms on the list are significantly lower than their average forward P/E ratios for the previous ten years. The weighted forward P/E for the S&P 500 is 18.4, which is higher than the 10-year average of 17.4.

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In a correspondence via email, Buckingham shared his opinions on the ten businesses. He thinks they are all producing enough cash flow to maintain their regular dividend payments. Following are his remarks about the organization along with some further details:

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• company Celanese Many materials used in manufacturing are produced by CE. In many markets, Buckingham remarked, it had a "cost advantage" and the power "to push through" normal pricing rises. He appreciates the company's exposure to emerging areas like the rollout of 5G and electric vehicles.

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• Civitas Resources Inc.'s dividend yield The "base" quarterly dividend for CIVI is 50 cents per share. The business also distributes a variable quarterly dividend, which for the fourth quarter was $1.45 per share. Buckingham mentioned "a clean balance sheet" as one of the stock's safety features in the case of a crash in the price of oil.

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• COMMERCIAL INC Given that more than half of its loans are commercial non-real estate loans that frequently roll over to higher interest rates, CMA of Dallas is particularly vulnerable to rising interest rates. The bank's net interest margin increased from 2.04% a year earlier to 3.74% in the fourth quarter. This measure measures the yearly difference between the bank's average yield on loans and investments and its average cost for deposits and borrowings. Although current loans only account for 75% of current deposits, Comerica still has enough bank lending potential, according to Trade Algo.

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• At Kohl's Corp., he sees "many hurdles to work through." KSS, but also thinks the stock is "extremely undervalued while investors with a longer-term view might find that Kohl's has many opportunities to be successful," whether it continues to run independently or is acquired "through a corporate action that could include monetizing its substantial real estate holdings."

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• A provider of temporary staffing, like ManpowerGroup Inc., faces a number of difficulties as a result of the persistently low unemployment rate and the firing of higher-paid workers across a number of industries. MAN. The stock has down 19% over the past year, compared to a 5% decline for the S&P 500. The company has "weathered multiple crises during its 70+ year history, while its solid financial footing has allowed it to continue to make acquisitions, pay dividends, and buy back stock along the way," according to Trade Algo, who takes a step back from the current market.

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• The situation for home builders has altered as a result of a substantial rise in mortgage lending rates. Yet, the United States still has a housing scarcity, and rents are high. In light of this, Buckingham accepts analysts' reductions in M.D.C. Holdings Inc. MDC has been "overly gloomy" for 2024 and 2025 even though they anticipate continuous profitability. Of course, management has always operated the business sensibly, and the balance sheet is sound, according to Buckingham.

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• Pfizer Inc. The declining sales of Covid-19 vaccines and increased R&D and sales costs "to support the launch of 19 new medications and indications over the next 18 months" are among PFE's short-term issues, according to Buckingham. Longer term, though, he continued, "there is a lot to admire" about Pfizer, including the "almost $30 billion in cash to support its promising drug pipeline and the billions of dollars more to be made in the years ahead from its Covid vaccines and therapies."

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• The semiconductor industry will likely continue to experience a "bumpy ride," but according to Trade Algo, Qualcomm Inc.'s QCOM profitability is "likely to remain robust, with the bottom line eventually seeing renewed growth as margins improve, supply chains stabilize, and the Chinese handset market further matures."

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• For Tyson Foods Inc., Buckingham anticipates the recent "perfect storm." Not to be repeated is TSN, which included dismal quarterly results and the detention of its chief financial officer John Tyson. The company's profits, in his opinion, are approaching a "trough," and he predicted that "a continuous focus on reducing operations to pay off, normalizing margins and leading to a considerably improved bottom line over the next years" would help the shares recover.

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• According to Trade Algo, Verizon Inc.'s VZ decision to concentrate on delivering content rather than producing it has created a network that is very appealing to all different sorts of internet and telecom service users. As the business continues to invest in 5G, he anticipates some "pressure," but he thinks the efforts will be worthwhile because they "perpetuate the delivery of consistent, quality results."