VZ - Up To 10% Yields: My Top 10 High Dividend Yield Companies For January 2024

2024-01-06 07:15:00 ET

Summary

• High dividend yield companies are essential components within a well-balanced and diversified dividend portfolio, particularly for those seeking to generate substantial additional income via dividends.
• In this article, I will present 10 high dividend yield companies that are worth considering an investment in due to their attractive Valuation, high Dividend Yield, and financial health.
• 3 of the 10 selected picks provide investors with a Dividend Yield [FWD] above 9%: Altria (9.76%), British American Tobacco (9.55%) and Banco de Chile (9.40%).

Investment Thesis

The inclusion of high dividend yield companies in your investment portfolio demands a discerning selection process. Those companies, which pay sustainable dividends, are crucial for your overall investment portfolio, given their lower risk level and their ability to provide a stable and predictable dividend income stream.

Companies that pay sustainable dividends have a lower probability of experiencing a dividend cut. In addition to that, given their financial health, they are more likely to help your overall investment portfolio reach an attractive Total Return.

Companies that do not pay sustainable dividends and which have a higher risk of featuring a dividend cut, have an elevated probability of reducing the Total Return of your investment portfolio. This is the case as their stock price can decrease significantly as a result of a dividend cut.

For this reason, I aim to identify companies that pay sustainable dividends. In general, I suggest limiting the position on your overall portfolio of companies that have a higher risk of experiencing a dividend cut. This strategy ensures that you reduce the risk level of your portfolio while enhancing the probability of reaching positive investment results.

This strategy is meticulously implemented within The Dividend Income Accelerator Portfolio . In this portfolio, I plan to overweight companies that pay sustainable dividends while underweighting those with a greater risk of experiencing a dividend cut. This approach ensures a stable income stream for you as an investor, while, at the same time, ensuring a favorable risk-return profile for your overall investment portfolio.

Before I introduce you to the 10 selected companies that I believe are worth investing in during this month of January 2024, I will explain the selection process in greater detail.

Since I have already described the detailed selection process of high dividend yield companies in a previous article . you can skip the following section written in italics, If you are already familiar with it.

First Step of the Selection Process: Analysis of the Financial Ratios

In order to identify companies with a relatively high Dividend Yield [FWD], I use a filter process to make a pre-selection. From this pre-selection, I will later choose my top 10 high Dividend Yield companies of the month. To be part of this pre-selection of high Dividend Yield stocks, the companies should fulfil the following requirements:

• Market Capitalization > $10B
• Dividend Yield [FWD] > 2.5%
• P/E [FWD] Ratio < 30 or P/AFFO [FWD] < 30

In the following, I would like to specify why I have chosen the metrics mentioned above in order to select my top 10 high Dividend Yield stocks of the month.

A Market Capitalization of more than $10B contributes to the fact that the risks attached to your investments are lower, since companies with a higher Market Capitalization tend to have a lower volatility than companies with a low Market Capitalization.

A P/E [FWD] Ratio of less than 30 implies that the price you pay for the company is not extraordinarily high, thus filtering out those that have stock prices in which high growth expectations are priced in. High growth expectations imply strong risks for investors, since the stock price could drop significantly. Again, the filtering process helps us to reduce the risk so that we are more likely to make an excellent investment decision.

Second Step of the Selection Process: Analysis of the Competitive Advantages

In a second step, the companies' competitive advantages (for example: brand image, innovation, technology, economies of scale, etc.) are analyzed in order to make an even narrower selection. I consider it to be particularly important for companies to have strong competitive advantages in order to stand out against the competition in the long term. Companies without strong competitive advantages have a higher probability of going bankrupt one day, thus representing a strong risk for investors to lose their invested money.

Third Step of the Selection Process: The Valuation of the Companies

In the third step of the selection process, I will dive deeper into the Valuation of the companies.

In order to conduct the Valuation process, I use different methods and criteria, for example, the companies' current Valuation as according to my DCF Model, the expected compound annual rate of return as according to my DCF Model and/or a deeper analysis of the companies' P/E [FWD] Ratio. These metrics should serve as an additional filter to only select companies that currently have an attractive Valuation, which helps you to identify companies that are at least fairly valued.

The Fourth and Final step of the Selection Process: Diversification Over Industries and Countries

In the fourth and final step of the selection process, I have established the following rules for choosing my top picks: in order to help you diversify your investment portfolio, a maximum of two companies should be from the same industry. In addition to that, there should be at least one pick that is from a company that is based outside of the United States, serving as an additional geographical diversification.

My Top 10 High Dividend Yield Companies to Consider Investing in for January 2024

• Coca-Cola (KO)
• Zurich Insurance Group AG (ZURVY)
• Verizon (VZ)
• AT&T (T)
• Altria Group (MO)
• British American Tobacco (BTI)
• ING Groep N.V. (ING)
• Bayer (BAYZF) (BAYRY)
• Banco de Chile (BCH)
• Realty Income (O)

Overview of the 10 Selected High Dividend Yield Companies to Consider Investing In For January 2024

Source: The Author, data from Seeking Alpha

Coca-Cola

With Coca-Cola's current share price at $58.77, it pays shareholders a Dividend Yield [FWD] of 3.13%. Additionally, it is worth highlighting that Coca-Cola boasts a 10 Year Dividend Growth Rate [CAGR] of 5.09%, indicating that it pays sustainable dividends. This is further confirmed by the fact that the company has shown 61 Consecutive Years of Dividend Growth.

These metrics underscore that Coca-Cola is an attractive pick for those seeking to combine dividend income with dividend growth. The company's Payout Ratio of 68.68% makes me believe that its dividend will be relatively safe in the coming years. This theory is further underlined by the company's EPS GAAP [FWD] Growth Rate of 6.38%.

The Seeking Alpha Profitability Grade strengthens my belief that Coca-Cola is an excellent pick in terms of Profitability and underscores its leading position within the Soft Drinks & Non-alcoholic Beverages Industry: the company's EBIT Margin [TTM] is at 28.88%, which is significantly above the Sector Median of 8.43%. Coca-Cola's Return on Equity stands at 43.85%, which is 275.42% above the Sector Median.

Zurich Insurance Group

Zurich Insurance Group is a company from the Multi-line Insurance Industry that was founded in 1872. Presently, the company pays its shareholders a Dividend Yield [FWD] of 5.15%. Zurich Insurance Group's 5 Year Dividend Growth Rate [CAGR] stands at 9.10%, which indicates that it is not only an attractive pick for dividend income investors but also for those aiming for annual dividend growth.

Zurich Insurance Group's EBIT Margin [TTM] of 15.95% and Return on Common Equity of 18.41% highlight its strong Profitability. The company's Return on Common Equity stands 57.68% above the Sector Median, further underscoring its financial health.

The company's EBIT Growth Rate [FWD] of 11.45% highlights its steady trajectory of growth, a key factor in my decision to include it in this list of attractive high dividend yield companies to consider investing in during this month.

Below you can find the Seeking Alpha Dividend Grades, which underline the company's solid dividend and its strength in terms of dividend growth.

The Elevated Risk Factors of an Investment in Zurich Insurance Group - The Case for a 2.5% Limit on Your Overall Portfolio

I have identified two significant risk factors for investors considering the company for their investment portfolio: currency risk and the elevated risk of a potential dividend cut, evidenced by its Dividend Payout Ratio [FY1] [Non GAAP] of 82.08%, which indicates that the company's dividend is not entirely safe. For this reason, I suggest limiting the position to a maximum of 2.5% if you decide to include the company in your investment portfolio.

Verizon

Verizon has significantly underperformed the S&P 500 within the past 3 years: while the S&P 500 has shown a Total Return of 27.98% within this time-period, Verizon's Total Return has been -21.81%.

At Verizon's current price level, it pays shareholders a Dividend Yield [FWD] of 7.13%. It is worth highlighting that I consider Verizon's dividend to be relatively safe. This theory is underscored by the company's Dividend Payout Ratio [TTM] [Non GAAP] of 54.41%. In addition to that, it can be noted that Verizon has already shown 19 consecutive years of dividend growth, underscoring its growth outlook.

Presently, Verizon has a P/E [FWD] Ratio of 8.47, which is 20.14% below its 5 Year Average, suggesting that the company is presently undervalued. Verizon's undervaluation is further confirmed when looking at the company's Price/Sales [FWD] Ratio of 1.19, being 25.10% below its 5 Year Average.

Below you can find the Seeking Alpha Dividend Yield Grade for Verizon, underlying the company's attractiveness for dividend income investors.

ING Groep N.V.

ING Groep is a financial institution that was founded in 1762. The company is headquartered in Amsterdam, Netherlands. It operates through the following segments :

• Retail Netherlands
• Retail Belgium
• Retail Germany
• Retail Other
• Wholesale Banking
• Corporate Line Banking

Today, ING Groep exhibits a P/E [FWD] Ratio of 7.00, which not only stands 37.35% below the Sector Median of 11.18, but also 18.04% below its 5 year average (8.54). These metrics clearly indicate that ING Groep is presently undervalued, making the company an appealing choice to be part of this list.

The company pays a Dividend Yield [FWD] of 5.01% and boasts a 3 Year Dividend Growth Rate [CAGR] of 2.03%. In addition to that, with a Dividend Payout Ratio [FY1] [Non GAAP] of 46.80%, it is well-positioned to provide investors with a balanced combination of dividend income and potential for dividend growth.

It is further worth highlighting that ING Groep exhibits strong Profitability metrics: its Net Income Margin [TTM] stands at 44.83%, surpassing the Sector Median by 77.83%. The company's Return on Common Equity [TTM] is at 29.64%, exceeding the Sector Median by 153.94%.

The Seeking Alpha Growth Grade further underscores ING Groep's excellent growth outlook.

The Elevated Risk Factors of an Investment in ING Groep - The Case for a 2.5% Limit on Your Overall Portfolio

Due to the bank's elevated risk level, which includes currency risk and the risk of a dividend cut (I do not consider its dividend to be entirely safe), I suggest limiting the proportion of ING Groep to a maximum of 2.5% of your overall investment portfolio. By doing so, you will lower the portfolio's risk level.

Bayer

Bayer is a company from the Pharmaceuticals Industry that was founded in 1863. The company is headquartered in Leverkusen, Germany, and it operates through the following segments :

• Pharmaceuticals
• Consumer Health
• Crop Science segments

With a P/E Non-GAAP [FWD] Ratio of 5.45, which is 71.53% below the Sector Median and 33.85% below its 5-year average, I consider the company to be currently undervalued.

Bayer's Dividend Yield [FWD] presently stands at 7.08%. However, it should be noted that the company has shown a negative 3 Year Dividend Growth Rate [CAGR] of -4.69%.

When compared to other companies from the Pharmaceuticals Industry, such as Johnson & Johnson (NYSE: JNJ ), for example, it can be highlighted that Bayer has the significantly lower Valuation and pays the significantly higher Dividend Yield [FWD] (7.08% compared to 3.04%).

However, I consider the risks associated with an investment in Bayer to be substantially higher than those linked to an investment in Johnson & Johnson. This thesis is underscored by Bayer's significantly lower EBIT Margin [TTM] of 4.11% (compared to Johnson & Johnson's 27.97%), its higher Total Debt to Equity Ratio (141.37% compared to 42.01%) and higher 60M Beta Factor (0.99 compared to 0.57).

In addition to that, Johnson & Johnson has a significantly broader product portfolio, which plays a crucial role in mitigating risks.

The Elevated Risk Factors of an Investment in Bayer - The Case for a 2% Limit on Your Overall Portfolio

Despite Bayer's Dividend Payout Ratio [TTM] [Non GAAP] of 41.26%, I do not consider the company's dividend to be entirely safe.

I suggest limiting the Bayer position to a maximum of 2% of your overall portfolio, due to its relatively low EBIT Margin [TTM] of 4.11%, and its relatively high Total Debt to Equity Ratio of 141.37%.

This approach helps you to mitigate your portfolio's downside risk while elevating the chances of positive investment results.

Banco de Chile

Banco de Chile, established in 1893 and headquartered in Santiago, Chile, provides its shareholders with a Dividend Yield [FWD] of 9.40%. This figure is even more noteworthy when considering the bank's 5 Year Dividend Growth Rate [CAGR] of 16.13%.

However, it is important to highlight that I do not consider the bank's dividend to be entirely safe. This statement is underlined by its relatively high Dividend Payout Ratio [TTM] [Non GAAP] of 75.91%, which is 118.92% above the Sector Median. It is further underlined by a D rating in terms of Dividend Safety from the Seeking Alpha Dividend Grades.

Banco de Chile's P/E [FWD] Ratio of 9.27, which is 17.08% below the Sector Median and 16.24% below its 5-year average, indicates that the bank is currently undervalued.

When compared to U.S. banks such as JPMorgan (NYSE: JPM ) and Bank of America (NYSE: BAC ), it can be highlighted that Banco de Chile has a lower Valuation (P/E [FWD] Ratio of 9.27 compared to JPMorgan's P/E [FWD] Ratio of 10.21, and Bank of America's 10.07).

Moreover, Banco de Chile pays a significantly higher Dividend Yield [FWD] of 9.30 compared to JPMorgan's Dividend Yield [FWD] of 2.47% and Bank of America's 2.85%.

However, I consider the risks that come attached to an investment in Banco de Chile to be significantly higher in comparison to an investment in JPMorgan or Bank of America.

Therefore, in case you are looking for a bank with less risks associated, you should consider investing in JPMorgan or Bank of America. I consider JPMorgan and Bank of America's dividend to be significantly safer than the dividend of Banco de Chile.

The Elevated Risk Factors of an Investment in Banco de Chile - The Case for a 1.5% Limit on Your Overall Portfolio

I believe that the risk level that comes attached to an investment in Banco de Chile is relatively high. Not only does the currency risk contribute to an elevated risk level, but also the fact that its dividend is not entirely safe. A dividend cut could have a strong negative impact on the company's stock price.

For this reason, I suggest that you limit the position on Banco de Chile to a maximum of 1.5% of your overall investment portfolio.

Realty Income

Realty Income presently pays a Dividend Yield [FWD] of 5.31%, which is an appealing figure, given the sustainability and safety of the company's dividend. The sustainability of its dividend is underscored by its EPS Diluted Growth Rate [FWD] of 21.24% and its 26 consecutive years of dividend growth. In addition to that, it is worth noting that Realty Income exhibits a 10 Year Dividend Growth Rate [CAGR] of 3.79%.

At its current price level of $57.50, I see the company as being undervalued. This is evidenced by its P/AFFO [FWD] Ratio of 14.35, which is 6.25% below the Sector Median of 15.35.

The Seeking Alpha Dividend Grades further underscore the sustainability of Realty Income's Dividend. The company receives an A+ rating for Dividend Consistency, a B+ for Dividend Growth, a B for Dividend Safety, and a B- for Dividend Yield.

The company's solid dividend in combination with its attractive risk-reward profile underscore my investment thesis to overweight the company in a long-term investment portfolio.

I am following this approach with the implementation of The Dividend Income Accelerator Portfolio, in which I plan to provide Realty Income with an elevated proportion of the overall portfolio.

In the article below, I discuss in greater detail the reasons for having incorporated Realty Income into The Dividend Income Accelerator Portfolio:

Realty Income: A Strong Alignment With The Dividend Income Accelerator Portfolio Approach

British American Tobacco

Within the past 12-month period, British American Tobacco has shown a negative performance of -26.74%. This means that the company has significantly underperformed the S&P 500, which has shown a positive performance of 23.91% within the same period.

Today, British American Tobacco has a P/E [FWD] Ratio of 7.13, which is 63.34% below the Sector Median and 25.84% below its average from the past 5 years. These metrics strengthen my belief that British American Tobacco is presently undervalued.

The company boasts a Dividend Yield [FWD] of 9.55%, which is significantly above its average from the past 5 year (7.56%), serving as an additional indicator that it is currently undervalued.

In addition to that, it is worth noting that British American Tobacco has shown a 5 Year Dividend Growth Rate [CAGR] of 2.46%, suggesting that the company is attractive for those seeking to blend dividend income with dividend growth potential.

This combination of dividend income and potential for dividend growth is also one of the reasons why I added British American Tobacco to The Dividend Income Accelerator Portfolio:

British American Tobacco Vs. Altria: Which Is The Better Dividend Choice?

AT&T

Within the past 3 years, AT&T has clearly underperformed the S&P 500. While the S&P 500 has shown a positive performance of 27.98% within this time-period, AT&T's performance has been negative (-7.64%).

Today, AT&T exhibits a Dividend Yield [FWD] of 6.69%, being 110.59% above the Sector Median, underlining the company's attractiveness for dividend income investors.

In terms of Valuation, it can be highlighted that AT&T's current P/E [FWD] Ratio is at 7.56, which is 31.22% below its 5 Year Average, indicating that the company is undervalued at its current price level of $17.10.

AT&T's undervaluation is further underscored by its Price/Sales [FWD] Ratio of 0.98, which is 15.93% below its 5 Year Average.

My article below explains in greater detail why I have incorporated AT&T into The Dividend Income Accelerator Portfolio:

AT&T: A Strategic Choice To Increase Your Portfolio's Dividend Yield And Reduce Its Risk Level

Altria

When comparing the performance of Altria with the performance of the S&P 500 during the past 12-month period, it can be noted that the S&P 500 has outperformed: while the S&P 500 has shown a positive Total Return of 23.91%, Altria has shown a negative Total Return of -4.03%.

With Altria's current stock price standing at $41.18, it provides investors with an attractive Dividend Yield [FWD] of 9.76%.

Moreover, the company shows notable figures in terms of Profitability, underlined by the Seeking Alpha Profitability Grade, which you can find below.

Overview of the Dividend Yield [FWD] of the Selected Companies

The graphic below illustrates the Dividend Yield [FWD] of the 10 selected high dividend yield companies that are worth considering investing in during this month of January. From the 10 selected companies, Altria, British American Tobacco and Banco de Chile stand out with the highest Dividend Yield [FWD] of 9.76%, 9.55% and 9.40%.

However, it should be noted that Altria, British American Tobacco and Banco de Chile's Dividend Payout Ratios [FY1] [Non GAAP] stand at 77.32%, 63.40%, and 70.10%, respectively. These figures indicate that their dividends are not entirely safe.

Therefore, I suggest that their proportion compared to the overall portfolio should not be disproportionally high (for Banco de Chile, for example, I suggest limiting the position to 1.5% compared to the overall portfolio as mentioned previously). This strategy helps to mitigate the downside risk of your portfolio, thereby enhancing the prospects for positive investment outcomes.

Conclusion

Today's article has focused on companies that pay an attractive Dividend Yield, aimed at generating additional income for investors.

Each of the selected companies not only boast an attractive Valuation and financial health, but also possesses strong competitive advantages, in addition to offering an attractive Dividend Yield with potential for substantial dividend increases in the years ahead.

In my opinion, incorporating high dividend yield companies that pay sustainable dividends into an extensively diversified dividend portfolio which also includes companies that emphasize dividend growth, provides investors with the greatest benefits. This approach ensures a steady income stream for you as an investor, coupled with annual dividend enhancements.

I am actively applying this investment strategy through The Dividend Income Accelerator Portfolio. Thanks to the portfolio's focus on risk-mitigation, it is strategically positioned to achieve an attractive Total Return with a high probability, while, simultaneously, balancing dividend income with dividend growth. This investment strategy continuously strives to maximize investor benefits.

Author's Note: I would appreciate hearing your opinion on my selection of high dividend yield companies to consider buying in January 2024. Do you already own or plan to acquire any of the picks? Which are currently your favorite high dividend yield companies?

For further details see:

Up To 10% Yields: My Top 10 High Dividend Yield Companies For January 2024