Amidst the clamor for artificial intelligence (AI), income-focused investors are sleeping on three top dividend payers: AT&T, Ares Capital, and Altria Group. These companies offer an average yield of 8.6%, and a modest investment spread across them could yield $1,000 in annual dividend income.
Image source: Getty Images.
AT&T: The Resilient Telecom Giant
AT&T’s telecom business continues to thrive despite dwindling landline usage, with mobile and broadband internet revenue offsetting the decline. This stalwart currently offers a tempting 6.6% yield, with strong prospects for future payout raises.
Despite moderate revenue growth, AT&T’s shift to internet services holds the promise of sustained mid-single-digit growth. With an anticipated free cash flow of $17-18 billion this year, the company is well-positioned to meet its dividend commitments and beyond.
Ares Capital: The Robust Business Development Company
Ares Capital, as a Business Development Company (BDC), boasts an even higher yield of 9.5% at recent prices. Operating as a BDC, the company’s tax-advantaged structure allows for substantial dividend distributions, attracting income-seeking investors.
Ares Capital’s lending focus on mid-market businesses, coupled with rising variable interest rates, has propelled its average yield on total investments to 11.3%. While facing transient challenges from increased interest rates, the company’s nonaccrual status is on a declining trend, indicating improving loan performance.
Altria Group: The Defiant Tobacco Giant
Altria Group, a titan in the U.S. tobacco industry, continues to demonstrate resilience despite declining cigarette consumption. With a robust pricing structure and a diversified product portfolio, Altria has weathered the storm and currently offers an impressive 9.8% dividend yield.
Despite challenges from declining cigarette volumes and the ban on flavored e-vapor products, Altria has consistently raised its dividend. By exercising prudent cost management and share repurchases, the company has managed to maintain its bottom line and sustain its high dividend yield.
Looking to Invest in AT&T?
Before diving into AT&T stock, explore the Motley Fool Stock Advisor‘s top 10 stock recommendations. As the service has surpassed S&P 500 returns since 2002, it provides a solid framework for maximizing investment returns.
*Stock Advisor returns as of February 12, 2024
Cory Renauer has positions in Ares Capital. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
