Interest rates move higher but remain historically low.
Persistent inflation and Fed action pushed the yield on 10-year Treasury bonds above 3% earlier this month before re-establishing themselves at the current 2.8%. Going back to 1912, the 10-year benchmark has averaged just over 5%.
There are still ways to get that 5%.
With rising government and corporate yields, bonds are becoming more attractive to some investors. Its relative security in a equity market combined with more attractive returns is a tempting value proposition.
An alternative approach is to invest in gross stocks that offer succulent dividend yields. While some high-yield stocks are best left intact due to their dividend instability, others are ripe for collection.
These three stocks offer the best of both worlds: dividend yields that are about twice as high as 10-year stocks and have long-term capital appreciation potential.
What is a good energy existence?
A sharp increase since the end of 2021, Devon Energy Corporation (NYSE: DVN) he has a certain impulse by his side. It is not too late to get on the bandwagon or to benefit from a generous dividend.
Currently, the oil and gas producer is offering a quarterly dividend of $ 1.27, which has increased in each of the last five years. This equates to an annualized dividend yield of 7.2% which far exceeds the average yield of 4.2% in the energy sector. And with a prepayment ratio of 61%, there is still room to further increase the dividend.
From the cash flow that Devon Energy is generating these days, more dividend increases are likely. Its ground operations in the United States and Canada made profits of more than $ 1.2 billion in the first quarter amid much higher crude oil and natural gas prices. The company also benefits from the synergies arising from its acquisition of WPX Energy.
It remains to be seen how high energy prices will remain. What is certain is that Devon Energy owns some of the strongest assets in the industry and incurs relatively low extraction costs. Global long-term energy demand should keep dividends flowing and stock prices flowing upstream.
Is there a public investment vehicle for private capital?
Blackstone Inc. (NYSE: BX) offers unique exposure to alternative investments as well as higher market returns. With much of the company’s real estate earnings, it’s a REIT-like investment that distributes more than 80% of the profits as dividends. The $ 5.28 annualized dividend means that Blackstone currently offers a return of approximately 5%.
In addition to a variety of property types, Blackstone invests in private equity, hedge funds, credit assets and closed-end investment funds. It is looking to grow the share of commissions earned from its managed assets (AUM), which translates into stellar financial results.
Distributable first-quarter earnings of $ 1.55 were up 61% year-over-year and crushed analysts’ consensus by $ 0.48. Commission-related earnings rose 55% as Blackstone’s AUM rose to $ 916 billion and a staggering distance from the year-end management goal of $ 1 trillion. The recent fall in capital markets has probably pushed the company back, but the goal still seems achievable.
Despite its exposure to risky assets, Blackstone has a substantial cash cushion. It has $ 139 billion in unexploited funds that can be used to buy assets at attractive discounts amid the recent market downturn.
Blackstone shares have also been corrected recently. Marketing 28% below their record high, they currently offer a good combination of growth and revenue.
Is IBM a growth and revenue action?
International Business Machines Corporation (NYSE: IBM) It may not be the cutting-edge technology company it was, but it still offers exposure to growing technology areas and a 5% term dividend yield.
“Big Blue” has increased its dividend for 28 consecutive years. As an infrastructure consulting service provider rather than a hardware manufacturer these days, IBM has shifted its focus from desktop computers and to the fastest-growing cloud computing and artificial intelligence markets. The move is a good omen for margins and the ability to continue to return more than 60% of profits to shareholders in the form of dividends.
After separating the Kyndryl business, approximately 70% of IBM’s revenue comes from higher-growth segments. As a result, margins increase. In the first quarter, revenue exceeded Street’s forecast and the pre-tax margin widened 230 basis points to 12.4%.
IBM believes it can maintain single-digit growth and continue to improve margins as it relies more on cloud and AI. This should support its ability to extend its dividend-raising streak over the coming years.
As Big Blue reinvents itself, investors have the potential to make a big deal out of both price appreciation and dividends.