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3 Stocks That Outperform Treasury Yields With High Dividends

Key Points

  • The market has shaped itself into a completely different machine today, hungry for yield and low-risk assets.
  • Luckily, a list of stocks across other sectors brings you reliable dividends with some available upside equities.
  • Take your pick according to what your portfolio calls for, and enjoy the ride.
  • 5 stocks we like better than Altria Group

Today’s market is not the one you inherited many years ago; this is entirely different. With giants like BlackRock NYSE: BLK and The Goldman Sachs Group NYSE: GS guiding their own ships toward a mix of yield and liquidity and away from what seems to be overvalued stocks, you, too, can adjust accordingly.

Today’s focus is finding stocks that can offer a high dividend yield, preferably above the near 5.0% from the treasury bonds. Ideally, these higher yields still carry some of the low-risk nature of bonds, with a bit of the upside appreciation potential of stocks.

Using tools like MarketBeat’s stock screening tool can help you find – and filter – through some of these stocks offering a high yield; however, the homework has been done to bring you a list of stable yields with some added upside on top.

Icahn Enterprises

Everyone knows about Carl Icahn, often called the most feared man on Wall Street because of his ruthless activist strategies. Little do these people know, he runs Icahn Enterprises NASDAQ: IEP, a holding company enabling the everyday investor to ride the benefits of his system.

Because the fund’s strategies rely on heavy financing to make its acquisitions, it is negatively correlated (moves in the opposite direction) to bond yields or other interest rate benchmarks. As the FED has been hiking rates and pointing to keeping them higher for longer, you can imagine what happened to this stock.

On a year-to-date basis, Icahn has declined by as much as 65.4%, underperforming the market by 78.4%. While this may seem scary today, it is helpful to understand that once interest rates come down in the next cycle wave, the opposite will be valid for the stock’s performance.

Understanding that the fund has significant exposure to real estate, the automotive sector, and energy names can make it clear why the fund’s value has declined by so much. These sectors are being severely undervalued in today’s market, increasing the potential upside swings when things inevitably turn.

Considering that, as of the second quarter of 2023, the fund counted with $6.5 billion of total liquidity, shareholder benefits seem safer than ever. The fund’s market capitalization at these prices is roughly $7.0 billion, making this liquidity a massive amount of ‘dry powder.’

As the holdings keep pumping out free cash flow to the fund, shareholders will likely keep receiving their quarterly dividend payout of $2.0 a share, making for an annual dividend yield of – drum roll, please… 22.4%!

Analysts share this lack of concern with their $27.0 price target, which requires a rally of up to 51.2%. Bottoming prices, high yield, and all the upside: Those bonds don’t look so hot now, do they?

Altria Group

If the potential price swings in Icahn are too much for your stomach to handle without reaching for the Tums pack, then this stock may be a better choice for you. With a still highly competitive annual dividend yield of 9.1%, Altria Group NYSE: MO is a great way to diversify some of the volatility.

Regarding the bottom line, Altria has achieved a steady and impressive net income margin of roughly 25% over the past five years. With this remaining cash, management is doing the right thing by showcasing their skills as great .

With an ROIC (return on invested capital) rate hovering around 25-30%, long-term compounding returns will also be on your side. The catch? There doesn’t seem to be one so far; you could lock in the dividend rate today while still enjoying the extra compounding effects.

Petrobras

Jumping over to international markets, which have by far the least attention drawn in today’s uncertain market conditions, this stock offers all the signs of undervaluation at a mouth-watering dividend yield.

is a Brazilian energy company, in fact, one of the biggest in the country. With a historically strong dollar, these ADRs (American depository receipts) add an extra layer of upside.

While analysts – just like broader markets – lack any sort of excitement around this name, there are still reasons to get excited beyond the prospect of an improved exchange rate.

Today’s stock is offering you a 21.8% dividend yield; just how stable and this one is becomes the main question to tackle.

Well, the financials again speak for themselves; with a gross margin of 48-50%, this company clearly showcases its entrenched relationships with the government and its pricing power.

Net income margins have also shown to be strong industry-leading, with an average rate of 25% over the past five years. With all the retained earnings the business generates, the free cash flow is more than enough to afford the dividend payments.

So don’t be fooled by the lack of analyst bullishness; this stock can give you the yield you need alongside the upside to cushion through a domestic market slowdown.

Before you consider Altria Group, you’ll want to hear this.

MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and Altria Group wasn’t on the list.

While Altria Group currently has a “Hold” rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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