High-yield stocks can give income portfolios a nice boost, but not every high-yield stock deserves a spot in your income portfolio. Sometimes, a high yield can indicate business problems that cause share prices to fall, and when that happens, the losses can far exceed any benefit associated with pocketing dividend checks.
You won’t always be able to avoid that risk, but taking the time to consider the business behind the high yield before buying may reduce your risk. For instance, following stocks are high-yielding stocks that are backed by strong businesses, which could make them worth owning.
Top China Stocks To Watch For 2019: American Tower Corporation (REIT)(AMT)
American Tower may not be a household name, but its business is as ubiquitous as it can get. The company owns more than 160,000 cell tower sites throughout the U.S. and across the globe, and rents out the space to wireless carriers. This means that in the U.S. the top wireless service providers pay American Tower to put up signals on its towers, and when they need more capacity — and carriers always do — they have to fork over more money to American Tower.
The demand for wireless data is poised to increase: From 2016 to 2021, mobile data usage is expected to jump 700%. American Tower benefits by entering into long-term lease agreements; the stability from those contracts allows the company to earn about 99% of its sales from recurring revenue.
The great news for dividend investors is that American Tower is a real estate investment trust(REIT), which means that the majority of its net income is paid out as dividends. So as data usage grows — and revenue and income increase — so do the company’s dividends.
American Tower can experience up and downs in sales and earnings just like any other company, and in the first quarter its revenue climbed 7.8% year over year, but earnings fell 8.8%. But that shouldn’t discourage investors. Management expects full-year 2018 sales to increase by 6% and net earnings to rise by 13% year over year, both at the midpoint of guidance.
The company should also benefit from the ongoing wireless evolution, including the upcoming 5G standard. Carriers are already testing 5G, and as they ramp up usage they’ll have to update and expand their signals on cell towers.
American Tower pays a forward yield of 2.19% right now, and has raised its dividend for a modest, but not insignificant, six consecutive years. If you’re looking for a bet on the future of wireless communication — and want a reliable dividend too — you may want to consider this towering tech play.
Top China Stocks To Watch For 2019: Capital One Financial Corporation(COF)
Shares of Capital One are down just 1.2% over the last month, which shows that it has been a bit more resistant to the nearly market-wide downturn than many other stocks. The credit card company is projected to see its quarterly revenues climb by 6.4% to hit $6.96 billion, based on our current Zacks Consensus Estimates. Meanwhile, Capital One’s Q1 earnings are expected to surge by 32% to $2.31 per share.
Better still, Capital One is currently a Zacks Rank #3 (Hold) and sports an Earnings ESP of 0.79%. The company’s Most Accurate Estimate—the representation of the most recent analyst sentiment—calls for earnings of $2.33 per share, which comes in 2 cents above our current consensus estimate. This means that Capital One is a stock that could top earnings estimates when it reports its first quarter financial results after market close on Tuesday.
Top China Stocks To Watch For 2019: BB&T Corporation(BBT)
This super-regional bank offers an attractive value as it realizes expense cuts in its core business and benefits from rising interest rates thanks to a sticky deposit mix.
BB&T is a powerhouse in the American Southeast, where it ranks as a top 10 bank by deposits in every state in which it competes. Thanks to established commercial relationships, roughly one-third of its deposits are noninterest-bearing — deposits on which it pays nothing in interest. Costly and less-sticky certificates of deposit make up less than 9% of its deposits.
Investors who examine this bank based on headline figures will miss the favorable trends in its loan portfolio. Though loan growth has been flat, or even negative, in recent months, BB&T is effectively swapping low-yielding warehouse loans for higher-yielding commercial loans, thus generating better returns on its $144 billion loan book.
This slow-growing bank is unlikely to surprise, but that’s a good thing. Bank investors know that BB&T was one of the very few that remained profitable even at the depths of the financial crisis, thanks to a conservative lending culture that puts credit quality ahead of growth. And at roughly 13 times Wall Street’s consensus earnings estimate in 2018, investors aren’t exactly overpaying for quality, either.