As a Dividend King that has raised its payout for 57 consecutive years and running, it’s no wonder that Coca-Cola (NYSE: KO)Â is popular with investors across a diverse range of portfolio types and investment strategies. Considering its cheap share price of less than $50 and a solid dividend yield of 3.4% that far outshines the S&P 500‘s average of 2%, Coca-Cola is a long-term growth stock that’s tough to beat. But when it comes to dividends, Coca-Cola definitely isn’t the biggest fish in the sea.
Insurer MetLife (NYSE: MET), pharmaceutical giant Pfizer (NYSE: PFE), and tobacco maker Altria (NYSE: MO) have one major thing in common. These companies all pay dividend yields that are well above average — MetLife’s dividend currently yields 5.2% for investors, while Pfizer boasts a 4.3% payout. Altria has both companies beat with a mouthwatering 9% dividend yield.
Here’s what you need to know before you scoop up one or more of these companies for your basket of stocks.Â
Image source: Getty Images.
On Sept. 17, MetLife’s management announced that the company would be acquiring Versant Health, a move that will significantly boost its foothold in the vision care market. The $1.7 billion transaction, which is slated to conclude in the final quarter of 2020, “will establish MetLife as [a] top-three Player in [the] U.S. managed vision care industry,” according to the press release, while providing an additional base of about 35 million consumers who are currently insured by Versant Health.
In the first quarter of 2020, which ended March 31, MetLife reported a 12% increase in its total revenue, which amounted to $18.3 billion. The company’s revenue fell by a notable 19% in the second quarter to a total of $14.1 billion. MetLife’s Q2 net income of $68 million represented a 96% year-over-year decline . Its premiums, fees, and other revenues declined 13% in Q2, resulting in a 43% year-over-year drop in the company’s adjusted earnings.
In light of concerns about whether life insurance covers deaths resulting from COVID-19 (which may be unfounded, but may also be affecting the stock), as well as decreases in consumer spending, it makes sense that MetLife’s revenue took a noticeable hit in the second quarter. With that being said, the company’s cash position is excellent. Having closed the second quarter with cash flow totaling $6.6 billion, management noted that the amount “is above our target cash buffer” of $3 billion to $4 billion.
As of 2019, MetLife was the top life insurance company in terms of direct premiums written, with a weighty 13% share of that market. Shares of MetLife have recovered from the company’s March low, but the stock is still down by more than 30% compared to January. Trading at under $40 and at just about 5 times earnings, this value stock is a compelling potential buy for the long-term investor.
Pfizer is a compelling dividend stock, but its role in the ongoing coronavirus vaccine race is another point of interest. The company is developing and studying a COVID-19 vaccine called BNT162b2 with a German company called BioNTech. Enrollment for the ongoing phase 3 clinical study is still in progress. Pfizer announced Sept. 12 that it had presented an amended protocol to the U.S. Food and Drug Administration to allow enrollment of up to 44,000 subjects across a diverse range of health profiles in the phase 3 trial. It had originally intended to include just 30,000 participants in the phase 3 study.
As of Sept. 15, management announced that it had already enrolled 29,000 subjects in the phase 3 study of BNT162b2. The press release also included limited blinded tolerability data from the phase 3 trial, noting that the vaccine candidate has been generally well-tolerated by dosed subjects with mild to moderate side effects reported. Of the subjects encompassed by this early blinded data, half were administered the vaccine candidate and half a placebo. BNT162b2 previously produced strong T-cell responses in subjects in the phase 1 clinical trial. T-cells help to fuel the production of antibodies.
Pfizer and BioNTech anticipate reaching a determination as to the safety and effectiveness of their COVID-19 vaccine candidate by the end of next month. The companies have already reached manufacturing and supply agreements for BNT162b2 with a number of governments around the world, including the U.S., Canada, and Japan. Pfizer and BioNTech hope to produce more than 1.3 billion doses of BNT162b2 by the end of next year.
Pfizer currently has 89 different projects in its pipeline, with 23 programs in late-stage studies. The company’s second-quarter earnings were certainly affected by the COVID-19 pandemic, but its core group of consistently profitable products helped Pfizer to manage the volatility well. Two of the company’s most profitable drugs for the quarter were anticoagulant medication Eliquis and oncology drug Ibrance. These products amassed sales of approximately $1.3 billion each in Q2. Pfizer clocked close to $12 billion in revenue for the second quarter, and reported 6% operational growth in its biopharma division.
Pfizer’s pending merger of subsidiary Upjohn with generics and specialty pharmaceuticals company Mylan (NASDAQ: MYL) will significantly increase the company’s presence in the generics market — and none too soon. Upjohn has been a considerable drag on Pfizer’s revenues of late, effecting a 31% operational decline in the most recent quarter. While the lion’s share of Upjohn’s troubles can be attributed to its loss of exclusivity for Lyrica last year, the Mylan merger should result in a much-needed refresh for this unit and bodes well for its future profitability. Pfizer expects to report earnings between $48.6 billion and $50.6 billion in 2020.
Shares of Pfizer are down about 9% year to date, while the stock is trading at a comfortable 14 times its earnings. Top Wall Street analysts think that Pfizer could increase its earnings by more than 5% per year over the next five years. Although a safe and effective vaccine would undoubtedly be a feather in its cap, Pfizer’s strong portfolio of products and exceptional pipeline make the company a compelling investment regardless.Â
Even though Altria’s net revenue declined by nearly 4% in the most recent quarter, it still managed to achieve 4% year-over-year net revenue growth in the first six months of 2020, amounting to net revenues of just under $13 billion. The company’s diluted earnings per share (EPS) also grew in the first half of 2020 compared with the same period in 2019, by a noteworthy 13%.
The company reported 10% year-over-year revenue growth in its oral tobacco products segment for the first six months of 2020, a sharp contrast to the 12.3% decline Altria saw in its wine segment during the same period. Marlboro is by far one of the most prominent brands that Altria owns, and the company achieved a shipping volume of 44 billion Marlboro cigarettes during the first six months of this year. Across all its smokeable products brands, Altria reported a shipment volume of roughly 50.8 billion units during the first half of 2020.Â
Commenting on the company’s first-half results, Altria’s chief executive officer, Billy Gifford, said, “We believe Altria showed resilience in volatile market conditions, growing adjusted diluted earnings per share by 8.5%, driven by the outstanding financial performance of our core tobacco businesses.”
Altria also reported a strong cash position of $4.8 billion at the close of Q2, and used about $1.8 billion of its cash to pay its dividends and taxes in July.Â This tobacco stock is a tempting value play with a dividend that’s hard to pass up. It’s still cheaper than it was in January, and now could be a good time to snag this one on sale.
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