“If you don't find a way to make money while you sleep, you'll work until you die.” That's a quote from billionaire investor Warren Buffett, in which he emphasizes the importance of making your money work for you. Generating income without having to work will improve your financial position and potentially allow you to retire early. In today's challenging economic conditions, that may seem unlikely.
But by investing in dividend stocks and by accumulating wealth over time, early retirement is possible. Three high-yielding stocks that can help you generate decent dividend income right now are Pfizer (NYSE:PFE), Bank of Nova Scotia (NYSE:BNS)And AT&T (NYSE:T). By investing $30,000 in these three stocks, you can expect to receive around $2,000 per year in dividends.
1. Pfizer
Pfizer is a leading pharmaceutical company, but lately investors have turned bearish on the stock. The company's revenue from COVID products is declining, and the company is also facing multiple patent cliffs, which only adds to revenue concerns.
But Pfizer has invested both in its pipeline and through acquisitions to help grow and diversify its business going forward. Last year, the oncology company acquired Seagen for $43 billion. It estimates that acquisition alone could generate at least $10 billion in revenue by the end of the decade.
Investing in Pfizer requires a small leap of faith that the company's strategy and plan will pay off. But this is not a very risky stock to invest in. Although profits plummeted last year due to a sales decline and restructuring and asset impairment charges, the company still generated positive free cash flow of nearly $5 billion.
Pfizer has a plan to add $25 billion in sales to its top line by 2030, and if successful, investors who pass on the stock today may regret that decision in the future. At just twelve times estimated forward earnings, the stock is trading at an incredibly cheap valuation.
And Pfizer still pays its dividend. At a lower price, the yield is up to 6.5%, meaning a $10,000 investment in the company would be enough to generate $650 in annual dividends.
2. Bank of Nova Scotia
Investors can get even higher returns from Canada-based Bank of Nova Scotia, which currently yields about 6.7%.
Being one of Canada's top chartered banks, investors get a fairly safe investment with this stock. The bank's geographical profile, which includes a greater focus on emerging markets, means that it has a more volatile and therefore riskier investments than his peers. But Bank of Nova Scotia, also known as Scotiabank, still provides a safe long-term investment. The company has been paying dividends since 1833.
In the most recent quarterly results, for the period ending January 31, the company's numbers still seemed strong. Revenue totaling 8.4 billion Canadian dollars increased 6% year over year, and net profit of CA$2.2 billion improved 25%.
At less than ten times estimated forward earnings and 1.1 times book value, Scotiabank is another cheap dividend stock to own. Investing $10,000 in the stock could yield about $670 in annual dividends for your portfolio. And because bank stocks often increase their payouts, dividend income is likely to increase over time.
3. AT&T
The list is completed by telecom giant AT&T. The stock has struggled to gain momentum this year as high interest rates and lackluster growth have led investors to look elsewhere for good investment opportunities. The company's recent data breach has put even more negative pressure on an already beaten stock. In three years, AT&T shares are down 27%.
But the problems the stock is facing today are transitory and shouldn't impact your long-term prospects for AT&T. As a leading telecoms provider, the company is well-placed to benefit from population growth, increased data usage and people upgrading their phones. And it's not that the company isn't growing; during the last three months of 2023, AT&T's revenues rose 2.2% to $32 billion. Operating cash flow of $11.4 billion was also 10% higher than the previous year.
Despite what appears to be an unsustainably high yield of over 6.7%, AT&T's dividend is not in immediate danger as the company remains solid. Investing another $10,000 in AT&T stock could yield just over $670 in dividends.
Combining all of these investments brings your total to almost $2,000 in dividends, with a total of $30,000 invested in these three dividend stocks.
Should you invest €1,000 in Pfizer now?
Consider the following before buying shares in Pfizer:
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Pfizer. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has one disclosure policy.
Want $2,000 in annual dividends? Invest €30,000 in these three stocks was originally published by The Motley Fool
