Yahoo Finance These High-Yield Dividend Stocks Are All The Rage Right Now, But Are They The Newest Yield Traps?
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High-yield dividend stocks present an enticing option as investors continue to brace for a possible recession. Consistent dividend payouts can provide returns, even if stock prices begin to fall.
With the Federal Reserve Chairman Jerome Powell ruling out a rate cut in the near term, citing a "lack of further progress" on the inflation front, US equities have edged lower. The broader S&P 500 index and the tech-focused Nasdaq Composite Index are still trying to recover from their losses last month.
However, as alluring as high-yield dividend stocks may be, investors should exercise caution regarding them being potential yield traps. As with any investment, it's important to take a close look at a company's operations before choosing to dive in.
Kohl's
Kohl’s Corporation (NYSE:KSS), a prominent retail chain in the U.S., pays $2 in dividends annually, boasting an impressive dividend yield of 8.35% on its current share price. Moreover, with a four-year average dividend yield of 5.43%, the company appears to be a dividend powerhouse.
However, recent challenges in the retail sector cast doubts on the sustainability of such high dividends. Kohl’s has been grappling with declining foot traffic and increased competition from e-commerce giants.
The company's net sales fell 1.1% year-over-year to $5.7 billion in the fourth quarter of 2023, which ended on February 3, 2024. Comparable sales, on the other hand, fell 4.3% during the last reported quarter.
Kohl's earnings prospects seem grim, as analysts predict the company's annual revenues to decline by 20 basis points year-over-year in the current year. Furthermore, the consensus annual EPS estimate of $2.33 for the ongoing year indicates an 18.2% decrease from the same period last year.
Don't Miss: Passive income investments are one of the most trusted methods for riding out a recession, so it's no surprise that people are turning to these high-yield real estate notes that pay a fixed 7.5% – 9%.
CVS Health
CVS Health Corporation (NYSE:CVS), one of the most popular healthcare retail pharmacy chains in the US, is popular among income investors. The company pays $2.66 in dividends annually, yielding 3.93% on its current share price.
Despite being a stalwart in the healthcare sector, CVS faces its own set of challenges, including regulatory uncertainties and evolving consumer preferences. Shares of CVS have plunged by more than 28% year-to-date and by nearly 24% in the past month.
In the fiscal first quarter of 2024 ended March, CVS Health's total revenues rose 3.7% year-over-year to $88.44 billion. However, the retail pharmacy chain's adjusted operating income amounted to $2.96 billion in the last quarter, marking a 32.3% decline from the same period last year. Moreover, the company's diluted earnings per share fell by over 40% year-over-year to $1.31.
Manulife Financial
With a trailing twelve-month dividend yield of 4.73% and an annual payout of $1.10, Manulife Financial Corporation (NYSE:MFC) presents another intriguing option for dividend seekers. The Canada-based financial services provider hiked its quarterly dividends by 9.6% in March.
As a leading financial services provider, Manulife Financial operates in a sector known for its stability, with its four-year average dividend yield standing at 5.15%.
However, economic volatility and interest rate fluctuations could impact its ability to sustain dividend payments over the long term. Analysts polled by Yahoo Finance estimate Manulife Financial's revenues to come in at $1.47 billion in the fiscal first quarter of 2024 (ended March), indicating a 76.2% decline from the same period last year.
An Alternative Income Play
Real estate has been the ultimate income investment throughout history. No matter what happens in the world, people always have and always will need a place to live. Now, with homeownership becoming further out of reach for Americans, the single-family rental market looks as promising as ever.
A relatively new investment platform, backed by Amazon.com Inc. founder Jeff Bezos, is making it incredibly simple for average individuals to start investing in rental properties by offering shares of fractionalized homes. Investors collect monthly income from the rent and wait for the property to appreciate in value while Arrived takes care of the management responsibilities.
One of the latest offerings on the platform is The Breckenridge, a single-family rental in Knoxville, TN, bringing in $2,620 per month in rent. Shares of this property are priced at $10, with a $100 minimum investment. It only takes about 10 minutes to become an owner of this cash-flowing rental property. Click here to view offering details or browse other investment properties on Arrived.
This article These High-Yield Dividend Stocks Are All The Rage Right Now, But Are They The Newest Yield Traps? originally appeared on Benzinga.com
