There are two ways to secure a steady dividend stream for retirement. Shares of companies that can rapidly increase dividends have modest initial yields. You might also aim for big yields upfront. Unfortunately, equities rarely generate significant yields unless investors are worried about the business's growth.
Altria Group (NYSE: MO) and AT&T (NYSE: T) stand out since they offer significant initial returns and can likely improve their dividends over time.
Altria Group Since 2022, Altria Group, which sells Marlboro in the U.S., shares have fallen 23%. At its low price, the stock yields an eye-popping 9%. Altria Group has raised dividends for 54 years. Despite a strong track record, the stock market doesn't expect payment increases due to faster-than-expected combustible cigarette sales decline.
Marlboro's cigarette market share remained about 42% in 2023. A secular move away from combustible cigarettes reduced cigarette sales by 9.9% last year.
Many former smokers are buying flavored e-vapor items that Altria can't sell due to an FDA restriction years ago. Altria's unlawful disposable vaporizer losses may decrease in 2024 due to FDA flavor ban enforcement and NJOY sales. Altria Group bought NJOY in 2023, one of three FDA-approved e-cigarette systems.
Last year was particularly bad for Altria Group due to severe illicit market competition. The corporation increased adjusted EPS by 2.3% in 2023 despite obstacles. NJOY's launch and FDA taste restriction enforcement may make expanding earnings and dividend payouts simpler.
AT&T AT&T stock is down 29% from its early 2021 top. The telecom carrier has been under pressure since spinning off its uncertain media holdings and cutting its dividend in 2022. The stock yields 6.3% at current pricing.
Due to the exodus of wireline phone and internet consumers, AT&T shares have fallen. Last among its rivals to provide a fixed wireless internet service using 5G infrastructure.
AT&T's 5G infrastructure is offsetting declining landline sales with rising wireless income. Additionally, fiber internet sales are rising. AT&T added over 1 million fiber internet subscribers for the sixth year in a row. Broadband revenues rose 8% last year due to fiber growth and fixed wireless service launch.
AT&T's 2023 free cash flow was $16.8 billion, up from $14.1 billion in 2022. Management anticipates continued profitability growth. It expects free cash flow of $17–18 billion this year. AT&T may not have the fastest-growing dividend payout in your portfolio, but its position in America's three-way telecom oligopoly offers it a good chance of raising it for years. Most investors think owning shares for the long term is smart.
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