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“If you don’t find a way to make money while you sleep, you will work until you die.” That’s a quote from billionaire investor Warren Buffett that emphasizes the importance of making your money work for you. By generating income without having to work, you improve your financial situation and potentially set yourself up for early retirement. In today’s challenging economic conditions, that may seem unlikely.
However, by investing in dividend stocks and accumulating wealth over time, early retirement is possible. There are three high yielding stocks that can help you generate some decent dividend income right now Pfizer (NYSE: PFE), Bank of Nova Scotia (NYSE: BNS)a AT&T (NYSE: T). By investing $30,000 in these three stocks, you can expect to collect about $2,000 a year in dividends.
1. Pfizer
Pfizer is a top pharmaceutical company, but recently investors have grown bearish on the stock. The company’s revenue from COVID products is falling, and it’s also facing multiple patent cliffs that only exacerbate concerns about its top line.
But Pfizer has been investing in its pipeline and through acquisitions to help grow and diversify its operations in the future. Last year, the oncology company bought Seagen for $43 billion. He estimates that that acquisition alone could generate at least $10 billion in revenue by the end of the decade.
Investing in Pfizer requires a little faith that the company’s strategy and plan will pay off. But this is not a very risky stock to invest in. While profits increased last year due to a decline in sales along with 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 revenue 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 12 times its estimated future earnings, the stock trades at an incredibly cheap valuation.
And Pfizer still pays its dividend. At a discount, its 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 collect an even higher yield from Canada’s Bank of Nova Scotia, which currently yields around 6.7%.
Being one of Canada’s top chartered banks, investors get a pretty safe investment with this stock. The bank’s geographic profile, which includes a greater focus on emerging markets, means it is a more volatile and therefore riskier investment than its peers. But Bank of Nova Scotia, also known as Scotiabank, still makes a safe long-term investment. The company has paid a dividend since 1833.
In its latest quarterly results, for the period ending January 31, the company’s numbers still looked strong. Total revenue of 8.4 billion Canadian dollars was up 6% year over year, and net income of CA$2.2 billion improved 25%.
At less than 10 times its estimated future earnings and 1.1 times its book value, Scotiabank makes for another cheap dividend stock to own. Investing $10,000 in the stock could generate about $670 in annual dividends for your portfolio. And with the bank’s stock often raising its payout, that dividend income is likely to rise over time.
3. AT&T
Rounding out this list is telecommunications giant AT&T. The stock has struggled to gain momentum this year as high interest rates and lackluster growth have led to investors looking elsewhere for good investment opportunities. The company’s recent data breach has piled even more bad press on an already battered stock. In three years, AT&T shares are down 27%.
But the problems facing the stock today are temporary and should not affect your long-term view of AT&T. As a leading telecommunications provider, it is well positioned to benefit from population growth, increased data usage, and people upgrading their phones. And it’s not as if the company isn’t growing; for the last three months of 2023, AT&T revenue rose 2.2% to $32 billion. Its operating cash flow of $11.4 billion was also 10% higher than in the previous year.
Despite what may look like an unsustainably high yield at more than 6.7%, AT&T’s dividend is not in any imminent danger, as the business remains robust. Investing another $10,000 in AT&T stock could yield just over $670 in dividends.
Combining all these investments, that would mean your total is close to $2,000 in dividends from a total of $30,000 invested across these three dividend stocks.
Should you invest $1,000 in Pfizer right now?
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.
Want $2,000 in Annual Dividends? Invest $30,000 in These 3 Stocks was originally published by The Motley Fool
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