The U.S. stock market continues to climb the wall of worry. The Wilshire 5000 Index (a broader gauge of the total U.S. stock market) has returned approximately 20% in the past year, not including dividends.

With the market’s strong rally, dividend yields across the market are much lower than they were a year or two ago. The S&P 500 Index currently yields just 1.4% right now. 

However, there are still quality dividend stocks with high yields. These 3 dividend stocks have strong business models, competitive advantages, and have dividend yields above 4%.

Bristol-Myers Squibb (BMY)

Bristol-Myers Squibb is a leading healthcare company. Its top three selling pharmaceuticals, Revlimid, Opdivo and Eliquis, have shown solid growth rates and are expected to see high peak annual sales. The stock has a market capitalization of approximately $100 billion.

On April 25th, 2024, Bristol-Myers reported first quarter results for the period ending March 31st, 2024. For the quarter, revenue improved 5% to $11.8 billion, which was $330 million better than expected. Adjusted earnings-per-share totaled -$4.40 compared to $2.05 in the prior year. This was $0.02 above estimates. The earnings-per-share loss was related to the closing on several acquisitions during the quarter. 

Adjusting for unfavorable currency exchange, revenue was higher by 6% for the quarter. U.S. revenues grew 7% to $8.5 billion while International was once again flat. Eliquis, which prevents blood clots, increased 9% to $3.72 billion due to strong demand in the U.S. Eliquis remains the top oral anticoagulant outside of the U.S. and generated more than $12 billion in revenue for 2023, which was a 4% increase.

We are reaffirming our target multiple of 11 times earnings. This brings Bristol-Myers’ valuation more in line with its medium-term average valuation. Still, BMY stock trades for just 6.7 times the midpoint of 2024 EPS guidance. Therefore, the stock seems to be undervalued in our view.

For example, if the P/E multiple for BMY expanded from 6.7 to 11 over the next five years, it would increase annual returns by 10.4% over that period. Combined with 3% annual EPS growth and the 4.6% dividend yield, BMY stock could generate 10%+ total returns over the next five years.

Kraft Heinz (KHC)

Kraft-Heinz is a processed food and beverages company which owns a product portfolio that includes food products such as condiments, sauces, cheese & dairy, frozen & chilled meals, and infant diet & nutrition. 

The Kraft-Heinz Company reported its fourth quarter earnings results on February 14. Revenues totaled $6.9 billion during the quarter, which was down 7% compared to the revenues that Kraft-Heinz generated during the previous year’s period. Organic sales were down by 1%. 

Kraft-Heinz generated earnings-per-share of $0.78 during the fourth quarter, which beat the consensus estimate. Earnings-per-share were down 8% versus the previous year’s quarter, which was a weaker result compared to the previous quarter, when earnings-per-share were up year-over-year. Kraft-Heinz’ management stated that they see organic net sales rising by around 1% in 2024, while management is forecasting earnings-per-share to come in between $3.01 and $3.07 for the current year.

There are several avenues for future growth the company can pursue. The first factor is international expansion. Market penetration in many emerging countries is not very high. These markets are huge, and they are growing relatively quickly. Due to steadily rising disposable incomes in countries such as China and India, more consumers have the means to purchase consumer goods from Western companies such as Kraft-Heinz. 

Another factor for earnings growth is margin expansion, as Kraft-Heinz’ management is experienced in cutting costs.

KHC stock currently yields 4.2%.

FirstEnergy Corp. (FE)

FirstEnergy Corp, through its subsidiaries, generates, transmits, and distributes electricity in the United States. The company operates through Regulated Distribution and Regulated Transmission segments. It owns and manages hydroelectric, coal-fired, nuclear, and natural gas, as well as renewable power generating facilities. 

Its 10 electric distribution companies form one of the nation's largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland, and New York. The $20.7 billion company serves approximately six million customers. 

On February 8th, 2024, FirstEnergy announced its Q4 and full-year results for the period ending December 31st, 2023. For the quarter, revenues came in at $3.2 billion, down 1% year-over-year, while adjusted EPS totaled $0.62, compared to $0.50 last year. On a weather-adjusted basis, distribution deliveries increased just over 1% in 2023 compared to the fourth quarter of 2022. 

Weather-adjusted sales to residential customers decreased slightly, while deliveries to commercial and industrial customers increased 2%. For the year, adjusted EPS came in at $2.56, up from $2.41 in fiscal 2022. GAAP EPS were $1.96. Management introduced its FY2024 outlook, which projects adjusted EPS between $2.61 and $2.81.

FirstEnergy’s dividend should be safe, as management has provided an optimistic EPS growth outlook and plans to resume dividend growth soon. Further, the company has a quality asset base, despite failing to provide investors with consistent returns in the past. First Energy also features a well-laddered debt maturity profile, while its liquidity remains strong.

FE stock currently yields 4.3%.