"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 which emphasizes the importance of making your money work for you. By generating income without having to work, you improve your financial position and potentially set yourself up for an early retirement. Amid today's challenging economic conditions, that may seem unlikely.
However, by investing in dividend stocks and accumulating wealth over time, retiring early is possible. Three high-yielding stocks that can help you generate some decent dividend income right now are Pfizer (NYSE: PFE), Bank of Nova Scotia (NYSE: BNS), and AT&T (NYSE: T). By investing $30,000 into these three stocks, you can expect to collect about $2,000 per year in dividends.
1. Pfizer
Pfizer is a top pharmaceutical company, but lately investors have grown bearish on the stock. The company's revenue from COVID products is declining, and it's also facing multiple patent cliffs which only exacerbate concerns relating to its top line.
But Pfizer has been investing into both its pipeline and through acquisitions to help grow and diversify its operations in the future. Last year, it acquired oncology company Seagen for $43 billion. It estimates that that acquisition alone could generate at least $10 billion in revenue by the end of the decade.
Investing in Pfizer requires a bit of a leap of faith that the company's strategy and plan will pay off. But this isn't a terribly risky stock to be investing in. While profits nosedived last year due to a drop 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 it's successful, investors who pass on the stock today could regret that decision in the future. At just 12 times its estimated future earnings, the stock is trading at an incredibly cheap valuation.
And Pfizer's still paying its dividend. At a reduced price, its yield is up to 6.5%, which means that 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 the Canadian-based Bank of Nova Scotia, which is currently yielding around 6.7%.
As it is one of Canada's top chartered banks, investors are getting a fairly safe investment with this stock. The bank's geographic profile, which includes focusing more on emerging markets, means it's a more volatile and thus riskier investment than its peers. But Bank of Nova Scotia, also known as Scotiabank, still makes for a safe long-term investment. The company has paid a dividend since 1833.
In its most recent quarterly results, for the period ended Jan. 31, the company's numbers still looked strong. Revenue totaling 8.4 billion Canadian dollars was up 6% year over year, and net income of CA$2.2 billion improved by 25%.
At less than 10 times its estimated future profits and 1.1 times its book value, Scotiabank makes for another cheap dividend stock to own. Investing $10,000 into the stock could generate approximately $670 in annual dividends for your portfolio. And with the bank stock often raising its payouts, that dividend income is likely to rise over time.
3. AT&T
Rounding out this list is telecom giant AT&T. The stock has struggled to gain momentum this year as high interest rates and lackluster growth have resulted in investors looking elsewhere for good investment opportunities. The company's recent data breach has piled even more bad press on to an already beaten-down stock. In three years, shares of AT&T are down 27%.
But the problems facing the stock today are transient in nature and shouldn't affect your long-term outlook on AT&T. As a leading telecom provider, it's in a good position to benefit from population growth, greater 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's revenue rose by 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 isn't in any imminent danger, as the business remains solid. Investing another $10,000 into AT&T stock could generate a little more than $670 in dividends.
When combining all these investments, that would put your total at close to $2,000 in dividends from $30,000 in total invested across these three dividend stocks.
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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.
