High-Yield Dividend Stocks to Consider This September
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Understanding Market Trends in September
September is often regarded as a challenging month for the stock market. A common practice among individual investors and hedge fund managers is to realize profits accrued during the summer, or to sell off losing investments to minimize their taxable income. This seasonal trend can significantly impact the market behavior.
This September, anticipation is building around a possible reduction in interest rates by the Federal Reserve. Historically, such rate reductions tend to stimulate market growth. However, given that investors have awaited this decision for over a year, it raises concerns about the likelihood of stock performance disappointing yet again.
Prospective Opportunities in Dividend Stocks
Investors now find themselves at a critical juncture. If market prices decline as many analysts predict, it may create strategic buying opportunities for high-yield dividend stocks. Two stocks that have caught the attention of many investors are AbbVie (NYSE: ABBV) and AT&T (NYSE: T), both offering yields significantly exceeding those of average stocks in the S&P 500 index.
Profile on AbbVie
AbbVie is a prominent pharmaceutical corporation renowned for consistently rewarding its shareholders. The company currently provides a 3.2% dividend yield and boasts a commendable history of annual dividend increases. Notably, AbbVie has successfully raised its quarterly dividends since its independence from Abbott Laboratories in 2013, a record that speaks volumes about its commitment to returning value to investors. Abbott itself has raised its dividends for an astonishing 52 consecutive years.
Over the last decade, AbbVie has increased its quarterly dividend payments by an impressive 269%. This upward trend is underpinned by robust financials, with the company generating $17.8 billion in free cash flow over the past twelve months, utilizing only 61% of that amount for dividend distributions. Such a strong cash flow position leaves significant room for future dividend growth.
However, AbbVie has encountered challenges. The patent expiration of its flagship drug, Humira, in 2023 has led to some investor concern. Nevertheless, the company has strategically diversified its portfolio. Drugs like Rinvoq and Skyrizi, which cater to arthritis and psoriasis, respectively, are already generating a substantial $16.6 billion in annual sales. The performance of other products, like Qulipta and Ubrelvy, which address migraine headaches, further positions AbbVie to continue rewarding its shareholders.
Exploring AT&T's Potential
AT&T also presents an intriguing investment opportunity. After spinning off its media assets in 2022 and subsequently reducing its dividend, AT&T has maintained a substantial 5.6% yield. Despite recent challenges with mobile equipment sales linked to extended upgrade cycles, the demand for broadband services remains robust, providing a bright spot in its financial outlook.
AT&T has seen strong growth in consumer broadband sales, buoyed by new customers subscribing to AT&T Fiber and the introduction of a fixed wireless service. The company reported a 7% increase in broadband sales year-over-year, demonstrating potential for growth in this segment. Furthermore, mobility service revenues have increased, reflecting the company's ability to retain customers effectively.
Looking forward, AT&T anticipates generating between $17 billion and $18 billion in free cash flow this year, laying the groundwork for potential dividend increases in the future. This liquidity allows AT&T to tackle its considerable debt while also investing in growth initiatives.
Investment Considerations
Before deciding to invest in AbbVie or AT&T, it is essential to carefully analyze their market positions and financial health. AbbVie and AT&T both have the potential to provide significant returns through dividends and stock appreciation, especially amidst current market dynamics.
Frequently Asked Questions
What are the primary reasons investors should consider AbbVie?
AbbVie offers a strong dividend yield, a consistent history of dividend increases, and is actively growing its portfolio through new product launches, which are expected to drive further profit.
How does AT&T's dividend yield compare to other companies?
AT&T currently stands out with a 5.6% dividend yield, making it an attractive option especially for income-focused investors seeking substantial returns.
What significant challenges is AbbVie facing following Humira's patent expiry?
AbbVie faces pressure on its stock price due to loss of exclusivity for Humira, but it has diversified successfully with new products that are generating impressive revenue streams.
Are there future dividend increases expected from AT&T?
While AT&T has not increased its dividend recently, its current free cash flow allows for potential increases in the coming years as it continues to manage debt efficiently.
What market conditions typically affect stock performance in September?
September is traditionally a month where investors sell off stocks to realize gains or limit tax liabilities, often leading to downward pressure on stock prices.
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