When people think about dividend investing, they may often think about retirees. After all, those regular payouts can come in handy for someone who’s retired from the workforce.
But they’re not the only ones who can benefit. In fact, all investors should at least consider if dividend stocks are right for them.
And that includes young investors.
When it comes to holding stocks for dividend income, young investors have the advantage of time. They can average into positions and not worry too much about the price paid. And the longer the holding period, the more dividends investors collect.
So, what are five great dividend stocks for young investors? Here are my picks.
Great Dividend Stocks: AT&T (T)
Dividend Yield: 5.5%
Since they’re still trading near 52-week highs, shares of AT&T (NYSE:T) are not ideal right now if the young investor does not want to pay a premium. However, they could be an excellent pick on a pullback.
The telecom services giant acquired Time Warner last year, a move that is proving to pay off handsomely for investors. AT&T currently has two major sources of cash flow: wireless services subscriptions and media content.
T shares have a dividend of over 5%.
At its WarnerMedia Day, AT&T said that it expects 34 million subscribers for HBO Max. By 2025, it forecasts 50 million subscribers. At launch next spring, the service will reduce customer churn, which will add $100 million in incremental revenue.
And the base price is $14.99, which is higher than the competition. This is a good price point because AT&T will not lose money from the service’s launch.
BCE (BCE)
Dividend Yield: 5%
North of the border, BCE (NYSE:BCE) continues to shine. The stock’s dividend yield is close to 5%. Investors should consider this telecom giant because it has a near oligopoly in the Canadian market. In the third quarter, it added a record net addition of 204,000, up 14.8% year over year. ARPU rose by 1%. New internet customer additions topped 58,000, up 9.4% YoY. That’s its best performance since Q4 2006.
Similar to AT&T, BCE owns media subsidiaries. Its TSN was the top-rated Canadian sports network and specialty TV channel overall. Crave TV will enable BCE to deliver HBO Max.
BCE has a long-term agreement with Warner Bros to bring the service to Crave and CTV.
BCE is also trading at yearly highs but is still valued at a price-to-earnings ratio that is below 20x.
AbbVie (ABBV)
Dividend Yield: 5.4%
In the drug manufacturing space, AbbVie (NYSE:ABBV) is a solid dividend income stock for young investors. It priced $30 billion worth of senior unsecured notes to pay for the Allergan (NYSE:AGN) acquisition. Without any issues raising debt, ABBV stock rallied in the last months as markets grew more confident the deal would pay off.
On Nov. 15, the FDA approved Pfizer’s (NYSE:PFE) Abrilada, a biosimilar to AbbVie’s top-selling drug, Humira. Because Pfizer cannot sell the generic drug until 2023, markets figure Humira will still generate tons of cash for now. AbbVie plans to use that cash to pay down debt and cover interest costs related to the Allergan acquisition.
AbbVie stock is valued in the sub-10x range (forward P/E) and pays a dividend that yields over 5%.
Ford (F)
Dividend Yield: 6.7%
Ford (NYSE:F) shares pay an eye-popping dividend that yields over 6%. Markets ignored Ford after the company issued disappointing guidance in its third-quarter report. Though it delivered EBIT of $1.88 billion, up YoY, it lost money in South America, China and Europe.
Looking ahead, Ford has billions earmarked for electric vehicles. On Nov. 18, it launched the Mustang Mach-E. This positive buzz sets a new course for the company’s future. And as it builds profitability from SUV and F-150 truck sales, its long-term growth will come from electric vehicle sales.
Ford also secured a labor deal with the union, removing an unknown. Its $6 billion in U.S. manufacturing should please the government. It will also create 8,500 jobs in the U.S. Again, Ford’s commitment to the U.S. market should win customers in the region.
Altria (MO)
Dividend Yield: 6.8%
Altria (NYSE:MO) is a controversial stock and a bit speculative, but young investors who can take a chance may find it to be a solid play. Very recently, the CDC’s warnings over vaping and the government bans against Juul’s products sent Altria stock to the $40 range. Yet Altria stock bounced back. After the month-long rally, the stock still pays a dividend that is close to 7%.
Altria’s Juul investment is still not out of the woods. It ended mint-flavored product sales in November. After Altria invested $12.8 billion for 35% of Altria, its write-down amounting to $4.5 billion is unfortunate. And the drop in Cronos (NASDAQ:CRON) is another loss for MO shareholders.
Still, these are all accounting write-downs. Altria continues to generate healthy cash flow from its cigarette business.
In the long term, Cronos and Juul’s prospects may improve. If they do, Altria shares will continue its climb for years to come.
As of this writing, Chris Lau owned shares of Ford.