Billionaire investors generally don’t necessarily need dividend income to make ends meet. They buy dividend-paying stocks because they know that companies that commit to returning a portion of their profits to shareholders tend to outperform those that don’t.
In the first three months of the year, billionaire hedge fund managers bought millions of shares of Pfizer (NYSE:PFE) And AT&T (NYSE:T).
These two dividend-paying companies offer enticing yields close to 6% at recent prices. Here’s a look at how they could maintain their quarterly payments in the long term. Let’s see if they are also suitable for ordinary investors.
Pfizer
Pfizer is down more than half from its late 2021 high. Perhaps sensing a bargain, Two Sigma’s John Overdeck and David Siegel added 18.9 million shares of the big pharma company to funds that they manage during the first nine months of 2024.
At recent prices, Pfizer shares offer a 5.9% yield and the confidence that comes with 15 straight years of annual dividend increases.
Pfizer stock has fallen from previous highs because sales of its COVID-19 products collapsed faster than most investors expected. Ingenious pharmaceutical stock Investors know that the company has channeled much of its past profits into new revenue streams, such as the $43 billion acquisition of cancer drug developer Seagen last year.
One of the drugs Pfizer acquired from Seagen, Padcev, recently won expanded approval to treat patients with newly diagnosed bladder cancer. The expanded indication is expected to generate annual Padcev sales in excess of $7 billion at its peak.
In addition to expansions of existing drugs like Padcev, Pfizer has many new drugs to launch this year. In 2023, Pfizer won approval from the U.S. Food and Drug Administration for nine new drugs, setting a new record. Acquiring some Pfizer stock is a great way for individual investors and billionaires to increase their passive income stream.
AT&T
AT&T probably doesn’t come up when you’re looking for attractive dividend stocks. In 2022, the company cut its dividend by almost half. The stock has also fallen significantly, and at recent prices it offers a juicy 6.1% yield.
In the first quarter, Steven Cohen and Point72, the fund he manages, bought about 15.3 million shares of AT&T. AT&T’s dividend had to fall because the company divested its unpredictable media assets. Now that it’s just a telecommunications company, cash flow should be much more reliable. After all, how often do you change mobile or broadband internet service providers?
AT&T Fiber has been a big success for the telecommunications company. The first quarter of 2024 is the 17th in a row with more than 200,000 new fiber subscribers. Last year, the company launched a fixed wireless service for customers who aren’t near fiber optic cable, and that service is taking off. Total broadband sales are expected to increase by more than 7% this year.
AT&T’s pace of investment in the 5G network has passed its peak, and declining spending is driving up profitability. The company expects between 17 and 18 billion dollars in free movement of capital This year. Strong cash flow leads management to believe it can reduce its debt load from 2.9 times adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) currently to 2.5 times adjusted EBITDA in the first half of 2025 .
Management is playing its cards tight, but there’s a good chance the company will start raising its dividend next year, after hitting its debt reduction target. Buying stocks now and holding them for the long term could generate huge dividend income for patient investors.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool holds positions at and recommends Pfizer. The Mad Motley has a disclosure policy.
Billionaires are buying these 2 super high-yielding dividend stocks. Are these smart purchases for your wallet? was originally published by The Motley Fool
