The current slate of dividend stocks still looks attractive, with many yields still tilted on the historically higher end. As rate cut expectations pick up traction, yields on popular dividend stocks could follow suit, if they haven’t already. In any case, investors should focus on the long term and not be put off by choppy moves that’ll probably carry over into this new year.
I have no idea if it’s the “last call” for ultra-high dividend yields. Rates are expected to fall from here. But shares of high yielders have already adjusted accordingly. If we’re dealt fewer than three (or even two) rate cuts this year, dividend stocks could be in for a mild dip. Should a dip happen, investors should be ready to add to positions on weakness.
For now, though, I view plenty of opportunity in the high-yield space as investors become increasingly hopeful for rate cuts. Without further ado, let’s check out three dividend stocks I find quite intriguing ahead of the first round of Bank of Canada (and U.S. Federal Reserve) rate reductions.
First up, we have a Canadian telecom stock that showed signs of life in the back half of last year. The stock is up almost 13% from its 2023 lows and could be headed much higher from here if it is the “last call” for high yields. Even after the solid relief rally surge, shares of Telus (TSX:T) still sport a dividend yield (currently at 6.28%) that can only be described as generous.
Telus stock may have bottomed out last year, but the road higher could be made rockier if the first round of rate cuts aren’t delivered as expected.
In any case, I think investors seeking income (and value) shouldn’t look to time the Bank of Canada. Telus stands out as a great telecom firm to own for five years or more. You’re getting a solid dividend and a good shot at capital gains in this environment.
Up next, we have a U.S. telecom firm that’s even more battered than Telus. Verizon (NYSE:VZ) stock has been an absolute dog in recent years. The stock plunged to multi-year lows last year before surging nearly 30% in just a matter of weeks. The surge was likely driven (in part) by hopes for lower interest rates for the year ahead. Indeed, lower rates are good news for firms that spend considerable sums on infrastructure upgrades.
With a 6.62% dividend yield, investors are getting paid quite a bit to wait. With the juiciest dividend of the Dow Jones Industrial Average (DJIA) components, I view VZ stock as worthwhile if you’re looking for a bit more yield at a much lower price of admission. Of course, the U.S. telecom scene seems more challenging. But with Wolfe Research recently upgrading the stock, I’d not bet against the firm and view it as a deep-value option for income seekers.
The Foolish bottom line
Is it the last call for extremely high yields on the income-heavy blue chips?
Only time will tell. Regardless, I’d not be afraid to nibble on the beaten-down telecoms as they look to heal for 2024. The telecom scene is a great place to look if you seek big income at reasonable levels, but it’s not the only place to check out.