“If you can’t find a way to make money while you sleep, you’ll work until you die.” This is a quote from billionaire investor Warren Buffett, who emphasizes the importance of making your money work for you. By earning an income without having to work, you will improve your financial situation and potentially prepare for early retirement. Given today’s difficult economic conditions, this may seem unlikely.
However, early retirement is possible by investing in dividend stocks and building wealth over time. Three high-yield stocks that can help you earn decent dividend income now are: Pfizer (NYSE:PFE), Bank of Nova Scotia (NYSE:BNS)And AT&T (NYSE:T). If you invest $30,000 in these three stocks, you can expect to receive about $2,000 per year in dividends.
1. Pfizer
Pfizer is a top pharmaceutical company, but investors have recently become more bearish on the stock. The company’s sales of COVID products are declining, and it’s also facing several patent cliffs that only add to concerns about its sales.
But Pfizer has invested in both its pipeline and through acquisitions to support the growth and diversification of its operations in the future. Last year, the company acquired oncology company Seagen for $43 billion. It is estimated that this acquisition alone could generate at least $10 billion in revenue by the end of the decade.
Investing in Pfizer requires a certain level of confidence that the company’s strategy and plan will pay off. But it’s not a particularly risky stock to invest in. While profits fell last year due to declines in sales and restructuring and asset impairment charges, the company still generated positive free cash flow of nearly $5 billion.
Pfizer has a plan to increase its revenue by $25 billion by 2030, and if it succeeds, investors who abandon the stock today may regret that decision in the future. At just 12 times its estimated future earnings, the stock trades at an incredibly cheap valuation.
And Pfizer still pays its dividend. At a discounted price, the yield is up to 6.5%, meaning a $10,000 investment in the company would be enough to generate an annual dividend of $650.
2. Bank of Nova Scotia
Investors can achieve an even higher return with Canada-based Bank of Nova Scotia, which currently yields around 6.7%.
Since it is one of the most well-chartered banks in Canada, investors get a fairly safe investment with this stock. The bank’s geographical profile, which includes a greater focus on emerging markets, makes it a more volatile and therefore riskier investment than its peers. But Bank of Nova Scotia, also known as Scotiabank, is still 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 appeared strong. Sales totaled C$8.4 billion, up 6% year-over-year, and net income of C$2.2 billion improved 25%.
At less than 10 times its estimated future earnings and 1.1 times its book value, Scotiabank is another cheap dividend stock. Investing $10,000 in the stock could result in an annual dividend of about $670 for your portfolio. And since bank stock payouts often increase, this dividend income is likely to increase over time.
3. AT&T
Rounding out this list is telecommunications giant AT&T. The stock has struggled to gain momentum this year as high interest rates and weak growth have sent investors looking elsewhere for good investment opportunities. The company’s latest data breach has added even more negative impact to the already struggling stock. In three years, AT&T shares have fallen 27%.
But the issues facing the stock today are temporary and shouldn’t affect your long-term outlook on AT&T. As a leading telecommunications provider, the company is well positioned to benefit from population growth, increasing data usage and phone upgrades. And it’s not that the company isn’t growing; In the final three months of 2023, AT&T’s revenue rose 2.2% to $32 billion. Operating cash flow of $11.4 billion was also 10% higher year-over-year.
Despite a potentially unsustainably high yield of more than 6.7%, AT&T’s dividend is not in immediate danger as its business remains solid. Investing another $10,000 in AT&T stock could generate a dividend of just over $670.
Combining all of these investments, if you invest a total of $30,000 in these three dividend stocks, the total payout would be almost $2,000.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in Pfizer and recommends it. The Motley Fool recommends Bank of Nova Scotia. The Motley Fool has a disclosure policy.
Do you want a $2,000 annual dividend? Invest $30,000 in These 3 Stocks was originally published by The Motley Fool