Few things are more satisfying than watching a steadily growing stream of passive income flow into your brokerage account. If you've been holding back from investing because you think you can't afford to, I've got good news. Now that brokerages have done away with transaction fees, less than $100 is enough to set yourself up with quarterly payments from a pair of legendary dividend payers.
At recent prices, Altria Group (MO -0.37%), and Pfizer (PFE 0.55%) offer investors dividend yields of 9.1% and 6.1%, respectively. That's heaps more than the 1.35% yield you'd receive from the average stock in the benchmark S&P 500 index.
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Unusually high dividend yields are typically a sign the market doesn't think a company has what it needs to grow its payout further. These two stocks stand out because they offer huge dividend yields up front, and there's a pretty good chance their dividends will grow steadily throughout your retirement years.
Altria Group
Altria Group is the tobacco giant that markets the leading Marlboro brand in America. Last August, it raised its dividend for the 58th time in 54 years. The 4.3% payout bump was consistent with the company's established plan to raise its payout by a mid-single-digit annual percentage.
Despite management's plan to provide steady dividend growth, the stock offers a huge 9.1% yield. The stock price is under pressure because investors are nervous about more than steadily declining combustible cigarette sales. They're also worried about competitive pressure from an illicit market for e-vapor products that aren't following a flavor ban established by the U.S. Food and Drug Administration (FDA).
Altria reported Marlboro shipments that fell 8.8% in 2023. The company was able to offset shrinking cigarette volume with price increases on premium brands plus rising sales of non-combustible products. Altogether, the company reported revenue net of excise taxes that fell 0.9% last year.
Altria's top line shrank, but careful cost controls plus a reduced share count allowed adjusted earnings per share to rise 2.3% last year and further movement in the right direction seems likely. Last year, Altria acquired NJOY, which is one of just three e-cigarette products approved for sale by the FDA. Competitive pressure from the illicit e-vapor market could subside in 2024 thanks to increasing enforcement of the FDA's flavor ban on nicotine-based products.
Pfizer
Pfizer spun off its collection of established medicines in 2020. These days it sports the pharmaceutical industry's largest collection of innovative drugs with patent-protected market exclusivity. At recent prices, the stock offers a 6.1% yield.
Pfizer has raised its dividend payout every year since 2009. Unfortunately, its pace of dividend payout raises hasn't been anything to write home about in recent years. The company's payout has grown by just 16.7% since 2020.
The stock has been beaten down about 38% since the start of 2023 largely because COVID-19 product sales evaporated much faster than anticipated. Excluding COVID-19 product sales, though, revenue rose by a healthy 7% in 2023 thanks to new product launches and new indication expansions for existing products.
Pharmaceutical companies are made of many parts moving in opposite directions. For example, revenue from Xeljanz, an anti-inflammatory tablet the FDA approved 12 years ago, fell 5% to $1.7 billion last year. Xeljanz's losses were more than offset by rising sales of a rare heart disease drug that launched in 2019, called Vyndaqel.
Sales of Vyndaqel soared 36% to $3.3 billion in 2023 and there could be plenty of new blockbuster drugs on the way. Pfizer received FDA approvals for a record-setting nine new drugs last year. Buying some shares of the stock now to hold for an indefinite period looks like a smart move for investors who want to bulk up their passive income stream.
