Dj 10 Dividend Stocks That Look Better Than Bonds - Barrons.Com

By Ian Salisbury

Locking in stable income isn't easy — especially with interest rates slowly coming down. Dividend stocks offer a way to secure attractive yields while still providing potential upside.

Payouts on Treasury bonds have fallen sharply this year, with the 10-year yield sliding from nearly 4.6% in January to below 4.2% today. That decline could continue next year as a softening economy pressures the Fed to cut rates.

Dividend stocks can help fill the gap. Roughly 30 S&P 500 companies now sport dividend yields higher than the 10-year Treasury.

Finding a stock with a juicy-looking yield can be counterproductive if the dividend ends up getting cut — a real risk when hunting for stocks with unusually high payouts.

To find stocks that could beat bonds, Barron's used FactSet to screen for companies with yields that exceed 4.2% and whose annual cash dividend payouts amount to less than 80% of free cash flow.

The good news is that investors have plenty of options. The bad news is that many of these companies are in slow-growth industries like consumer goods and real estate. Of course, if you're looking for a bond alternative, growth may not be your prime concern.

Near the top of our list are three companies built around stable, everyday brands: Conagra, the maker of Slim Jims, Reddi-Wip, and Hebrew National hot dogs; Altria Group, which sells Marlboro cigarettes and other tobacco products; and Kraft Heinz, the cheese and ketchup giant.

These companies face health-related headwinds.

In Altria's case, the challenge is a steadily decreasing smoking population. For packaged-food companies, it's rising interest in healthier food options and a surge of interest in GLP-1s. Still, these are known, manageable pressures that shouldn't pose an immediate threat to dividend payouts.

Meanwhile, efforts to offset those risks, like Altria's push into smokeless pouches and expanded health-focused offerings from Conagra and Kraft Heinz, could provide upside. Kraft Heinz plans to split into two companies next year, separating its sauces and spice business from its U.S. grocery staples.

10 potential dividend-stock winners

Conagra Brands / CAG

Dividend yield: 8.2% Free cash flow payout ratio: 51% Forward price-to-earnings ratio: 9.7

Altria Group / MO

Dividend yield: 7.3% Free cash flow payout ratio: 79% Forward price-to-earnings ratio: 10.7

Verizon Communication / VZ

Dividend yield: 6.6% Free cash flow payout ratio: 57% Forward price-to-earnings ratio: 8.8

Kraft Heinz / KHC

Dividend yield: 6.6% Free cash flow payout ratio: 61% Forward price-to-earnings ratio: 9.7

VICI Properties / VICI

Dividend yield: 6.5% Free cash flow payout ratio: 74% Forward price-to-earnings ratio: 10.2

Alexandria Real Estate / ARE

Dividend yield: 6.3% Free cash flow payout ratio: 60% Forward price-to-earnings ratio: N/A

Realty Income Corp. / O

Dividend yield: 5.5% Free cash flow payout ratio: 78% Forward price-to-earnings ratio: 48

Franklin Resources / BEN

Dividend yield: 5.5% Free cash flow payout ratio: 77% Forward price-to-earnings ratio: 9.3

ONEOK / OKE

Dividend yield: 5.4% Free cash flow payout ratio: 79% Forward price-to-earnings ratio: 14

General Mills / GM

Dividend yield: 5.3% Free cash flow payout ratio: 58% Forward price-to-earnings ratio: 13

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

Al Root

President Donald Trump is going to help American farmers. It will help American investors a little bit, too.

Trump will announce $12 billion in aid to U.S. farmers, who are beset by rising costs and trade uncertainty.

The money is nice, but it doesn't amount to much. It works out to about $6,300 per farm. There are about 1.9 million farms in the U.S., according to the Department of Agriculture, which estimates 2025 farm income of about $180 billion, or about $95,000 per farm.

The U.S. and other countries have a history of supporting farmers. Annual support to farmers tops $840 billion globally, according to the Organization for Economic Cooperation and Development, which tracks spending across 54 countries. Payments in the U.S. are expected to top $40 billion in 2025.

There are good reasons to support farmers. Farming requires an enormous amount of working capital each year, and crops are subject to the whims of the weather. U.S. farming is an export business. America is one of the largest grain producers in the world.

An extra $12 billion in the pockets of farmers could flow through to several stocks. Farmers buy products such as fertilizer, seeds, and crop protection from the likes of Mosaic, Corteva, and FMC. They also buy machinery from Deere, AGCO, CNH Industrial, and others.

The aid money is likely to benefit seed and crop protection makers sooner than machinery makers. Tractors are big purchases that aren't bought every year; one year of financial support might not make a difference there.

Ahead of the expected announcement, Corteva stock was down by 0.4%, Mosaic was up 1%, and FMC was down 1.6%.

Deere and AGCO shares were mixed. AGCO stock was up 0.3%.

Deere shares were down 0.6%, hovering around $473 after trading as high as $488.99. Its investor day had more to do with the move than farm subsidies. Deere management said the company was targeting 10% sales growth between fiscal year 2025 and 2030. Wall Street estimates don't go out that far; however, analysts project about 8% growth between fiscal year 2025 and 2028. Management's goal looks aggressive, and investors appear to be taking a wait-and-see approach.

Then there is the next layer of companies in the farming ecosystem. Processors such as Bunge and ADM, grain buyers such as egg producer Cal-Maine and meat producer JBS, and packaged-food companies including General Mills and Kellanova might see some less obvious benefits.

Packaged-food stocks don't typically react to farm support. Grain costs are an important but relatively small piece of profit margins.

Grain prices matter more for processors and meat producers, but investors have to pay attention to spreads in those businesses — what those companies pay for inputs and sell as outputs matters more than the absolute price of corn or soybeans.

Shares of grain buyers were taking the news of extra support the worst. Shares of Bunge and ADM were down more than 1% each.

Cal-Maine shares were off 0.2%, while JBS stock was off more than 4%. That would indicate investors expect grain prices to rise, but demand for meat and other products stays flat. That hasn't happened yet. Benchmark corn futures were down 0.2% in midday trading on Monday. Soybean prices were down 1.1%.

The Consumer Staples Sector Select SPDR exchange-traded fund was down 0.7%, not too much different than the broader market. The S&P 500 and Dow Jones Industrial Average were down about 0.4%.

Of the stocks mentioned, Wall Street is lukewarm on most. The average Buy-rating ratio for shares in the S&P 500 is about 55%. The average Buy-rating ratio for food stocks is about 40%. The only food stocks listed with average Buy-rating ratios are Deere, with 56%, along with Bunge and Corteva, which have ratios of 73%. Kellanova has no buy ratings among its 16 analysts, according to Bloomberg.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

By Ian Salisbury

Altria stock has plenty of problems. But it also boasts a stable 7% yield — and a payout that big can cover a lot of blemishes.

Altria, America's leading cigarette manufacturer, isn't anyone's idea of an ESG (environmental, social, and governance) stock. As if to wink at the very idea, the maker of Marlboro and Parliament-brand cigarettes, also owns an 8% stake in brewer Anheuser-Busch InBev and 41% of cannabis company Cronos.

Americans continue to smoke fewer cigarettes each year. The share of adults that smoke has declined to less than 12% today from 15% in 2015, according to the American Lung Association. That decline isn't going to reverse, and has taken a toll on Altria's shares, which trade at $58 today — almost exactly where they were a decade ago.

But for investors who are more interested in payouts than growth (or health), the stock still looks plenty attractive. Wall Street analysts forecast earnings per share growth of 5% to 6% in 2025 and 2026, according to FactSet.

While Wall Street analysts see 2026 sales as flat or slightly down, per-share earnings should benefit from buybacks. In October, Altria said it spent more than $700 million on buybacks since the start of the year and that its board had increased the buyback program, which expires next December, to $2 billion from $1 billion.

Altria has also been working on new products to make up for lost cigarette revenue. This fall, the company launched On! PLUS nicotine pouches in North Carolina, Texas, and Florida. Pending Food and Drug Administration approval, Altria could soon start selling the product nationwide.

"We are particularly attracted to the consistency of the growth at Altria." wrote Stifel analyst Matthew Smith, who rates the company a buy, in late October. "The company balances earnings growth and investments to support its smoke-free ambitions."

Add to Altria's stable profit growth a 7.3% dividend yield, and it isn't hard to see why the stock looks attractive. The payout rate is the highest in the S&P 500 after Ford Motor, and looks fairly solid.

Altria isn't always included in lists of dividend aristocrats — companies with decadeslong histories of making and raising payouts. But if you count its previous life as part of Philip Morris, it has been a consistent payer for more than 50 years. (Philip Morris was renamed Altria in 2003, and then in 2008 Altria spun off Philip Morris International.)

Altria generates about $3 billion in cash per quarter, while the dividend costs just $1.7 billion, according to FactSet. Another $500 million to $600 million goes toward debt and the buybacks, but that should leave plenty of room for error.

In a note Friday, Bespoke Investment Group said that, while Altria's share price gains have lagged behind the market over the past two decades, but if you factor in reinvested dividends, Altria handily comes out ahead, returning 1,300% compared with 730% for the broad market.

"Whatever you think of tobacco stocks and their impact on the health of the population, investing in them over the last 20 years has been anything but putting your money up in smoke," the firm wrote.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.