3 High-Yield Dividend Stocks You Should Buy Right Now – The Motley Fool | Jewelry Dukan

Stocks have come under pressure as inflation is rampant and the Federal Reserve is taking aggressive action to bring them back under control. What has worked for investors in recent years just doesn’t work anymore.

One thing that tends to work over the long term is buying stocks of high-quality companies that pay solid, reliable dividends. While the stock market may continue to suffer, it looks like a good time to pick up some stocks AT&T (T -1.87%), International paper (IP -1.64%)and Hanesbrands (HBI -0.98%).

AT&T

Telecom giant AT&T is exiting the media business. The Time Warner spin-off is complete and the company can now focus on its core wireless and fiber optic businesses.

The stock market has never liked AT&T’s foray into the media, but it doesn’t appear to have liked the company’s exit from the media business either. AT&T stock has plummeted in recent months, pushing its market cap down to around $120 billion.

To be fair, AT&T cut its dividend after the spin-off and lowered its free cash flow forecast for the year as customers began delaying payments in a troubled economy. Despite this, AT&T’s valuation is extremely pessimistic. The dividend currently yields 6.7%, and the stock trades at just 8.5 times its depressed 2022 free cash flow outlook.

AT&T will certainly suffer from a recession as customers push back phone upgrades and potentially switch to cheaper wireless plans. But these are short-term problems. As free cash flow recovers in the coming years, fueled by AT&T’s investments in 5G and fiber, its current share price will look like an impossible bargain.

International paper

A disastrous report of results FedEx has caused some related stocks to falter. The delivery specialist withdrew its full-year guidance and said it was surprised at how quickly its business had deteriorated. International Paper felt the sting of FedEx’s warning. Shares of the paper and packaging giant plummeted in response to the news from FedEx, losing about 18% of its value in about a week.

Corrugated packaging sales totaled $10.8 billion for International Paper in 2021, by far the largest product category. About half of the company’s sales come from this type of packaging, which is widely used throughout the e-commerce industry due to its durability.

With FedEx warning of a slowdown, it’s likely that International Paper will also feel some pain. Analysts are expecting earnings per share of $4.52 this year, which translates to a price-to-earnings (P/E) ratio of just 7.6. This ratio is a bit deceptive; International Paper’s profits will almost certainly decline as economic conditions deteriorate.

Still, such a low valuation offers investors a reasonable margin of safety. The depressed stock price has also boosted the dividend yield. Based on the most recent dividend payment, International Paper stock is yielding about 5.4%.

Owning international paper stocks is going to be a tough ride. But for long-term dividend investors who are ready to weather the storm, it’s looking like a pretty good deal.

Hanesbrands

You would think that a recession wouldn’t stop consumers from replacing worn-out underwear, but you’d be wrong. So wrong that the “Underwear Index” is often cited as a recession-detection mechanism. If sales of men’s underwear start to fall, the reasoning is that a recession is likely.

Hanesbrands is one of the biggest players in the underwear market and its customers are already pulling out. Undergarment sales fell 12% year over year in the second quarter, despite a major ransomware attack that prevented the company from fulfilling orders. Still, Hanesbrands pointed to worse-than-expected in-store sales trends for part of the decline.

Even Hanesbrands’ activewear business, led by the Champion brand, suffered an 18% drop in sales in the second quarter. The ransomware attack was part of the problem, but so was increased retailer inventory and weak end-customer demand.

Hanesbrands stock has plummeted this year, down more than 50% year-to-date. The dividend yield is up to 7.3%, and shares are trading at just 7 times the median analyst estimate for full-year earnings. As with International Paper, you can expect Hanesbrands’ earnings to come under further pressure as the economy slows. But with such an intense level of pessimism, Hanesbrands looks like a great dividend stock for long-term investors.

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