Dividend investing allows you to generate cash flow by holding onto shares. You can reinvest dividends and watch them compound over time, and many companies hike their dividends every year. In today’s market, this has led to the rise of undervalued high-yield stocks to buy.
You can increase your dividend payouts by seeking high-yielding stocks. Higher yields allow you to get more out of your money now. However, high yields aren’t always a good thing. AT&T (NYSE:T) sharply cut its dividend in 2022 and may have to reduce their dividend again within a few years. AT&T has always boasted a high yield, but its stock has woefully underperformed the market.
AT&T is an example of a high-yield trap. The high yield entices investors, but long-term returns aren’t that appealing. Some stocks combine high yields with respectable returns and present attractive price points for investors. These are some of the most undervalued high-yield stocks to buy now.
Qualcomm (NASDAQ:QCOM) hasn’t seen the same level of success as other stocks poised to benefit from AI chips. Right when the stock was starting to gain momentum, from May until the end of July, shares proceeded to stumble by 15% in August.
Shares currently trade at a 15 P/E ratio, and the dividend yield is getting closer to 3%. The valuation is more affordable than most high-flying AI chip stocks like Nvidia (NASDAQ:NVDA). Investors shouldn’t expect Qualcomm to achieve the same valuation as Nvidia, but the firm may deserve a multiple expansion.
Qualcomm has a good history of raising its dividend and hiked its quarterly distribution from $0.75/share to $0.80/share, marking 6.67% year-over-year dividend growth. That growth rate can reward long-term investors while giving them exposure to a stock that has rewarded long-term investors.
Qualcomm’s semiconductor technology powers up smartphones, vehicles, cities, gaming devices, and other resources. Many industries rely on Qualcomm’s technology to produce products and provide services.
Comcast (NASDAQ:CMCSA) shares have gained 32% year-to-date and have a 30 P/E ratio. The stock currently offers a 2.50% dividend yield that received a 7.4% year-over-year hike from a quarterly rate of $0.27/share to $0.29/share.
In the second quarter, revenue growth came in at an unimpressive 1.7% year-over-year. However, the company improved its profit margin and reported 25.1% year-over-year net income growth. Better margins help the company support the dividend and continue to raise it in the future.
The company used some of its profits to initiate a $2 billion stock buyback. Peacock Paid Subscriber revenue soared by 85% year-over-year, and the subscriber base doubled to 24 million.
Although Peacock streaming is currently unprofitable, many streaming services are raising their prices. Comcast has followed suit with its streaming service. The current price hike won’t be enough to generate a profit, but the company’s profit margins can expand rapidly if it makes its streaming services profitable. In the meantime, Comcast still posts respectable profits and pays out steady dividends.
Prudential (NYSE:PRU) is a financial services company that offers insurance, retirement planning, investment management, and other products. The company is approaching its 150th year anniversary in 2025 and has been resilient in various economic cycles.
People need insurance policies and other financial products that Prudential offers. This level of reliability doesn’t mean high share appreciation, but investors can expect a solid dividend.
Prudential stock currently has a 5.40% dividend yield and hiked its quarterly dividend per share from $1.20 to $1.25 in 2023. That gain marks a 4.2% year-over-year improvement. The forward P/E for Prudential sits at 7.90.
Prudential reported $511 million in net income in the second quarter. It’s a big improvement from the $1.01 billion net loss from a year ago. The company’s Group Insurance experienced record operating earnings.
Prudential won’t appreciate like other stocks, but it offers a stable dividend yield that is above 5%. Some investors may even consider selling covered calls on Prudential stock to increase their cash flow. This helps to make it one of those undervalued high yield stocks to buy.