2 Top Stocks That Shine With 7% Yields! | news

Looking for top stocks with a 7% yield? For income investors, dividends are an important element in building a passive income stream. The focus is, among other things, on the dividend yield and dividend growth.

Shares with a high dividend yield already provide a high return on invested capital. However, they usually grow only weakly.

Conversely, stocks with high dividend growth often have low dividends. In the long term, however, they can outperform high yield stocks.

But beware: Dividends should never be used as the sole criterion when deciding whether to buy or sell a stock. The business model and future prospects are more important.

Two top stocks that currently have a yield of more than 7% can currently be included altria (WKN: 200417) and the chemical company BASF (WKN: BASF11).

Altria stock – 7.92% dividend yield

With a single-digit expected price-earnings and a dividend of just under 8%, shares in the tobacco company Altria can currently be bought. The dividend has also been increased regularly – for 52 years, to be exact. At the same time, the company regularly buys back its own shares.

The tobacco giant from the US has long had an above-average dividend with a moderate valuation. It expresses the skepticism of many investors. Tobacco use is considered harmful to health, and there is political opposition.

Volume sales are correspondingly decreasing. But by raising prices, stronger sales declines can be avoided.

While Altria has new alternatives (e-cigarettes), they don’t have the momentum to warrant a re-rating of the stock. Get started with the e-cigarette specialist Juul Labs recently ended in disaster with billions of write-offs.

The billion-dollar offensive on the cannabis market with an entry into the Cronos group has so far not really had a positive effect on the share price. The stock leads a shadowy existence on the capital market.

BASF share – 7.90% dividend

It also has a high yield The German chemical giant BASF. Shares in the Ludwigshafen-based company can currently be bought at an expected price-to-earnings ratio of 7.4 with a yield of 7.9% (as of 8/21/22, Reuters).

Again, there may be valid reasons for the low valuation, as BASF is highly cyclical. In addition, the current energy crisis in Europe is a burden. The increased price level itself appears to be less of an issue as BASF was able to show robust growth in recent quarterly numbers.

The uncertainties surrounding Russian gas supplies currently appear to be more problematic. The main plant in Ludwigshafen would have to be shut down if BASF received less than 50% of its natural gas needs.

As gas supplies from Russia decline, this scenario may eventually become a reality. On the other hand, BASF has a systemically important function that could account for priority delivery. However, it is unlikely to achieve much if the customers’ industries collapse and Germany or the world go into a deep recession.

Conclusion

As you can see from the two examples, there are top stocks with a high yield, but the risk of these stocks is significantly higher.

Article 2 The Top Stocks That Shine With 7% Yields! first appeared on The Motley Fool Germany.

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Frank Seehawer owns shares in Altria and BASF. The Motley Fool does not own any of the stocks listed.

Motley Fool Germany 2022

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