Drip Your Way to Wealth: 3 High-Yield Dividend Stock Picks for a Recession (2024)

High-yield dividend stocks for a recession can be an excellent way for investors to continue generating income even during economic downturns.

The key is to use dividend reinvestment plans, or DRIPs, which automatically channel dividend payments back into purchasing additional shares. This compounds returns over time as more shares accumulate that also pay dividends for further reinvesting.

Basically, DRIPs allow your money to work smarter since every dividend dollar gets put back to work.

Now specifically, what constitutes a high-yield dividend stock? Under normal conditions, it’s one with a dividend yield higher than the U.S. 10-year Treasury yield.

As of June 2024, that yield sits around 4.36%. So any stocks currently providing dividends over 4.36% qualify as high yield. Below, we’ll cover three recession-resilient picks ideal for a DRIP strategy.

All three offer strong yields over 4.36%, have histories of reliably paying dividends, and generate stable cash flows that should keep dividends secure even in downturns.

Additionally, they trade at reasonable valuations right now. Investors aiming to build lasting passive income streams would do well to check them out.

Altria Group (MO)

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Altria Group (NYSE:MO) is an excellent high-yield dividend stock for a recession with its juicy 8.61% dividend yield (both trailing and forward).

As a dividend king, Altria has an over 50-year track record of dividend increases without a single reduction since 1970, making its payout extremely reliable even in tough times. That type of consistency is exactly what investors want from the dividend stocks they own during an economic downturn.

Beyond its recession-proof high dividend yield, Altria offers investors growth potential as the company transitions beyond traditional tobacco into smoke-free products.

As per the company’s “Moving Beyond Smoking” vision, Altria aims to responsibly lead the transition of adult smokers to noncombustible alternatives. This includes heated tobacco, oral nicotine pouches, and e-vapor products. Altria’s strong cash flows from its core cigarette brands help fuel investments in these promising new platforms.

In terms of recent performance, Altria delivered a solid first quarter for 2024. While revenues declined 2.5%, adjusted earnings per share only dropped 2.5% amid a challenging environment.

Altria also continues returning tons of cash to shareholders. It paid out $1.7 billion in dividends during the first three months of the year. Altria’s robust balance sheet indicates ongoing growth and returns for shareholders. That makes it one of the best high-yield dividend stocks for a recession.

Verizon Communications (VZ)

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Verizon Communications (NYSE:VZ) is a standout high-yield dividend stock ideal for a dividend reinvestment plan (DRIP) during a recession.

With a trailing dividend yield of 6.42% and a forward yield of 6.45%, Verizon offers a very attractive income stream. The company has not reduced its dividend since 2000. It has increased it for more than 17 consecutive years, putting it on track to becoming a Dividend Aristocrat.

In the first quarter of 2024, Verizon delivered solid financial results. Wireless service revenue climbed 3.3% to $19.5 billion. Earnings before interest, taxes, depreciation, and amortization rose 1.4% to $12.1 billion, and earnings per share dropped slightly to $1.15.

While Verizon did lose 158,000 postpaid phone customers, it added 90,000 postpaid business customers and 354,000 fixed wireless broadband customers.

Going forward, Verizon expects 2-3.5% wireless service revenue growth and 1-3% EBITDA growth in 2024. It also expects $4.50-$4.70 in adjusted EPS. This financial guidance shows continued resilience even in challenging economic conditions.

With uninterrupted dividend payments and moderate growth expected ahead, Verizon checks all the boxes as one of the more reliable high-yield dividend stocks for a recession.

The 6.4% forward dividend yield should attract income investors, while DRIP investors can steadily accumulate more shares. Even if business slows some in a downturn, Verizon’s essential telecom services and network upgrades position it well to maintain strengths.

Realty Income (O)

Drip Your Way to Wealth: 3 High-Yield Dividend Stock Picks for a Recession (3)

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Realty Income (NYSE:O) is an ideal high-yield dividend stock for a recession.

As a dividend aristocrat, Realty Income has increased its dividend annually for over 25 consecutive years without a reduction.

This level of dividend reliability is exactly what investors should look for when building a DRIP portfolio to ride out periods of economic uncertainty.

In the first quarter of 2024, Realty Income maintained strong financial performance. The company reported adjusted funds from operations of $1.03 per share.

It raised its monthly dividend by 2.4% to $0.77 per share. At these rates, Realty Income’s dividend yields a high 5.83% on a trailing basis and 5.98% on a forward basis. With dividend coverage of nearly 75% of AFFO, the payout is sustainable as well.

Realty Income also benefits from its recession-resistant business model. As of Q1 2024, the company owned over 15,000 commercial properties leased to over 1,500 clients spanning 89 industries.

This high level of tenant and industry diversification provides very stable rental income even during economic downturns.

Occupancy remained high in Q1 2024 at 98.6%. With its high yield, consistent dividend growth, strong AFFO dividend coverage, and diversified rental income stream, Realty Income checks all the right boxes for a DRIP investment.

The company’s impressive 25+ year streak of annual dividend increases shows it can continue churning out dividend income during good times and bad.

So, investors looking to drip their way to wealth should look at Realty Income. It is definitely one of the best high-yield dividend stocks for a recession.

On the date of publication, Andrea van Schalkwyk did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.

Andrea van Schalkwyk is a value investor who adheres to the principles of the renowned Warren Buffett and his mentor Benjamin Graham. He holds a Master of Engineering (MEng) from the University of Padua and an Executive MBA from the CUOA Business School.

Consumer Discretionary, Communications, Media, Real Estate, Retail

Drip Your Way to Wealth: 3 High-Yield Dividend Stock Picks for a Recession (2024)
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