Stocks to buy

3 Dividend Stocks to Buy Yielding 5% in January 2024

I last wrote about dividend stocks yielding 5% and included it in the headline in August 2019. Interest rates were considerably lower then, so 5% was considered a high-yield dividend stock. 

Fast forward to January 2024. While it’s still a high yield, income investors have more options. For example, a one-year Treasury bill yields about 4.76%, fully guaranteed by the U.S. Treasury. 

Looking at the names from my 2019 article, I’m not sure I’d consider any of them. I’ll throw my net a little wider, opting to find my three names from the S&P Composite 1500, which combines the S&P 500, the S&P MidCap 400 and the S&P SmallCap 600

Out of 1,500 stocks, there are 135, yielding more than 5%. Verizon Communications (NYSE:VZ) has the largest market capitalization. The smallest is Hanmi Financial (NASDAQ:HAFC). 

Here are my three selections. They are from three sectors and three different company sizes. 

Simon Property Group (SPG)

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Simon Property Group (NYSE:SPG) is the largest of the three stocks. It represents large-cap stocks. America’s largest mall owner has a market cap of $53 billion. Its annual payment of $7.60 yields 5.35%. 

On January 19, the University of Michigan reported that January’s consumer sentiment index reading was 78.8, the highest since July 2021. It is the second consecutive monthly increase. It is now just 7% of the historical average. The university has measured the index since 1978.

Higher consumer sentiment means more visitors to the mall and dollars spent on discretionary items. That’s excellent news for the shareholders of America’s largest retail REIT (Real Estate Investment Trust).

It’s been a tough road for long-time shareholders. Although its stock is up 11% in the past year, it’s down nearly 21% over the last five years. 

Simon continues to do whatever it can to get people to shop at its malls. In November, it announced a partnership with Mercedes-Benz to establish charging stations at 55 of its malls across the U.S. and Canada. These charging stations will use 100% renewable energy.

In the first nine months of 2023, its FFO (funds from operations) per share was $8.82, 3.3% higher than $8.54 a year ago. Its occupancy rate was excellent at 95.2%, 70 basis points higher than a year earlier.

Evergy (EVRG)

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Evergy (NASDAQ:EVRG) is a Kansas City-based utility that provides electricity to 1.7 million customers in Kansas and Missouri. Although its history dates back to 1881, it only got the name in 2018, when Kansas City Power & Light merged with Westar Energy. 

Evergy is a mid-cap stock with a market cap of $11.6 billion. Its annual payment of $2.57 yields 5.1%. Like most utilities, higher interest rates have not been good for share prices. Since the Federal Reserve started hiking interest rates in March 2022, Evergy stock has lost 23% of its value. 

How have higher interest rates affected utility companies more than most? In Q3 2023, its interest expense increased 34% to $136.8 million. Fortunately, it cut operating expenses by 11.1% in the quarter. As a result, it generated an earnings per share profit of $1.88. Although down 6% from Q3 2022, they were four cents higher than analyst estimates. 

The utility expects to earn $3.60 a share at the midpoint of its guidance in 2023. Its shares trade at 13.9x those earnings, the lowest multiple in a decade or more. 

Buckle (BKE)

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Buckle (NYSE:BKE) is one of my favorite retail stocks because of its dividend policy, which includes consistently rewarding loyal shareholders with special dividends. I first wrote about Buckle’s generosity in November 2012. 

Since then, it has made 11 consecutive annual special cash dividends in early January, totaling $22.32 a share, a yearly average of $2.03. Buckle paid its most recent special cash dividend on Jan. 26. It currently pays a quarterly regular dividend of $0.35. 

Based on its current dividend, it yields 3.8%, below the 5% minimum. However, given its special cash dividend has become a fixture with shareholders, it’s unlikely to end anytime soon. With that included, it yields 10.6%. Its annual total return over the past five years is 25.9%.

Based on a free cash flow of $216.7 million in the trailing 12 months ended Oct. 31 and an enterprise value of $1.81 billion, Buckle has a free cash flow yield of 12.0%. Anything above 8% is value territory. 

It’s important to note that Buckle is currently on a bit of a downcycle. For the 48 weeks ended Dec. 30, its same-store sales were down 7.4%, which explains why its stock is down more than 23% in January.

So, it might be wise to buy the stock, but also consider buying puts to protect your downside — perhaps the June 21 $37.50 or $40 strike. 

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

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.