Dividend stocks can be a smart way to ride out market volatility.
The stock market rally may be running out of steam. Through nearly the first two weeks of April, the S&P 500 is down 1%, while the Nasdaq Composite has eked out a gain of 0.3% through April 11.
Both of those indexes gained roughly 10% in the first quarter, but there are some signs of fatigue in the rally as stocks focused on artificial intelligence (like Nvidia) have already skyrocketed, and the higher-than-expected consumer price index report on Wednesday may signal that the Federal Reserve isn't going to cut interest rates three times this year, as it had forecast.
In volatile times, investors tend to look to dividend stocks for stability. After all, dividend stocks are profitable and give investors a return on their investment no matter what happens with the stock market. On that note, let's consider three Nasdaq-100 stocks with notably high dividend yields right now -- and see if any are worthy of investment.
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1. Walgreen Boots Alliance (4.8% dividend yield)
Not much has gone right for Walgreen Boots Alliance (WBA -0.93%) recently. The drugstore chain has posted weak results as it faces difficult comparisons with COVID-driven demand for vaccines and tests.
Its strategy of diversifying into healthcare clinics hasn't yielded great results so far, and the company brought in CEO Tim Wentworth, a seasoned healthcare executive, a sign that the company made a mistake with former CEO Rosalind Brewer, whose background was with consumer goods companies like Starbucks and Walmart.
Walgreens also slashed its dividend last year, showing that it needs to reserve that money for revamping its business. Nonetheless, it's still the top-yielding stock on the Nasdaq 100, with a yield of 4.8%.
The company's recently filed second-quarter report included a $5.8 billion write-down on its acquisition of VillageMD, yet another warning sign. Walgreens did return to growth on the top and bottom line, but adjusted earnings per share rose just 3%.
The company's stock is cheap, but that's for a reason as it still has work to do to return the business to health.
2. Gilead Sciences (dividend yield: 4.5%)
Pharmaceutical company Gilead Sciences (GILD 0.12%) is another top dividend payer on the Nasdaq 100. The company is known for HIV treatments like Biktarvy, which brings in nearly half of its revenue, and Descovy, as well as hepatitis C drugs like Sovaldi.
The company also has growth opportunities in antivirals like remdesivir and in oncology, a segment that saw sales rise by 37% last year.
Gilead said it's headed for several milestones around HIV prevention and treatment this year. Still, the company is calling for essentially flat growth this year, showing that investors should keep their expectations in check.
If you're looking for a reliable dividend stock, Gilead is a fine choice, but investors can find better growth opportunities elsewhere.
3. Kraft Heinz (dividend yield: 4.4%)
Finally, Kraft Heinz (KHC -0.21%) rounds out the top three dividend payers on the Nasdaq 100. It's a household name in consumer staples, and its merger was engineered nearly a decade ago with the help of Warren Buffett, whose Berkshire Hathaway conglomerate remains a major shareholder.
However, Kraft Heinz has mostly been a disappointment since it was formed, as consumers continue to turn away from processed food, and the company has taken billions in write-downs on brands like Oscar Mayer.
Still, Kraft Heinz continues to generate solid profits, allowing it to reward investors with a 4.4% dividend yield. But its growth still seems challenged. Organic revenue was up 3.4% in 2023, driven by an 8.9% increase in pricing and a 5.5% decline in volume and sales mix, which was due in part to a reduction in food stamp benefits.
For 2024, the company expects organic net sales growth of 0% to 2%, and adjusted earnings per share to rise 1% to 3%. As a consumer staples stock, those profits should be reliable, but investors can find better growth elsewhere.
Jeremy Bowman has positions in Starbucks. The Motley Fool has positions in and recommends Berkshire Hathaway, Gilead Sciences, Nvidia, Starbucks, and Walmart. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.
