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As volatility increases and capital gains turn into losses for some, it may be time to consider cheap, unloved dividend stocks that will pay you to hold on into the second quarter, which should see more of the same. Of course, there were high expectations that the Iran war would end soon this week. Now, it looks like the crisis may last a while longer, as companies look to pass on the benefits of higher transportation prices to consumers.
With inflation headed for an untimely comeback, I think the case for spending big money on dividends is strengthened. In this piece, we’ll look at two high-yield (6% yield or higher) stocks that stand out as great bets while risk and volatility remain high in the near future.
General Mills
General Mills (NYSE:GIS) Shares have actually declined over the past three years, with shares now down about 59% from their all-time high in 2023. The fall in Pride has taken the dividend yield to more than 6.5%. And while there’s no shortage of problems for the ailing consumer-packaged goods company as it stumbles its way to its optimistic turnaround, I think the name has been so oversold that the risk may actually be the lowest it’s been in some time, even though it seems like the opposite is true.
The stock trails price-to-earnings (P/E) by 9.15 times, which suggests a lot is going wrong. As the energy shock leads to higher transportation costs and, at the same time, more inflation at a time when headwinds are already heightened, it looks like things could get even worse by 2026. The consumer is in a tough spot, and it’s about to get worse.
With the outlook cut at the start of the year and the possibility of another if the Iran conflict isn’t resolved soon, it’s not easy to be a bull on any hard-hit consumer packaged goods, no matter how beloved the brand. While management can’t control macro, it can take steps to better position the company for an environment where inflation and other pressures are off the shoulders of consumers. In particular, General Mills is hoping to increase sales through some interesting new products.
Of course, consumers will need more than a few new flavors of cereal to splurge in that lonely middle aisle of the grocery store. If the company is to convince shoppers to fill their carts or go out of their way to search for a specific product, it will have to double down on the health and wellness trend.
With a range of better-for-you products and a growing demand for higher-protein options, there’s definitely an opportunity for General Mills. If the company can make its lineup healthier, more protein-rich, and tastier, I see a scenario where General Mills could begin a comeback, even at a time when inflationary pressures are rising.
energy transfer
energy transfer (NYSE:ET) appears to be an easy name to buy, with shares now up 135% over five years, with a 0.65 beta and 6.96% yield. Of course, midstream operators may not have as much torque as oil prices rise. But for those seeking stability and, most importantly, high yields and dividend growth, I see pipelines as exceptional bets.
The AI data center tailwind is alive and well, and with guidance recently coming in at a higher level, there’s every reason to believe that the pipeline darling will continue to pay growing dividends in the years to come. Of course, the company is spending a lot on development projects and with a considerable amount of debt, concerns could rise if interest rates rise from here to prevent any rise in inflation.
If you can look past the $69 billion long-term debt load, I think the CapEx plan will, in due course, pay off as the firm does its part to ease the disruptions in the Permian Basin. For now, the dividend looks safe and strong, given the plentiful cash flow. For long-term holders, expect low single-digit dividend growth in the 3-5% ballpark. At such a hefty yield, it’s a gift that keeps on giving.
Finally, at 15.6x Trailing P/E, the stock looks undervalued given its potential to survive a turbulent and inflationary year.