The Smartest Dividend Stocks to Buy With $10,000 Right Now

Globe and Mail

3 hours ago

Key Points
Several strategic decisions United Parcel Service has made of late are starting to come together just as the world shakes off the last of the post-pandemic delivery and logistics lull.
Shares of drugmaker Pfizer have been upended by price-control worries and a wind-down of its booming COVID-19 business. But there's reason to look for better days on the horizon.
Defense contractor Lockheed Martin looks and seems vulnerable. The market's not seeing its future in quite the right light, though.
10 stocks we like better than Lockheed Martin ›
Are you looking to put a sizable chunk of cash to work generating investment income? Whether you intend to live on this income or reinvest it to bolster your portfolio's overall growth, there are several great dividend-paying options out there right now. Here's a closer look at three of your best bets at this time, not despite each stock's recent turbulence and mostly bearish drama but because of it.
United Parcel Service
You probably already know that United Parcel Service 's (NYSE: UPS) revenue dwindled after soaring during and because of the COVID-19 pandemic, taking a similar toll on the bottom line. Indeed, the delivery giant's business has been stagnant -- at best -- since 2022. Its second-quarter sales and income both fell on the order of 1% year over year, extending its anemic results in the meantime. The amount of business and pricing power that was in place just four years ago simply isn't there anymore.
UPS stock's 63% pullback from its 2022 peak to yet another new multiyear low reached earlier this month, however, is overdone at the exact wrong time to price in such pessimism.
Not every investor will immediately agree with this assessment. The threat of a lingering tariff war continues to threaten United Parcel Service's business following its post-pandemic slowdown. The company isn't exactly helping its stock either, opting not to offer any guidance with its recently released Q2 report, after which CEO Carol Tomé lamented during the quarterly earnings call that "for our sector, this remains a very unsettling time."
There's an argument to be made, however, that all the worst-case scenario is now priced in at a time when things are on the verge of turning around. The decision to make fewer but more profitable deliveries has already been enacted, for instance. And the company has already cut $3.5 billion worth of annual overhead, with total yearly savings of $6 billion being targeted further down the road. It's just going to take a little more time to make and see the adjustment to such changes. The backdrop is still quite bullish in the meantime, though.
An outlook from Mordor Intelligence suggests the global parcel delivery market is set to grow at an average annual pace of just over 5% through 2030, jibing with expectations from Global Market Insights. That's better growth than we've seen at any point since the wind-down of the coronavirus contagion.
Newcomers will not only be plugging into UPS while its forward-looking yield stands at 7.4%, but while the stock's priced dirt cheap -- at only 13 times this year's analyst-expected per-share earnings of $6.64. It's not going to get much cheaper than that.
Pfizer
It's a tough time to be excited about owning any pharmaceutical stocks, but especially Pfizer (NYSE: PFE). Not only is the federal government looking to force drugmakers to offer better prices to its Medicare program, but Pfizer still hasn't restored the revenue it lost once the need for its COVID-19 vaccine and treatment evaporated in 2023.
That's the chief reason shares have been more than halved since late 2021. Well, that and the fact that the company is technically dishing out more in dividends than it's earning while it's facing a handful of patent expirations in the foreseeable future.
Just don't lose perspective here. On any of it.
Take its underfunded dividend as an example. It's not actually underfunded. Last year's reported per-share earnings of $1.41 were less than the full-year dividend payout of $1.68 per share, but that figure reflected a one-time accounting charge. Stripping this expense out of the equation reinflates earnings to a more normalized figure of $3.11 per share, easily covering its dividend.
Pfizer also has replacements in the works for all its COVID drugs that are less needed, as well as its drugs with patents set to expire in the foreseeable future. Vepdegestrant (for ER+/HER2- metastatic breast cancer) and sigvotatug vedotin (for metastatic non-small cell lung cancer) are both in late-stage trials now, for instance, as part of a developmental pipeline that consists of around 50 oncology drugs.
Although none of these drugs are going to be approved and marketed in the immediate future, the company is aiming to launch at least eight new cancer drugs by 2030. The market could begin rewarding their eventual success much sooner, though.
The company's also looking to enter the multibillion-dollar weight-loss market with its own GLP-1 receptor agonist, which is based on the same basic science as well-known semaglutide.
And as for the threat of lower drug prices for Medicare-covered patients, don't read too much into it. This threat remains in permanent circulation and rarely causes as much trouble as feared. As BMO Capital Markets analyst Evan David Seigerman noted back in May, when President Donald Trump first ramped up his rhetoric on the matter, his plan "could be more rhetoric than actual implementable policy." In other words, it's more bark than bite.
Don't be surprised to see Pfizer shares start climbing again once more investors start connecting all these dots, particularly given how their weakness has inflated the stock's forward-looking dividend yield to 7.2%.
Lockheed Martin
Finally, add defense contractor Lockheed Martin (NYSE: LMT) to your list of dividend stocks to buy with bigger amounts of capital while its forward-looking dividend yield is a respectable 3.1%.
It's yet another victim of federal budget cuts...both real and feared. In June, for instance, the U.S. Department of Defense halved its previous order of F-35 fighter jets (which account for more than one-fourth of Lockheed's annual revenue) for the government's fiscal year beginning in October. That followed March's news that the DoD chose Boeing rather than Lockheed to manufacture the next-generation F-47 fighter plane... a contract that could have been worth hundreds of billions of dollars over the course of many, many years. Meanwhile, support for Ukraine in its conflict against Russia appears to be waning, potentially crimping deliveries of new weaponry to the region. All told, Lockheed Martin shares are down more than 30% from October's peak and still testing new 52-week lows on these worries. .
Once again, though, don't lose perspective. The U.S. military may not need as many F-35 fighter planes as it thought it would in the year ahead, nor does it want Lockheed-Martin to manufacture its next generation of fighter jets. It still needs much of Lockheed's weapons and military hardware, though, like its newly unveiled artificial intelligence-powered synthetic aperture radar (SAR) that facilitates airborne maritime surveillance or its new magnetic anomaly detection technology (capable of finding submerged submarines) for its Sikorsky MH-60R "Seahawk" maritime helicopters. And just last month, the U.S. Missile Defense Agency added another $2 billion to an $8.3 billion contract with Lockheed to provide it with terminal high-altitude area defense (THAAD) interceptor missiles.
Sure, investors would love to see strong and sustained demand for the F-35, which generates maintenance revenue long after the purchase of the aircraft is completed. Shareholders would have also been thrilled to see the company win the F-47 contract to the same reason. Lockheed Martin still has a range of ways to monetize its military hardware know-how for the long haul, though.
Let's also not forget that one of the few things the United States' two major political parties agree on is the need to fully fund the nation's ability to defend itself and its interests. Even in the face of economic uncertainty, the U.S. Senate's overseeing panel recently approved a defense budget of $852 billion for the upcoming year, up just a bit from this year's figure and extending a multiyear growth trend that isn't apt to slow anytime soon.
Admittedly, Lockheed stock's 3.1% yield isn't huge. It's based on a dividend; however, that's now been raised for 22 consecutive years. So close to becoming dividend royalty, it's unlikely the company's going to stop raising its annual dividend payments now.
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