3 Top High-Yield Stocks to Buy in November
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A high yield isn't the only thing you should consider when you are looking for a dividend stock. Maybe it's what gets you to look at a stock, but you also want to make sure the business backing the lofty yield is worth owning. If you want high yields from good companies, you should examine Chevron (NYSE: CVX), United Parcel Service (NYSE: UPS), and Enbridge (NYSE: ENB) as November gets underway. Here's why these three stocks are worth considering this month.
1. Chevron is the all-in-one energy play
Energy is vital to the global economy, and you should probably have some exposure to the sector. The problem is that oil and natural gas stocks are highly volatile, so picking a good energy-focused dividend stock really means picking an energy stock that can survive the full energy cycle while continuing to pay you your dividends.
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Chevron has increased its dividend annually for 37 consecutive years. That's impressive given that it operates in all of the important energy segments, including oil and gas production (upstream), energy transportation (midstream), and chemicals and refining (downstream).
Two of these three segments are highly cyclical (more on the more stable midstream sector in a moment). Indeed, Chevron has grown into one of the largest integrated energy companies on the planet despite frequent swings in commodity prices. It has proven that it is a survivor and one that can support its attractive 4.3% dividend yield even if oil prices plunge. Part of the reason is that it has an incredibly conservative balance sheet, with low leverage giving it the wherewithal to add debt during tough times to support its business and your dividends. If you want to add oil and gas to your portfolio in November, Chevron is a good way to do it.
2. UPS' yield is near historic highs
United Parcel Service, more commonly known as UPS, is attractive because its lofty 4.8% dividend yield is near the highest levels in its history. Using yield as a rough gauge of valuation, the high yield suggests one of the largest delivery companies on the planet is very cheap as November gets going and the all-important holiday shipping period gets underway.
To be fair, there's a reason for UPS' high yield. It isn't hitting on all cylinders today, with margins recently under pressure from rising wages on one side and lower profitability customers on the other.
Those headwinds are already starting to look like they are in the rear-view mirror, with strong volumes in its package business and a renewed focus on the most profitable customers. If UPS can get margins expanding again, investors are likely to afford the company a higher valuation. But the real story here is that UPS is one of a small number of large delivery companies in a world filled with people who increasingly buy online. Nothing moves in a straight line on Wall Street, but UPS seems to be gearing up to fly high again.