3 High-Yield Stocks Still Worth Buying

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If you're in search of income, sometimes the best place to begin your search is with out-of-favor dividend-paying stocks. Not only do the following stocks offer outstanding payouts, each has the potential for long-term growth.

The three high-yield stocks still worth buying include beleaguered smartphone king Qualcomm (NASDAQ: QCOM), record storage icon Iron Mountain (NYSE: IRM), and global tobacco giant Altria Group (NYSE: MO).

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Light at the end of the tunnel

Tim Brugger (Qualcomm): That Qualcomm stock is up 2% in the past year speaks to the confidence many investors have for its long-term prospects. And why not? When examined individually, the three primary concerns facing Qualcomm are all likely to end positively for shareholders.

Qualcomm's legal snafu with Apple hits where it hurts: highly profitable licensing revenue. Last quarter's $1.21 billion in licensing revenue was a 36% drop year over year, and earnings before taxes (EBT) sank 48% to $829 million. Some of the sting from Qualcomm's licensing revenue declines were offset by a 13% jump in chip sales to $4.65 billion, which helped ease fiscal 2017's total revenue loss to 1% on an adjusted basis to $23.2 billion.

Qualcomm had legal issues with China, and after paying a $975 million fine, it now counts the fast-growing market as a key driver of growth. The $47 billion deal for Internet of Things (IoT) provider NXP Semiconductors would undoubtedly give Qualcomm's IoT initiatives a kick-start. But even if the NXP deal falls through, Qualcomm is already knee-deep into the wearables, smart car, and similar markets, not to mention Qualcomm's forays into 5G, mobile computing, and cloud networking opportunities.

Then there's the looming $130 billion takeover bid by Broadcom. At $70 a share, Broadcom's offer is 7% above Qualcomm's current stock price. Assuming Broadcom is serious and ups its offer, Qualcomm shareholders stand to gain even more, not to mention enjoy its 3.5% dividend yield along the way. Questions notwithstanding, Qualcomm remains a high-yield stock still worth buying.

Storing up nice dividends for investors

Keith Speights (Iron Mountain): Think about all of the paper records and electronic data generated by companies, government agencies, and non-profit groups across the world. Where to put all of it when it's not needed for immediate access? For more than 230,000 organizations spanning 53 countries, the answer is Iron Mountain.

Iron Mountain's business focuses on storing records, primarily physical records and data backup media, and providing information management services to its customers. We're talking about a lot of storage -- around 680 million cubic feet of records.

Because Iron Mountain is organized as a real estate investment trust (REIT), it must distribute at least 90% of earnings to shareholders as dividends. And that's exactly what the company has done, returning $2.8 billion to shareholders in ordinary dividends and special distributions between 2013 and 2017. Iron Mountain's dividend currently yields a mouth-watering 6.4%. Even better, the company expects to increase its dividend by at least 4% over the next few years.

While Iron Mountain is a great income stock, it's also not a bad growth stock. Over the past five years, the company increased revenue by a compounded annual growth rate of 8.3% and increased adjusted EBITDA by 11.3% annually. Iron Mountain should be able to grow for years to come, especially as it expands into more emerging markets and adjacent businesses.

A hot-not-burnt tobacco dividend

Cory Renauer (Altria Group): Dividend growth investors would do well to scoop up shares of this company for the juicy 3.8% yield they offer today plus potentially explosive growth from a licensed product that employs heat-not-burn technology. Philip Morris International (NYSE: PM) has given Altria's Philip Morris USA subsidiary an exclusive license to market its increasingly popular iQOS e-cigarette in the U.S., but the FDA is still reviewing the necessary applications.

If international sales of iQOS posted by Philip Morris International are any indication, Altria is well positioned to deliver another decade or two of exceptional returns whether the FDA approves an application that would allow it to market iQOS as a "reduced-risk" product, or a separate application that doesn't include the important designation.

Rather than causing tobacco to combust and create harmful smoke, iQOS gets just hot enough to release a flavorful vapor that smokers around the world can't seem to get enough of. During the first nine months of 2017, Philip Morris International shipped around 20 billion iQUS units, 540% more than it delivered during the previous year period.

Even though Altria Group raised its payout in each of the past 48 years, it still generates enough cash to cover dividend payments and make necessary investments to keep operations humming along. Although the distribution is on solid ground, investors need to understand that the FDA has been making noise about nicotine levels in traditional cigarettes recently.

Suddenly mandating that combustible cigarettes must contain tobacco bred to contain minuscule amounts of nicotine would be troublesome. Despite the potential calamity, Altria's dividend appears relatively safe for two important reasons that have little to do with the company itself. First, forcing all smokers to effectively switch to "ultra-light" cigarettes would incite nationwide rioting. Also, FDA Commissioner Scott Gottleib was recently appointed by President Trump, and we all know how he feels about government regulations that could lead to job losses.

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Cory Renauer has no position in any of the stocks mentioned. Keith Speights owns shares of Apple. Tim Brugger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool owns shares of Qualcomm and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Broadcom Ltd, Brookfield Infrastructure Partners, and NXP Semiconductors. The Motley Fool has a disclosure policy.

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