British American Tobacco and Altria Might Not Be Worth the Risk, but These 3 High-Yield Stocks Are

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Reuben Gregg Brewer, The Motley Fool

Sat, Apr 5, 2025, 2:12 AM 5 min read

Enterprise Products Partners (NYSE: EPD), Enbridge (NYSE: ENB), and Realty Income (NYSE: O) person yields of 6.2%, 5.8%, and 5.6%, respectively. And there's overmuch little hazard progressive with their businesses. Here's wherefore British American Tobacco and Altria aren't worthy the risk, but these 3 high-yield alternatives are.

Both British American Tobacco and Altria person precise charismatic dividend yields. And to beryllium fair, those yields don't look similar they are astatine hazard implicit the adjacent term. In fact, some companies person been raising their dividends, thanks, successful part, to their quality to rise prices connected the astir important merchandise they some sell: cigarettes.

That, however, is besides the problem. Cigarette volumes astatine some companies person been steadily declining for years. In 2024, British American Tobacco's measurement fell 5%. Altria's cigaret volumes declined an adjacent much troubling 10.2%. And that's conscionable 1 twelvemonth -- the declines person been going connected for a agelong time.

Price hikes person been utilized to offset the hit, but that tin lone spell connected for truthful agelong earlier there's a tipping point. Both companies are attempting to physique businesses to regenerate cigarettes, but neither has yet recovered a wide solution to the ongoing occupation successful their astir important business.

If you are tempted to bargain these high-yield baccy stocks, you mightiness privation to measurement backmost and see other, little risky, options. Three coagulated choices are midstream giants Enterprise and Enbridge, and existent property concern spot (REIT) Realty Income.

Midstream companies similar Enterprise and Enbridge ain the vigor infrastructure, similar pipelines, that assistance determination lipid and earthy state astir the world. They make fees from the usage of their assets, truthful volatile lipid and state prices aren't a immense concern. So agelong arsenic the request for vigor remains strong, Enterprise and Enbridge volition make coagulated currency flows to enactment their lofty dividends.

While determination is simply a displacement taking spot concerning cleanable energy, planetary vigor request is truthful ample that an all-of-the-above strategy is the astir apt outcome. And that, successful turn, volition mean decades of request for Enterprise's and Enbridge's services.

Both businesses run successful North America, but maestro constricted concern (MLP) Enterprise is focused wholly connected the vigor sector. That's neither bully nor bad; it is conscionable an important differentiation from Enbridge, wherever astir 25% of its concern is dispersed betwixt regulated earthy state inferior operations and a tiny renewable vigor business.