It’s not all about chasing the red-hot AI trade. Some value investors want solid dividend payouts that have the means to grow at a steady and relatively predictable rate over time. Undoubtedly, momentum investing isn’t going to be for everyone. And though there will be many winners to the artificial intelligence (AI) boom, including those that stand to indirectly profit (think the utility companies powering all those data centers), we shouldn’t simply forget about the blue-chip dividend stocks for cash flow.
You’re not going to get the same degree of gains with a proven dividend stock, especially if the yield is on the higher end. However, it’s probably a mistake to trade them in for something at the front of the AI race. After all, staying diversified is still important. And for the risk-off portion of one’s portfolio, the following dividend plays make a lot of sense when buying while undervalued.
So, if you seek a deal, “boring” dividend stocks for cash flow may be a worthy option if you fear the AI trade is overdue for a correction.
Starbucks (SBUX)
If chasing hot stocks isn’t your cup of tea, perhaps Starbucks (NASDAQ:SBUX) is while it’s down around 35% from its all-time high. As SBUX stock got crushed, the dividend yield swelled to 2.9%, close to the highest I’ve seen in several years. Opportunities to snag a near-3% yield from Starbucks shares don’t come around all too often.
While the company is experiencing serious macro headwinds that are weighing growth, I believe sales woes will be resolved as Starbucks implements a value menu. Indeed, Starbucks and value menus seem like oxymorons.
The coffee chain is best known for pricy premium brews at equally scorching prices, especially amid inflation. So, it will be interesting to see how discounting can help Starbucks get a caffeinated jolt without hurting the premier nature of its brand.
At 21.8 times trailing price-to-earnings (P/E), you’re getting a solid company that will see high-growth days again once consumers and the economy move past this inflationary hangover.
Intel (INTC)
Intel (NASDAQ:INTC) is a way to get direct AI exposure without the scorching momentum or the elevated multiple. The fallen chip company has lost many fans this year, down 36% year to date. It’s the biggest Dow Jones dog, but it deserves a second look by value-seeking investors.
The dividend yield is 1.63%, not exactly high, but still appreciated by investors seeking to be paid a fair sum while they wait for Intel’s turnaround plan to start moving the stock higher.
Aside from its ambitious, albeit very expensive, foundry plans, the company has also released a steady slate of impressive AI-capable hardware. The AI offerings may not be at the top of the class, but they will help fill the need for many enterprise customers looking for “picks and shovels” to unearth gold in the AI boom.
The firm recently unveiled a fully integrated I/O chiplet designed for AI in an industry first. This is a big deal that should attract the attention of INTC stockholders.
Pfizer (PFE)
Regarding growth and income, Pfizer (NYSE:PFE) stands out as an intriguing dividend stock to buy while in a multi-year rut. Like Intel, Pfizer has a game plan to orchestrate a comeback after a multi-year tumble. At writing, PFE stock is down over 53%, with a dividend yield of 6.1% — an incredibly bountiful payout for a company with some interesting candidates in the pipeline.
Notably, Pfizer is seeking to punch a ticket to the weight-loss drug race with three new candidates — two of which are GLP-1 agonists — currently in testing. Indeed, such weight-loss drugs could reignite PFE stock in a meaningful way.
Until Pfizer has an offering that can compete with the GLP-1 leaders, though, the stock could stay in a rut for longer. The good news is that the dividend pays you to wait for something promising to emerge from the pipeline.
On the date of publication, Joey Frenette held shares of Starbucks. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
