2 High-Yield Dividend Stocks I Can't Stop Buying

High-yield dividend stocks have been gaining momentum ahead of potential Fed rate cuts. While sticky inflation and possible Trump-era tariffs could complicate the Fed's plans, several blue-chip dividend powerhouses like AT&T and Altria have been outperforming the S&P 500 this year.

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Two high-yield stocks keep drawing my investment dollars in this market. Here's why these two high-yield dividend stocks deserve a closer look from income and value investors with a long-term outlook.

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Big pharma's biggest yield

Pfizer (NYSE: PFE) ranks among healthcare's most reliable dividend payers, but recent struggles have pushed its stock down 13.8% this year. That decline has lifted the yield to an enticing 6.77% while dropping its valuation to just 8.3 times forward earnings. As a result, the drugmaker now offers the highest yield among major drug manufacturers and one of the lowest multiples in the space.

Wall Street's skepticism centers primarily on Pfizer's recent acquisition frenzy. The company has racked up $68 billion in debt by buying a host of next-generation drug developers, but some of these deals have already turned sour. For example, Pfizer recently withdrew the sickle cell disease drug Oxbryta from the market, which was the centerpiece of its $5.4 billion acquisition of Global Blood Therapeutics in 2022.

Adding fuel to the fire, markets have also grown nervous about President-elect Trump's potential nomination of vaccine skeptic Robert F. Kennedy Jr. to lead the Department of Health and Human Services. While the potential impact on drug and vaccine approvals remains uncertain, investors have reacted negatively to the possibility.

Despite these headwinds, Pfizer's pivot to oncology is starting to pay dividends. Cancer treatments drove a healthy amount of last quarter's 32% year-over-year operational growth, and the recent Seagen acquisition added a deep pipeline of promising therapies. Moreover, the drugmaker's $4 billion cost-cutting program should help the deleveraging process and support future dividend payments.

With shares trading near historic lows and its dividend yield hovering around a record high, I see a bargain hiding in plain sight. While the debt load demands attention, and savvier business development deals would be nice, Pfizer's deep pipeline and growing cancer franchise make its 6.77% yield worth the risk, in my opinion.

Smoke-free future fuels growth

Philip Morris International (NYSE: PM) shares have surged 36.6% this year and still yield a healthy 4.2%. Despite having the lowest yield among major tobacco stocks, the company's aggressive push into smoke-free products keeps drawing my investment dollars.

The company leads the tobacco industry's shift away from cigarettes. Nearly 40% of revenue now comes from smoke-free alternatives, led by IQOS, a device that heats rather than burns tobacco. Philip Morris doubled down on this strategy in 2022, acquiring Swedish Match for $16 billion and adding Zyn nicotine pouches-a fast-growing tobacco-free alternative that's taken the U.S. market by storm.

The international tobacco giant's transformation is already showing tangible results. Third-quarter net revenue grew 8.4% relative to the same period a year ago while operating margins topped 40% during the three-month period. Most importantly, smoke-free products are already delivering higher revenue per unit than traditional cigarettes, suggesting the company's bold target of two-thirds smoke-free revenue by 2030 might not be so far-fetched.

With a clear path to the future, I'll gladly accept Philip Morris's lower yield for what looks like a safer long-term dividend. After all, the company isn't just talking about adapting to changing consumer habits-it's leading the change.

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George Budwell has positions in Pfizer and Philip Morris International. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.