These 2 Dividend Stocks Yield Over 8% — And Morgan Stanley Sees Major Upside Ahead

When the stock market was soaring, dividends of a few percent probably didn't seem like much. But in 2022 — when the benchmark S&P 500 tumbled nearly 20% — many investors learned the hard way that stocks don't always go up.

In the unpredictable stock market, investors may find solace in the steady rhythm of dividends. 

With the right dividend stocks, investors can bypass the stress and uncertainty associated with attempting to time the market, all while benefiting from a passive income stream.

Business magnate John D. Rockefeller once said, "Do you know the only thing that gives me pleasure? It's to see my dividends coming in."

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But most companies don't pay much these days. The average dividend yield of S&P 500 companies is now just 1.6%.

Still, some companies offer a far more generous yield. Here's a look at two stocks Wall Street giant Morgan Stanley (NYSE:MS) finds especially appealing — both boasting yields of over 8%.

Verizon Communications Inc. (NYSE:VZ)

Telecommunications is an essential service, meaning demand remains relatively consistent regardless of economic conditions.

Verizon is one of the biggest players in the telecom arena, generating $136.8 billion in revenue in 2022. The company also has a track record of paying dividends consistently and increasing them over time.

In the first half of 2023, Verizon paid shareholders $5.5 billion in dividends.

Last month, the company's board of directors declared a quarterly cash dividend of 66.5 cents per share, representing a 1.9% increase from its previous payout. This marked Verizon's 17th consecutive annual dividend hike.

At the current share price, the new dividend rate translates to an annual yield of 8.2%.

Morgan Stanley analyst Simon Flannery has an Overweight rating on Verizon and a price target of $44. Considering that shares were trading at $32.41 last week, the price target implies a potential upside of 36%.

Energy Transfer LP (NYSE:ET)

Energy Transfer owns one of the largest portfolios of energy assets in the U.S.

With approximately 125,000 miles of pipelines and associated energy infrastructure, the partnership has a strategic network that spans 41 states and all of the major production basins in the country.

In July, Energy Transfer announced a quarterly cash distribution of 31 cents per unit. At the current unit price, the amount comes out to an annual yield of 8.9%.

In the second quarter, Energy Transfer's distributable cash flow (DCF) attributable to its partners totaled $1.55 billion. In the earnings conference call, Energy Transfer Co-CEO Tom Long pointed out that the amount "resulted in excess cash flow after distributions of $579 million."

The stock has climbed 20% in 2023, and Morgan Stanley analyst Robert Kad sees further upside on the horizon. The analyst has an Overweight rating on Energy Transfer and a price target of $17 — roughly 22% above where the stock currently sits.

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