Introduction
High yield stocks have been a staple of income investors for years. They offer yields way above the market average so are perfect for those looking for regular income in retirement. But you need to approach high yield stocks with a critical eye. A high dividend stocks to buy can sometimes be a warning sign for the company so selection is key. This article will walk you through the basics of high yield stocks and look at 20 high yield stocks to consider for your portfolio.
High Dividend Stocks to Buy
What They Are
High yield stocks are stocks that offer a dividend yield way above the market average. While the S&P 500 average dividend yield is around 1.5% to 2%, high yield stocks have yields of 4% or more. They are perfect for investors looking for regular income.
But high yields can be a double edged sword. While they offer nice income they can also mean the market has pushed the stock price down due to risks or uncertainties about the company’s future. So you need to evaluate high yield stocks not just on the yield but also on their financials, payout ratios and industry stability.
What to Consider
Before we get into specific high yield stocks let’s go over the key things to consider:
- Dividend Yield: This is the annual dividend payment divided by the stock price. A high yield is nice but make sure the company can sustain this payout.
- Payout Ratio: The payout ratio is the percentage of earnings paid out as dividends. A lower payout ratio means the company has enough earnings to reinvest or cushion against downturns.
- Debt: Companies with high debt may struggle to pay dividends during economic downturns. Look for companies with manageable debt and strong cash flow.
- Dividend Growth: Companies with a history of growing their dividends are more likely to continue to do so even in tough economic times.
- Industry: Companies in stable, non-cyclical industries like utilities or consumer staples are less likely to cut dividends during tough times.
20 High Dividend Stocks to Buy
Altria Group, Inc. (MO)
- Dividend Yield: ~8%
- Payout Ratio: ~75%
- Industry: Tobacco
Altria is a leading tobacco company with a strong and consistent dividend history. Their Marlboro brand is the number one cigarette in the US and provides a stable revenue stream. While demand for traditional tobacco is declining Altria is expanding into alternative nicotine products and cannabis which could be growth areas. They are committed to returning capital to shareholders even in a highly regulated industry so are a top pick for income investors.
More Info: Altria’s focus on cost management and strategic acquisitions (like their stake in Cronos Group) helps their long term growth. But investors should be aware of the regulatory risks in the tobacco industry.
AT&T Inc. (T)
- Dividend Yield: ~7%
- Payout Ratio: ~58%
- Industry: Telecommunications
AT&T is a telecommunications giant that’s been in income portfolios for years because of their high dividend yield. Their revenue is from wireless, broadband and entertainment. They have a lot of debt and competition in the telecom space but their cash flow is consistent enough to support their dividend payments. They are working on paying down their debt which should help their financial flexibility and dividend sustainability.
More Info: AT&T’s recent focus on divesting non-core assets and investing in 5G infrastructure is to improve their competitive position and financial stability. But investors should watch how they manage their high debt and navigate the competitive landscape.
Verizon Communications Inc. (V.Z.)
- Dividend Yield: ~4.7%
- Payout Ratio: ~51%
- Industry: Telecommunications
Verizon, another telecom giant, has a high dividend yield. Their strong network and leadership in 5G gives them an edge. Verizon’s disciplined capital spending and focus on shareholder returns makes them a good option for high-yield income.
More Info: Verizon’s long term contracts with government and enterprise customers provide a steady revenue stream. They are expanding into new revenue streams like digital media and IoT (Internet of Things) which could be growth opportunities. But like AT&T, Verizon has a lot of competition in the telecom space.
Exxon Mobil Corporation (XOM)
- Dividend Yield: 4%
- Payout Ratio: 55%
- Industry: Energy
Exxon Mobil is a global energy leader with a long history of paying dividends. Their diversified operations in oil, natural gas and chemicals gives them a steady cash flow even in low oil price environment. Exxon’s focus on cost management and efficiency has allowed them to keep their dividend through all market cycles.
More Info: Exxon is investing in low carbon technologies and renewable energy to adapt to the new energy world. While the transition to renewable energy is a long term challenge, Exxon has the financial muscle to get through it.
Chevron Corporation (CVX)
- Dividend Yield: ~4.5%
- Payout Ratio: ~65%
- Industry: Energy
Chevron is another energy company with a high dividend stocks to buy yield. Their diversified oil and gas operations and strong balance sheet means they can weather the storms. Chevron’s investments in renewable energy also provides growth potential so it’s a good choice for income investors.
Additional: Chevron’s purchase of Noble Energy has given them a foothold in the Eastern Mediterranean and access to low cost high return assets. Their focus on shareholder returns including buybacks makes it even more attractive to income investors.
Best Blue Chip Stocks to Invest, Top Picks, Highest Return, Analyst Favorite
Realty Income Corporation (O)
- Dividend Yield: ~4.4%
- Payout Ratio: ~80% (Adjusted Funds from Operations)
- Industry: Real Estate
Realty Income is a real estate investment trust (REIT) and is often referred to as “The Monthly Dividend Company”. Their diversified portfolio of commercial properties and high quality tenants means a steady income stream. Realty Income’s commitment to high dividend stocks to buy every month makes it a top choice for high yield investors.
Additional: Realty Income’s focus on long term triple net leases with tenants in recession resistant industries (convenience stores and drug stores) provides stability. Their expansion into Europe also provides new growth opportunities.
Philip Morris International Inc. (PM)
- Dividend Yield: ~5%
- Payout Ratio: ~90%
- Industry: Tobacco
Philip Morris is the global leader in the tobacco industry and has a high dividend yield due to their strong market position and brand recognition. Their focus on reducing harm through smoke-free products such as their IQOS heated tobacco system provides growth potential. Philip Morris’s dividend is a good choice for income investors.
Additional: Philip Morris’s “smoke-free future” strategy is to shift their revenue base from traditional cigarettes to reduced-risk products. This high dividend stocks to buy will help them sustain their dividend in the long term even as cigarette volumes decline.
Pfizer Inc. (PFE)
- Dividend Yield: ~4.2%
- Payout Ratio: ~48%
- Industry: Pharmaceuticals
Pfizer is one of the largest pharmaceutical companies in the world and has a high dividend yield with a low payout ratio. Their strong pipeline of drugs and leading position in the global vaccine market means a steady stream of cash to pay dividends. Pfizer’s focus on innovation and strong financials makes it a good choice for high yield investors.
Additional: Pfizer’s success with the COVID-19 vaccine developed with Biotech has given them a big boost in revenue and cash flow. Their ongoing R&D investments and robust drug pipeline also supports their dividend.
IBM (International Business Machines Corporation) (IBM)
- Dividend Yield: ~5%
- Payout Ratio: ~75%
- Industry: Technology
IBM is a long time player in the technology sector and has a good dividend yield. They are undergoing a big transformation focusing on cloud, AI and quantum computing. While IBM is struggling to execute their turnaround, their strong cash flow and commitment to paying dividends makes it a good choice for income investors
More Details: Lumen’s fiber-optic networks and edge computing growth opportunities. Management of debt and execution of growth will be key to the dividend.
Enterprise Products Partners L.P. (EPD)
- Dividend Yield: ~7.5%
- Payout Ratio: ~80%
- Industry: Energy (Midstream)
Enterprise Products Partners is one of the largest midstream energy companies in the US, with pipelines, storage facilities and processing plants. The high dividend stocks to buy yield is supported by stable, fee-based revenue from transporting and processing energy products. Diversified asset base and conservative management makes it a high-yield stock for you.
More Details: Enterprise’s strong balance sheet with low leverage compared to peers and focus on organic growth projects supports the dividend. The company’s exposure to natural gas liquids which are in high demand for petrochemicals also adds to revenue stability.
Enbridge Inc. (ENB)
- Dividend Yield: ~6.8%
- Payout Ratio: ~70%
- Industry: Energy (Midstream)
Enbridge is a Canadian energy infrastructure company with a high dividend stocks to buy, driven by its pipeline and utility businesses. The company has stable cash flow from long-term contracts for transporting and storing energy products. Enbridge is also investing in renewable energy projects like offshore wind.
More Details: Enbridge’s diversified portfolio which includes natural gas distribution and renewable power generation reduces its commodity price risk. The company’s commitment to maintaining a strong balance sheet and disciplined capital allocation supports the dividend.
Magellan Midstream Partners L.P. (MMP)
- Dividend Yield: ~8.6%
- Payout Ratio: ~90%
- Industry: Energy (Midstream)
Magellan Midstream Partners is another midstream energy company with a focus on transporting, storing and distributing refined petroleum products and crude oil. The high dividend stocks to buy yield is supported by fee-based revenue model which provides cash flow regardless of commodity price.
More Details: Magellan’s extensive pipeline and storage network and conservative management makes it an income source. But investors should watch out for the impact of changing energy policies and shift to renewable energy on long term growth.
Comprehensive Stock Trading and Investing: Strategies, Tips, Quick Start Guide
The Kraft Heinz Company (KHC)
- Dividend Yield: ~4.5%
- Payout Ratio: ~60%
- Industry: Consumer Staples
Kraft Heinz is a global food and beverage company with a solid dividend yield backed by its brand portfolio and international distribution network. The company’s cost cutting initiatives and innovation in products has stabilized its financials making it a high yield stock for income investors.
More Details: Kraft Heinz needs to keep streamlining and paying down debt to support the dividend. Adapting to changing consumer trends (healthy and sustainable food) will be key to long term success.
Consolidated Edison, Inc. (E.D.)
- Dividend Yield: ~4.3%
- Payout Ratio: ~70%
- Industry: Utilities
ConEd is a utility company that provides electric, gas and steam to customers in NYC and surrounding areas. The regulated business model provides a steady cash flow which supports the dividend. ConEd is also expanding their renewable energy portfolio.
More Details: ConEd’s investments in solar and wind and grid modernization align with the growing demand for clean energy. The company’s strong regulatory environment and good management supports the dividend.
Duke Energy Corporation (DUK)
- Dividend Yield: ~4.2%
- Payout Ratio: ~75%
- Industry: Utilities
Duke is one of the largest utility companies in the US, with operations in electric and gas utilities. The regulated business model provides a steady cash flow which supports the dividend. Duke’s investments in renewable energy and grid modernization also provides growth. A good choice for income investors.
More Details: Duke’s long term plan is to reduce its carbon footprint by retiring coal plants and increasing its renewable energy. The company’s focus on cost management and regulatory compliance will help to support and grow the dividend.
Kimberly-Clark Corporation (KMB)
- Dividend Yield: ~3.4%
- Payout Ratio: ~60%
- Industry: Consumer Staples
Kimberly-Clark is a global leader in personal care products. The dividend is supported by their strong brand portfolio and international distribution network. Innovation and cost management has helped them maintain their market position and financial stability. A good choice for income investors.
More Details: Kimberly-Clark’s commitment to returning capital to shareholders through dividends and buybacks and their focus on sustainability and product innovation will support long term growth. Their ability to navigate supply chain and changing consumer trends will be key to their future.
Southern Company (SO)
- Dividend Yield: ~4.1%
- Payout Ratio: ~80%
- Industry: Utilities
Southern is a utility holding company that provides electric and gas to the southeastern US. The regulated business model provides a steady cash flow which supports the dividend. Southern’s investments in renewable energy and nuclear power provides growth. A good choice for income investors.
More Details: Southern’s long term plan is to increase renewable energy and reduce coal. Regulatory compliance and cost management will help to support and grow the dividend.
AbbVie Inc. (ABBV)
- Dividend Yield: ~4.2%
- Payout Ratio: ~42%
- Industry: Pharmaceuticals
AbbVie is a global pharma company with a high dividend yield from its strong product portfolio and pipeline. Immunology and oncology is driving the revenue growth so a good pick for income investors.
Additional: AbbVie’s acquisition of Allergan added more products and revenue streams. Ongoing R&D investments and focus on innovation supports long term growth and dividend sustainability.
International Paper Company (I.P.)
- Dividend Yield: ~4.2%
- Payout Ratio: ~60%
- Industry: Materials
International Paper is a global leader in renewable fiber-based packaging, pulp and paper products. Strong market position and cost management is supporting the dividend yield. International Paper’s focus on sustainability and innovation makes it a great pick for income investors.
Additional: International Paper’s ongoing efforts to reduce its environmental footprint and expand sustainable packaging products aligns with the growing demand for eco-friendly products. Ability to navigate supply chain and raw material cost will be key to its success.
Best Growth Stocks: Picking Best-Performing Growth Stocks: Expand Your Portfolio
How to Build a High-Yield Portfolio
Building a high-yield portfolio is about selecting a mix of stocks with attractive dividends while balancing the risk. Here are the steps:
- Diversify Across Sectors: High-yield stocks are concentrated in specific sectors like energy, telecom and REITs. Diversify your portfolio across industries to reduce risk.
- Focus on Dividend Safety: Look for companies with dividend history and increasing dividends. A high yield is attractive but must be sustainable.
- Monitor Financial Health: Regularly check the financials of the companies in your portfolio. High debt or declining earnings can kill the dividend.
- Consider Dividend Reinvestment: Reinvesting dividends can compound your returns over time. Many brokerages offer dividend reinvestment plans (DRIPs) that will automatically reinvest dividends into more shares.
- Stay Informed: Keep up with industry trends and news that may impact the companies in your portfolio. Changes in regulations, market conditions or company strategies can affect dividend sustainability.
Risks
Investing in high yield stocks comes with its own risks. While the income is attractive, be aware of these:
- Dividend Cuts: High yield stocks may cut dividends in economic downturns or financial stress.
- Market Volatility: High yield stocks can be more volatile especially in energy or telecoms. Market moves will impact your investment.
- Interest Rate Risk: Rising interest rates will make high yield stocks less attractive compared to fixed income investments like bonds and can cause prices to fall.
- Industry Risks: High yield stocks are often concentrated in specific sectors like energy or real estate which can have industry specific risks like regulatory changes or market saturation.
- Credit Risk: High debt companies may struggle to pay dividends especially in economic downturns. Monitor credit ratings and financials.
Conclusion
High dividend stocks to buy can be a good addition to an income portfolio. By choosing companies with strong financials, sustainable dividends and a commitment to returning value to shareholders you can build a portfolio that gives you regular income and manages risk.
Remember high yields are attractive but shouldn’t be the only reason for your investment decisions. A balanced approach that considers dividend sustainability, financials and industry stability will get you to your income goals without the pitfalls.
Read more:
Best Dividend Stocks for September 2024
