Investing for income is a difficult task right now. The Federal Reserve has kept interest rates at zero since the coronavirus pandemic, leading to lower yields across fixed income. Stocks aren’t much better, as record-high share prices has reduced the average dividend yield of the S&P 500 Index to just 1.3%.
But income investors can still find high dividend stocks with strong yields and secure payouts. These 19 high-yield stocks have attractive yields above 5%.
High Dividend Stock #1: Chevron Corporation (CVX)
Chevron is a well-known dividend growth stock, as it is on the prestigious Dividend Aristocrats list.
The company has increased its dividend for over 30 years in a row. Chevron is an integrated super-major, with large upstream (exploration and production) and downstream (refining and marketing) segments.
In the 2021 second quarter, Chevron grew its production 4.6% over the prior year’s quarter. The average realized price of oil of Chevron essentially tripled over last year’s quarter and thus Chevron switched from an adjusted loss of -$1.56 per share to an adjusted profit of $1.71 per share.
Thanks to the strong recovery of the oil price and the improved outlook for refining margins, Chevron raised its dividend by 3.9% this year. Shares currently yield 5.4%.
High Dividend Stock #2: Altria Group (MO)
Altria Group is a legendary dividend stock. It has increased its dividend for over 50 years, making the stock a Dividend King.
The company manufactures tobacco products including the Marlboro cigarette brand in the U.S., as well as chewing tobacco and cigars.
In response to the long-running trend of declining smoking rates in the U.S., Altria has invested heavily in adjacent categories for growth. Altria purchased a 55% equity stake in Canadian marijuana producer Cronos Group, invested nearly $13 billion for a 35% equity stake in e-vapor manufacturer Juul Labs, and the company owns 10% of Anheuser-Busch InBev (BUD).
Altria will also continue to expand its own heated tobacco products, IQOS and Marlboro HeatSticks, in 2021. Shares currently yield 7.1%.
High Dividend Stock #3: Exxon Mobil (XOM)
Like Chevron, Exxon Mobil is also a Dividend Aristocrat and is a global energy super-major.
In the second quarter, Exxon’s production in the Permian grew 34% over last year’s quarter but total production dipped -2% due to maintenance activity. However, the chemical segment posted record earnings of $2.3 billion thanks to high margins.
In addition, the upstream segment thrived thanks to the rally of the price of oil, which resulted from the deep production cuts of OPEC and Russia and the recovery from the pandemic. As a result, Exxon switched from an adjusted loss of -$0.70 per share in last year’s quarter to an adjusted profit of $1.10 per share.
Exxon Mobil stock yields 6.3%.
High Dividend Stock #4: AT&T Inc. (T)
AT&T is a telecom giant with a 7.4% dividend yield. AT&T is a telecommunications giant, as its core Communications segment provides mobile, broadband and video to 100 million U.S. consumers and 3 million businesses.
In the 2021 second quarter, AT&T generated 7% growth in revenue and adjusted earnings-per-share.
AT&T has announced a deal to combine WarnerMedia with Discovery, Inc. (DISCA) to create a new global entertainment company. AT&T will receive $43 billion in a combination of cash, securities and retention of debt.
We believe these various deals with allow AT&T to simplify its operations, become more efficient, and return to its core focus on telecom services such as 5G rollout.
High Dividend Stock #5: Enterprise Products Partners LP (EPD)
Enterprise Products Partners is a premier MLP with a huge network of assets that includes 50,000 miles of natural gas, natural gas liquids, crude oil, and refined products pipelines. It also has storage capacity of more than 250 million barrels.
In the 2021 second quarter, distributable cash flow covered the distribution by 1.6x. Additionally, volumes experienced 5% growth year-over-year.
Enterprise Products Partners is one of the safest midstream MLPs. It has credit ratings of BBB+ from Standard & Poor’s and Baa1 from Moody’s, and a modest leverage ratio of 3.24x in the trailing 12 months.
The company has increased its distribution to unitholders for 22 consecutive years. Enterprise Products is a blue-chip stock with an 8.1% yield.
High Dividend Stock #6: MPLX LP (MPLX)
MPLX, LP is a Master Limited Partnership that was formed by the Marathon Petroleum Corporation (MPC) in 2012. The business operates in two segments: Logistics and Storage – which relates to crude oil and refined petroleum products – and Gathering and Processing – which relates to natural gas and natural gas liquids (NGLs).
In the 2021 second quarter, adjusted EBITDA rose 12% while distributable cash flow increased 22%. The company is also a rare MLP in that it has an active buyback program in place; MPLX repurchased $155 million of its own units in the second quarter.
MPLX units currently yields over 9%. Distribution coverage was a very healthy 1.73x compared to 1.39x in the second quarter of 2020.
High Dividend Stock #7: British American Tobacco (BTI)
British American Tobacco is one of the world’s largest tobacco companies. British American Tobacco owns many tobacco brands, including Kool, Benson & Hedges, Dunhill, Kent, and Lucky Strike.
In the 2021 first half, BTI’s adjusted revenue and adjusted earnings-per-share increased 8.1% and 6.1%, respectively. Combustible product revenue increased 5.8%, while growth in the New Categories segment (which includes vapor, heated tobacco and modern oral products) increased 50% in constant currencies.
For the full year, BTI expects full-year constant-currency revenue growth above 5% along with mid-single-digit adjusted EPS growth, due largely to growth in New Categories. This should help protect the dividend, which yields nearly 8%.
High Dividend Stock #8: W.P. Carey (WPC)
W.P. Carey is a commercial REIT that operates two segments: real estate ownership and investment management. The REIT operates more than 1,200 single tenant properties on a net lease basis, across the US and Northern and Western Europe. Its asset management business has AUM of approximately $2.8 billion.
In the 2021 second quarter, total revenue increased 10% to $320 million. Adjusted EPS increased 11% to $1.27. The company also narrowed its full-year guidance, now expecting adjusted FFO-per-share in a range of $4.94 to $5.02 for the full year.
WPC stock yields 5.4%, and the company has increased its dividend every year since 1998.
High Dividend Stock #9: Magellan Midstream Partners LP (MMP)
Magellan Midstream is an MLP with the longest pipeline system of refined products, which is linked to nearly half of the total U.S. refining capacity. MMP has a fee-based model as only ~10% of its operating income depends on commodity prices.
Distributable cash increased 28% last quarter. MMP has more than $500 million of potential growth projects under consideration. This should secure the distribution, which currently yields 8.5%.
MMP also has strong coverage with a DCF coverage ratio of 1.17x expected for 2021, and a solid balance sheet with an investment-grade credit rating of BBB+ from Standard & Poor’s, and a debt-to-EBITDA ratio of 3.75x at of the end of the 2021 first quarter.
High Dividend Stock #10: Universal Corporation (UVV)
Universal Corporation is the world’s largest leaf tobacco exporter and importer. It is the wholesale purchaser and processor of tobacco that operates between farms and the companies that manufacture cigarettes, pipe tobacco, and cigars.
In the most recent fiscal quarter, revenue declined 2% due to lower tobacco volumes but adjusted EPS jumped 36%. Full-year adjusted EPS was $4.25.
The company is shifting its business model to include processing of produce to diversify. Universal acquired FruitSmart, an independent specialty fruit and vegetable ingredient processor. It also acquired Silva International, a dehydrated vegetable, fruit, and herb processing company.
Universal Corporation is a member of the exclusive Dividend Kings list due to its 50 years of annual dividend increases. Shares currently yield 6.2%.
High Dividend Stock #11: Omega Healthcare Investors (OHI)
Omega Healthcare Investors is one of the premier skilled nursing focused healthcare REITs. It also generates about 20% of its annual revenue from senior housing developments. Its current portfolio includes over 950 properties spread across 70 operaters in over 40 states and the U.K.
OHI is a major beneficiary of the aging U.S. population, a huge trend that will result in higher demand for healthcare facilities moving forward.
OHI recently reported second-quarter results which showed resilience in the face of the coronavirus pandemic. Adjusted FFO-per-share of $0.85 increased 4.9% year-over-year. Omega collected over 99% of contractual rent and mortgage payments in the quarter.
Shares currently yield 7.8%.
High Dividend Stock #12: Sunoco LP (SUN)
Sunoco is an MLP currently yielding over 9%. Sunoco is a Master Limited Partnership that distributes fuel products through its wholesale and retail business units. The wholesale unit purchases fuel products from refiners and sells those products to both its own and independently-owned dealers.
Sunoco is the largest fuel distributor in the U.S, but also operates a small number of retail stores, and a terminal facility in Hawaii.
In the 2021 second quarter, net income of $166 million increased 5.7% year-over-year while adjusted EBITDA increased 10.4%. Gallons of fuel sold rose 28% year-over-year.
Sunoco had a distribution coverage ratio of 1.67x in the most recent quarter, and 1.41x in the trailing four quarters.
High Dividend Stock #13: Enbridge Inc. (ENB)
Enbridge is a midstream oil and gas company headquartered in Canada and operates in four segments: Liquids Pipelines, Gas Transmission, Gas Distribution and Green Power. The company transports approximately 25% of North America’s crude oil and 20% of the natural gas consumed in the U.S.
Enbridge has grown its dividend (in CAD) for 26 consecutive years, at a 10% average annual rate.
Revenue soared 47% in the 2021 second quarter due to higher commodity prices primarily. Adjusted EBITDA of CAD$3.3 billion was flat for the quarter. Distributable cash flows totaled CAD$2.5 billion, which equates to US$2.0 billion, or US$0.98 on a per-share basis, which was up 3% year over year.
High Dividend Stock #14: Main Street Corporation (MAIN)
Main Street is a Business Development Company, or BDC. It is especially appealing for income investors as it has a 5.9% yield and it is also a monthly dividend stock.
The company operates as a debt and equity investor for lower middle market companies (those with $10-$150 million of annual revenues) seeking to transform their capital structures. The BDC has the capability to invest in both debt and equity.
Main Street Capital Corporation also invests in the private debt of middle market companies and has an asset management advisory business
Main Street has never reduced its monthly dividend payout since its 2007 IPO, and has raised the dividend by over 80% since it went public. Main Street has paid cumulative dividends exceeding $31 per share since its initial public offering.
High Dividend Stock #15: PPL Corp (PPL)
Pennsylvania Power & Light Company, or PPL, owns and distributes power to more than 10 million people in the U.S and the U.K.
PPL is the parent company of seven regulated utility companies and provides electricity to customers in Pennsylvania, Kentucky, Virginia and Tennessee. PPL also delivers natural gas to customers in Kentucky. About 7.8 million of the company’s customers are located in the U.K.
On 6/14/2021, PPL closed the previously announced sale of its U.K. business to National Grid plc (NGG) for ~$10.7 billion. The company expects to repurchase up to $3 billion worth of shares, including $500 million by the end of this year. In a separate transaction, PPL will acquire the Narragansett Electric Company from a subsidiary of National Grid for $3.8 billion. This transaction should close in March of 2022.
PPL stock yields 5.7%.
High Dividend Stock #16: B&G Foods (BGS)
B&G Foods is a notable outlier among consumer staples stocks, as it has a 6.4% dividend yield which towers above its peer group. It is a consumer staples company with operations in the U.S., Canada and Puerto Rico. Some of the company’s well-known brands include Green Giant, Cream of Wheat, Cary’s, Ortega, Mrs. Dash and Maple Grove Farms, with 50+ brands in total.
On December 1st, 2020, B&G Foods completed the acquisition of Crisco.
The company’s product portfolio focuses on shelf-stable, frozen and snack brands. In the most recent quarter, the company recorded revenue of $464.4 million, which was a -9.4% decrease compared to Q2 2020, as the company lapped strong results from pantry-stocking at the beginning of the COVID-19 pandemic.
High Dividend Stock #17: Canadian Utilities Ltd. (CDUAF)
Canadian Utilities is a utility with ~$20 billion in assets. The company is a diversified global energy infrastructure corporation delivering solutions in Electricity, Pipelines & Liquid, and Retail Energy, with the Utility segment making up the bulk of earnings.
Canadian Utilities has increased its dividend for 49 years (in its home currency), which according to the company is the longest track record of annual dividend increases for any publicly traded company in Canada.
Canadian Utilities’ competitive advantage lies in the moat of being a regulated utility. Due to the barriers to entry, regulated utilities enjoy an oligopolistic market with little competition threat. Despite multiple recessions, the company has withstood every one of them while raising its dividend.
Shares currently yield just over 5%.
High Dividend Stock #18: Iron Mountain (IRM)
Iron Mountain is a storage and information management REIT. Its services include record management, destruction, fulfillment services, data protection and recovery, server and computer backup services, and safeguarding of electronic and physical media.
Management updated and increased its guidance for this year’s adjusted FFO-per-share to a range of $3.28 to $3.45, which would mean a meaningful improvement versus the AFFO-per-share that the company generated in 2020.
Iron Mountain’s focus on secure data storage is a competitive advantage. The trust is active in a range of geographic markets across the US and internationally, and plans to expand its international operations further.
Iron Mountain currently yields 5.5%.
High Dividend Stock #19: SL Green (SLG)
SL Green is a commercial REIT. It is Manhattan’s largest office landlord, and currently has an interest in 77 buildings totaling 35 million square feet.
The current climate is difficult for SLG as it has been significantly impacted by the coronavirus pandemic, but there are signs of recovery emerging when it comes to Manhattan office and retail real estate.
SLG benefits from reliable growth in rental rates in one of the most popular commercial areas in the world, Manhattan. The REIT pursues growth by acquiring attractive properties and raising rental rates in its existing properties.
It also signs multi-year contracts (7-15 years) with its tenants in order to secure reliable cash flows. Shares currently yield 5.1%.
1. Why are high-dividend stocks attractive for retirees?
Investors such as retirees may have a need for higher levels of investment income from their portfolios. For this reason, many income investors prefer to buy high dividend stocks with 5%+ yields, as this provides them with suitable income that they can use to pay for everyday expenses.
2. Are there any risks with high dividend stocks?
All stocks have risks, and high dividend stocks are no different. Specifically, investors must be confident that the high dividend payout can be sustained by the underlying business, with sufficient profits and cash flow.
3. What are the popular market sectors for high yields?
While high dividend yields can be found in any sector, they are most prevalent among energy stocks, telecom stocks, tobacco stocks, utilities, and Real Estate Investment Trusts (also called REITs).