On the hunt for dividend stocks with high yields? If you are, one of the easiest ways to choose is to look at a list of solid high-dividend stocks to add to your portfolio. However, if you want to add to your portfolio, it's worth considering a few things, such as the definition of high-yield dividend stocks and the dangers of pursuing dividend stocks with a too-high return.
We've also put together a list of stocks (over 5%) that you may want to consider adding to your portfolio. Let's take a look.
What Are High-Yield Dividend Stocks?
When we talk about dividend stocks, we're talking about publicly traded companies that regularly share profits with shareholders through regular payments called dividends.
Dividend yield is the percentage of a company's share price that's paid out in dividends annually. High-yield dividend stocks offer a regular payout from your stocks with a reliable high dividend.
Learn more: Are Dividend Stocks Worth It?
The Dangers of Too-High-Yield Dividends
Even though your initial reaction may be to achieve as high of dividends as possible. However, it's worth making sure that you're not investing in a company that will pay you too-high dividends. It might signal financial difficulties for the company, meaning that the current high yield you're receiving might be fleeting. In fact, the company may be trying to offer a dividend instead of putting money back into the company.
It's a good idea to consider a company's true financial health to decide whether a company can indeed continue its dividend payments. You can take a few steps to ensure that you find the right dividends for your needs.
- Consistent growth: You want to ensure long-term profitability with consistent growth on an annual basis and should make the cut. This means you want to look at companies whose earnings growth expectations range from 5% and 15%. Growth that exceeds 15% could start to affect its stock price. You can also take a look at what the stock's dividend history has done in the past. Dividend stocks you want to invest in should have a long track record of consistent dividend increases over a number of years. Learn more: Should You Hold Dividend Stocks Long Term?
- Cash flow: Look for companies with healthy cash flow. Companies need a specific amount of cash flow in order to successfully offer dividends to shareholders.
- Debt: Before you settle on the right type of dividend-paying stocks for you, consider companies that don't have debt. If companies have to spend time whittling away at debt, that means they can't fully focus on dividend payouts.
- Check other sectors: What are other companies in the same sector doing? If one company in the tech sector suddenly starts struggling, for example, all others might follow suit. For example, consider the oil industry, which went down across the board during the early years of the pandemic. It's important to scan the landscape before you commit to a company in a particular sector or industry.
- Calculate the dividend yield: Divide the total dividend per share paid over the course of a year by the price of the stock. For example, let's say a $15 stock pays 50 cents per year in dividends, the dividend yield in this situation is 3%. Calculating dividend yield tells you how much value you can expect. Look for 0% to 5% to be on the safe side, though some offer a 6% dividend yield.
- Dividend payout ratio: A dividend payout ratio considers a company’s earnings and how they are returned to shareholders as dividends. You divide the total dividend paid by the company’s earnings. In other words, if a company offers $3 million in dividends each year and generates $10 million in annual net income, it has a dividend payout ratio of 30%. Make sure, however, that the company isn't cheating itself by money it's not putting back into the company. Look into several other ratios as well, including price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and others to make sure you don't invest in overvalued stocks.
- Dividend growth rate: In theory, as a company’s stock price increases, its dividend payments should grow as well. After all, as a company’s value grows, it’s a sign that it is generating strong revenue and earnings growth, so your cut of those profits should continue on the upward trend.
Consider using a dividend stock screener to narrow down specific dividend stocks to invest in.
11 High-Yield Dividend Stocks
Let's take a look at several high-yield dividend stocks that you may want to add to your portfolio.
The Altria Group Inc., headquartered in Richmond, Virginia, offers a dividend yield of 6.58%. The U.S. company manufactures and sells smokeable and oral tobacco products, including cigarettes under the Marlboro brand, cigars, and pipe tobacco under the Black & Mild brand, and smokeless tobacco products under the Copenhagen, Skoal, Red Seal, and Husky brands as well as oral nicotine pouches. headquartered in Richmond, Virginia.
NatWest Group plc, with a 6.48% dividend yield, is headquartered in Edinburgh, Scotland. NatWest Group provides banking and financial services and products to individuals and commercial customers in the United Kingdom and internationally. It offers accounts, mortgages, personal unsecured lending, personal deposits, and mobile and online banking services. NatWest Group operates approximately 800 branches across the UK and internationally.
The Honda Motor Co. Ltd., headquartered in Tokyo, Japan, offers a 6.43% dividend yield. The company develops and manufactures motorcycles, autos, and other products in Japan, North America, Europe, Asia, and other international locations. It produces motorcycles, off-road vehicles, passenger cars, light trucks, and mini vehicles. The company also offers retail lending and leasing services and wholesale financing services. Honda Motor Co. also produces engines, generators, water pumps, lawnmowers, riding mowers, robotic mowers, brush cutters, tillers, snowblowers, outboard marine engines, and more.
Medical Properties Trust Inc., with a 6.20% dividend yield, is a real estate investment trust (REIT) formed in 2003 to acquire and develop net-leased hospital facilities. The company is the world's largest owners of hospitals, including 431 facilities and 43,000 beds in nine countries and four continents. The company finances acquisitions and recapitalizations.
British American Tobacco plc, headquartered in London, the United Kingdom, offers a 5.99% dividend yield. The company manufactures tobacco and nicotine products worldwide. The company produces vapor, tobacco heating, snus, and snuff under the Kent, Dunhill, Lucky Strike, Pall Mall, Rothmans, Camel, Newport, Natural American Spirit, and other brands.
The Vodafone Group Public Limited Company, headquartered in Newbury, England, offers a 5.91% dividend yield, with telecommunication services in Europe and internationally, including mobile services such as call, text, fixed-line, and other services under the GigaKombi and Vodafone One brands. The company also offers Internet of Things (IoT) services, smart metering, insurance, cloud, security services, and more. Vodafone Group Public Limited Company has a strategic partnership with Open Fiber.
Gaming and Leisure Properties Inc., which offers a 5.87% yield, is a REIT that acquires and finances real estate property to be leased to gaming operators. Its portfolio consists of 55 gaming and related facilities through a diverse asset portfolio.
Simon Property Group Inc. is a REIT headquartered in Indianapolis, Indiana, has a current dividend yield of 5.82%. Simon Property Group invests in shopping malls, outlet centers, dining, community/lifestyle centers, entertainment and mixed-use destinations in properties across North America, Europe, and Asia.
Cheniere Energy Partners L.P., headquartered in Houston, Texas, offers a 5.76% dividend yield. The company owns and operates a natural gas liquefaction and export facility in Louisiana. It owns LNG storage tanks, two marine berths and vaporizers with regasification capacity as well as a 94-mile pipeline that interconnects the Sabine Pass LNG terminal with various interstate pipelines.
Enbridge Inc., an energy infrastructure company, headquartered in Calgary, Canada, has a dividend yield of 5.75%. The company operates pipelines and related terminals to transport crude oil and other liquid hydrocarbons in Canada and the United States. Natural gas pipelines, gathering and processing facilities, natural gas utility operations, natural gas distribution and energy transportation activities. The company operates power generating assets like wind, solar, geothermal, and waste heat recovery facilities as well as energy marketing services to refiners, producers, and other customers.
PetroChina Company Limited offers a dividend yield of 5.72% and is headquartered in Beijing, the People's Republic of China. The company creates petroleum-related products, services, and activities in China and internationally, including the exploration, development, production, and marketing of crude oil and natural gas. The company refines crude oil and petroleum products and produces and markets primary petrochemical products, derivative petrochemical products, and other chemical products. It also transmits natural gas, crude oil, and refined products and sells natural gas. It has natural gas pipelines, crude oil pipelines, and refined product pipelines. The company also explores, develops, and produces oil sands and coalbed methane, trades crude oil and petrochemical products, and utilizes and stores through transportation facilities and related businesses of chemical products.
Look for Dividend Stocks with High Yields
Consider a wide number of stocks before you land on the right ones for you. Consider tapping into the services of investment professionals to make the best possible choices. A fiduciary financial advisor can help you align your investments with the right types of goals.
Consider the Dividend Kings vs. Aristocrats if you're interested in another list of high-performing stocks.