Updated on April 9th, 2021 by Bob Ciura
Spreadsheet data updated daily
When a person retires, they no longer receive a paycheck from working. While traditional sources of retirement income such as Social Security help investors make up the gap, many could still face an income shortfall in retirement.
This is where high-yield dividend stocks can be of assistance. We have compiled a full downloadable list of stocks yielding above 5%.
You can download your full list of all 100+ securities with 5%+ yields (along with important financial metrics such as dividend yield and payout ratio) by clicking on the link below:
This article examines securities in the Sure Analysis Research Database with:
- Yields of 5% or greater
- Dividend Risk Scores of C or better
Note: We update this article at the beginning of each month so be sure to bookmark this page for next month.
With yields of 5% and greater, these securities all offer high dividends (or distributions). And with Dividend Risk Scores of C or better, they don’t suffer from the usual excessive riskiness of truly high yielding securities. Furthermore, these are large-cap stocks with sufficient size, as well as leadership positions in their respective industries.
In other words, these are relatively safe, high yield income stocks for you to consider adding to your retirement or pre-retirement portfolio.
Table Of Contents
All stocks in this list have dividend yields above 5%, making them highly appealing in an environment of falling interest rates. A maximum of three stocks were allowed for any single market sector to ensure diversification.
The 7 highest-yielding securities with Dividend Risk scores of C or better are listed in order by dividend yield, from lowest to highest.
- High Dividend Stock #7: W.P. Carey (WPC)
- High Dividend Stock #6: National Health Investors (NHI)
- High Dividend Stock #5: Altria Group (MO)
- High Dividend Stock #4: AT&T Inc. (T)
- High Dividend Stock #3: Magellan Midstream Partners LP (MMP)
- High Dividend Stock #2: Sunoco LP (SUN)
- High Dividend Stock #1: MPLX LP (MPLX)
High Dividend Stock #7: W.P. Carey (WPC)
- Dividend Yield: 5.9%
- Dividend Risk Score: C
W.P. Carey is a commercial real estate focused Real Estate Investment Trust, or REIT. These are companies that own real estate properties and lease them to various tenants to generate cash flow. You can see our full REIT list here.
WPC 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.
W.P. Carey has a highly diversified real estate property portfolio across multiple industry groups.
Source: Investor Presentation
W. P. Carey reported its fourth-quarter earnings results on February 12. Revenue totaled $310 million during the quarter, down 1% year-over-year. FFO-per-share declined 6% year-over-year.
W. P. Carey has issued guidance for 2021, forecasting funds from operations in a range of $4.79 to $4.93 on a per-share basis, which would mean an improvement versus 2020 at the midpoint of the guidance range. We expect 3.5% annual FFO-per-share growth going forward.
Growth is fueled by investments in new properties. Since 2012, the REIT invested more than $10 billion into new assets by either purchasing entire REITs or through single-asset/portfolio purchases. Plus, due to the defensive nature of its business and a strong performance during past recessions, we believe that W.P. Carey will navigate the coronavirus crisis.
W.P. Carey has an investment grade credit rating of BBB from Standard & Poor’s. It has a fairly low level of maturities ($768 million) through 2022. It also has a long history of stable dividend growth, having increased its dividend every year since 1998. The most recent increase was a 0.2% raise on March 11th, 2021.
High Dividend Stock #6: National Healthcare Investors (NHI)
- Dividend Yield: 5.9%
- Dividend Risk Score: C
National Health Investors is an REIT focused on healthcare facilities.Some of the healthcare facilities NHI invests in are independent living facilities, senior-living campuses, and medical office buildings.NHI specializes in sale-leaseback, joint-venture, mortgage, and mezzanine financing. National Health Investors has raised its dividend for 19 years. This healthcare facility REIT has a market capitalization of $3.2 billion.
On December 31st, 2020, NHI had investments in 162 senior housing properties, 75 skilled nursing facilities, 3 hospitals, and 2 medical office buildings across 34 states run by 36 operating partners. During 2020, rental income was $307 million and made up 92% of income.
Source: Investor Presentation
On February 22nd, 2021 National Health Investors released fourth quarter and full year 2020 results. Normalized AFFO per diluted common share was $1.30, unchanged from the prior year. The company collected 93.9% of contractual cash due in the quarter. This has improved with 99.4% collected in February.
For 2020, normalized AFFO per diluted common share of $5.29 was a 3.7% increase from the prior year, this despite the COVID-19 pandemic, thereby showing strong resilience to economic downturns. Future growth is likely, as the company deployed $177 million in healthcare real estate investments and $50 million in note investments for total investment activity of $227 million in 2020.
As of January 31st, NHI had $520 million available under its $550 million revolver and $37 million in unrestricted cash. In addition, $465 million was available under the ATM program.
As for many REITs, debt is a concern. Target leverage is set at 4x –5x. In the year 2020, NHI was within its target leverage range at 4.8x, however this is the highest it has been at least in the past 5 years. Fortunately, the payout ratio of 83% in 2020 is considered quite safe by REIT standards. The dividend appears to be well-covered and we expect it will continue to grow.
High Dividend Stock #5: Altria Group Inc. (MO)
- Dividend Yield: 6.9%
- Dividend Risk Score: B
Altria Group is a tobacco products giant. Its core tobacco business holds the flagship Marlboro cigarette brand. Altria also has non-smokable brands Skoal and Copenhagen chewing tobacco, Ste. Michelle wine, and owns a 10% investment stake in global beer giant Anheuser Busch Inbev (BUD).
Related: The Best Tobacco Stocks Now, Ranked In Order
Altria is a legendary dividend stock, because of its impressive history of steady increases. Altria has raised its dividend for 50 consecutive years, placing it on the very exclusive list of Dividend Kings.
On January 28th, Altria reported financial results for the fourth quarter and full year. Revenue (net of excise taxes) of $5.05 billion increased 5.3% year-over-year. Cigarette volumes surprisingly increased 3.1% for the quarter, reversing many quarters of volume declines. Adjusted earnings-per-share declined 2% for the fourth quarter.
For the full year, revenue net of excise taxes increased 5.3% to $20.84 billion, while adjusted earnings-per-share increased 3.6% to $4.36 for 2020. The core smokeable products segment grew operating income by 10% for the year.
Source: Investor Presentation
For 2021, Altria expects adjusted diluted EPS in a range of $4.49 to $4.62, representing a growth rate of 3% to 6% from 2020.
Altria’s key challenge going forward will be to generate growth in an era of falling smoking rates. Consumers are increasingly giving up traditional cigarettes, which on the surface poses an existential threat to tobacco manufacturers.
For this reason, Altria has made significant investments in new categories, highlighted by the $13 billion purchase of a 35% stake in e-vapor giant JUUL. This acquisition gives Altria exposure to a high-growth category that is actively contributing to the decline in traditional cigarettes. The long-term future is cloudy for cigarette manufacturers such as Altria, which is why the company has invested heavily in adjacent categories to fuel its future growth.
Altria also recently announced a $1.8 billion investment in Canadian marijuana producer Cronos Group. Altria purchased a 45% equity stake in the company, as well as a warrant to acquire an additional 10% ownership interest in Cronos Group at a price of C$19.00 per share, exercisable over four years from the closing date.
Altria enjoys significant competitive advantages. It operates in a highly regulated industry, which significantly reduces the threat of new competitors entering the market. And, Altria’s products enjoy tremendous brand loyalty, as Marlboro controls more than 40% of U.S. retail market share.
Altria is also highly resistant to recessions. Cigarette and alcohol sales fare very well during recessions, which keeps Altria’s strong profitability and dividend growth intact. With a target dividend payout of 80%, Altria’s dividend is secure.
High Dividend Stock #4: AT&T Inc. (T)
- Dividend Yield: 6.9%
- Dividend Risk Score: B
AT&T is the largest communications company in the world, operating in four distinct business units: AT&T Communications (providing mobile, broadband and video to 100 million U.S. consumers and 3 million businesses), WarnerMedia (including Turner, HBO and Warner Bros.), AT&T Latin America (offering pay-TV and wireless service to 11 countries) and Xandr (providing advertising).
On January 27th, 2021 AT&T reported Q4 and full-year 2020 results. For the quarter, the company generated $45.7 billion in revenue, down from $46.8 billion in Q4 2019, as the COVID-19 pandemic continues to weigh on results. Reported net income equaled a loss of -$13.9 billion or -$1.95 per share due to non-cash charges. On an adjusted basis, earnings-per-share equaled $0.75 compared to $0.89 in the year-ago quarter. The $0.75 figure does not adjust for -$0.08 in COVID-19 impacts.
Source: Investor Presentation
For the year AT&T generated $171.8 billion in revenue, down from $181.2 billion in 2019. The pandemic impacted revenue across all businesses particularly, WarnerMedia and domestic wireless service revenues. On an adjusted basis earnings-per-share equaled $3.18 for 2020, versus $3.57 in 2019. This figure does not adjust for -$0.43 in COVID-19 impacts. AT&T ended the quarter with a net debt-to-EBITDA ratio of 2.70x.
AT&T also provided a full year 2021 outlook. For this year, the company anticipates 1% revenue growth, adjusted earnings-per-share to be stable with 2020 and a dividend payout ratio in the high-50% range.
On February 25th, AT&T announced it will spin off multiple assets into a separate company called New DIRECTV that will own and operate the DirecTV satellite TV business, as well as AT&T TV and U-verse video. AT&T will own 70% of the company, and will sell 30% ownership to TPG for approximately nearly $8 billion, which will be used to pay down debt.
Two individual growth catalysts for AT&T are 5G rollout and its recently-launched HBO Max service. AT&T continues to expand 5G to more cities around the country. AT&T’s 5G service now covers more than 120 million people.
On May 27th, AT&T launched streaming platform HBO Max. At the end of 2020, AT&T had 41 million combined HBO Max and HBO subscribers in the United States. The new platform is a critical step for AT&T to keep up in the streaming wars..
AT&T is optimistic about generating reasonable growth and the payout ratio had been falling, resulting in excess funds to divert toward paying down debt. With a long history of increasing dividends each year (AT&T is a Dividend Aristocrat) we expect the company’s dividend payout to remain secure, even in a recession.
High Dividend Stock #3: Magellan Midstream Partners LP (MMP)
- Dividend Yield: 9.1%
- Dividend Risk Score: C
Magellan Midstream Partners is a Master Limited Partnership with the longest pipeline system of refined products, which is linked to nearly half of the total U.S. refining capacity. This segment generates ~65% of its total operating income while the transportation and storage of crude oil generates ~35% of its operating income. MMP has a fee-based model; only ~10% of its operating income depends on commodity prices.
Source: Investor Presentation
In early February, MMP reported (2/2/21) financial results for the fourth quarter of fiscal 2020. The demand for refined products remained suppressed due to the pandemic, and thus distributable cash flow fell 25% year-over-year. For the year, distributable cash flow per share declined 18%, from $5.67 to $4.66, resulting in a distribution coverage ratio of 1.13x.
MMP has promising growth prospects ahead, as it has several growth projects under way. The company invested $1.0 billion in these projects in 2019, and $355 million in 2020. It also has more than $500 million of potential growth projects under consideration.
We expect DCF-per-unit of $4.70 for 2021, which would sufficiently cover the distribution. MMP’s fee-based model (~85% of operating margin is comprised of fee-based activities) help insulate the company’s cash flows from volatile swings in commodity prices.
MMP also has a relatively healthy balance sheet for an MLP, with an investment-grade credit rating of BBB+ from Standard & Poor’s, and a debt-to-EBITDA ratio of 3.2x as of September 30th, 2020.
High Dividend Stock #2: Sunoco LP (SUN)
- Dividend Yield: 10.0%
- Dividend Risk Score: C
Sunoco is a Master Limited Partnership that distributes fuel products through its wholesale and retail business units. You can see our entire MLP list here.
Sunoco’s wholesale unit purchases fuel products from refiners and sells those products to both its own and independently-owned dealers. The retail unit operates stores where fuel products as well as other products such as convenience products and food are sold to customers.
Sunoco was founded in 2012, is headquartered in Dallas, and currently trades with a market capitalization of ~$2.6 billion.
Source: Investor Presentation
Sunoco reported its fourth-quarter earnings results on February 17. Fourth-quarter revenue of $2.6 billion dropped 38% year-over-year. Fuel prices were down compared to the previous year’s quarter, which was one factor for Sunoco’s declining revenues. Sunoco reported that its adjusted EBITDA was down only 6% for the quarter, while distributable cash flow of $97 million declined 20%, but DCF on a per-unit basis still handily covered the quarterly distribution. According to the company, cash coverage was 1.13x in the fourth quarter and 1.5x for 2020.
Sunoco was founded in 2012, so there is no available data on how the company performed during the Great Recession of 2008-2009. We would expect the company to struggle during a recession. The energy sector as a whole is not a recession-resistant business, as recessions are often accompanied by lower demand for oil and gas, and declining commodity prices.
Going forward, Sunoco can generate growth through multiple factors. Following the sale of a large amount of its convenience stores, Sunoco is now more dependent on its fuel wholesale business, where it profits from significant scale and revenue consistency. In the fuel wholesale industry, scale is important, as increased scale allows for higher margins and a better negotiating position with both suppliers and customers.
High Dividend Stock #1: MPLX LP (MPLX)
- Dividend Yield: 10.3%
- Dividend Risk Score: C
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 2019, MPLX acquired Andeavor Logistics LP.
The company’s Logistics and Storage segment has pipeline capacity of 4.7 million barrels per day.
Source: Investor Presentation
On February 2nd, 2020 MPLX released Q4 and full year 2020 results. For the fourth quarter, distributable cash flow equaled $1.155 billion (~$1.11 per unit) versus $1.045 billion (~$0.99 per unit) in Q4 2019. For the year, MPLX posted distributable cash flow of $4.327 billion, or $4.12 per unit, compared to $4.52 per unit in 2019.
MPLX ended the year with a consolidated debt to adjusted EBITDA ratio of 3.9x (down from 4.1x in 2019). Distribution coverage equaled 1.46x compared to 1.51x in 2019.
MPLX has positive growth prospects, due primarily to its projects currently under development. Pipelines tend to have a stronghold in terms of extracting economic rents, and natural gas is cleaner than coal.
In the last decade, natural gas has overtaken coal as the leading source of electricity generation in the U.S. Building pipelines requires years of approvals and ongoing regulation. MPLX in particular has a strong position in the Marcellus / Utica region, with long-term contracts from Marathon.
MPLX is an attractive stock for yield and distribution growth. MPLX has so far maintained its quarterly distribution at a rate of $0.6875 per unit, with a forward yield of 10.3%.
Final Thoughts
Interest rates have seriously declined. After two years of the Federal Reserve raising rates, the central bank announced immediate and profound interest rate reductions. Investors might scramble to search for suitable income in a low-rate environment, but these high-yield stocks are still presenting strong income generation ability.
The 7 stocks on this list have high yields above 5%. And importantly, these securities generally have better risk profiles than the average high-yield security. That said, a dividend is never guaranteed, and high-yield stocks are potentially at risk of dividend reductions or suspensions if a recession occurs in the near future. Investors should continue to monitor each stock to make sure their fundamentals and growth remain on track, particularly among stocks with 10%+ dividend yields.