Sure Dividend

Updated on September 10th, 2019 by Bob Ciura

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 between 5% and 10%, 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.

All stocks in this list have dividend yields above 6%, making them highly appealing in an environment of falling interest rates.

In other words, these are relatively safe, high yield income stocks for you to consider adding to your retirement or pre-retirement portfolio.

You can download your full list of all 300+ securities with 5%+ yields below to save for future reference.

You can also see these 300+ securities in the table below.

Table Of Contents

The 10 highest-yielding securities with Dividend Risk scores of C or better are listed in order by dividend yield, from lowest to highest.

• Enbridge Inc. (ENB)
• Gladstone Commercial Corp. (GOOD)
• Inter Pipeline Ltd. (IPPLF)
• British American Tobacco (BTI)
• Altria Group (MO)
• Micro Focus International (MFGP)
• Energy Transfer LP (ET)
• Gladstone Capital (GLAD)
• Tanger Factory Outlets (SKT)
• Imperial Brands plc (IMBBY)

10. Enbridge Inc. (ENB)

• Dividend Yield: 6.5%

Enbridge is an oil & gas company that operates the following segments: Liquids Pipelines, Gas Distributions, Energy Services, Gas Transmission & Midstream, and Green Power & Transmission. Enbridge made a major $28 billion acquisition of Spectra Energy in 2016 and currently trades with a market capitalization of $70 billion.

Enbridge operates almost entirely under the take-or-pay contract model. It also has a strong business model with steady cash flow and growth.

Source: Investor Presentation

Enbridge was founded in 1949 and is headquartered in Calgary, Canada. Enbridge reported its second-quarter earnings results on August 2nd. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 1.3% from the same quarter last year, while distributable cash flow (DCF) increased 24% year-over-year.

The company managed to grow its profits, as well as its cash flows substantially versus the previous year’s quarter. Enbridge’s newly built assets produce higher profits and cash flows per dollar of revenues than the older, non-core assets that Enbridge sold in order to finance its growth projects.

Along with quarterly earnings, Enbridge announced it had secured $2 billion of new growth projects across the utilities and renewable power businesses last quarter.

Enbridge maintained its guidance of distributable cash flows of ~CAD$4.30-$4.60 for 2019. At current exchange rates, this equates to roughly US$3.27-$3.50 for the year. With a current annualized dividend of approximately US$2.24 for 2019, the company is likely to maintain a dividend payout ratio of 66% this year.

Enbridge essentially will pay out roughly two-thirds of its DCF this year as a dividend, which represents a comfortable payout ratio and a secure dividend.

At the present rate, Enbridge’s dividend represents a current yield of 6.5%, a very attractive yield for income investors. On top of that Enbridge forecasts that its growth investments will allow for distributable cash flow growth of 5% to 7% beyond 2020.

9. Gladstone Commercial Corp. (GOOD)

• Dividend Yield: 6.6%

Gladstone Commercial Corporation is a real estate investment trust, or REIT, that specializes in single-tenant and anchored multi-tenant net leased industrial and office properties across the U.S.

The trust targets primary and secondary markets that possess favorable economic growth trends, growing populations, strong employment, and robust growth trends.

The trust’s stated goal is to pay shareholders monthly distributions, which it has done for more than 10 consecutive years. Gladstone owns over 100 properties in 24 states that are leased to 99 unique tenants. It had total assets of $970 million as of June 30th.

Source: Investor Presentation

On July 30th, Gladstone reported second-quarter financial results. Total operating revenue increased 0.2% from the previous quarter, while diluted FFO-per-share increased 0.8%. FFO growth was primarily due to acquisitions completed in the 2019 first quarter.

Gladstone has a high dividend yield above 7%, which is highly attractive for income investors. Gladstone has generated steady cash flow to pay its hefty dividend, although the company has not produced much growth over the past several years.

Gladstone’s FFO-per-share has been between $1.50 and $1.60 for most of the past decade as the trust continues to issue new shares and debt to fund acquisitions, but those acquisitions did not provide an economic gain.

That said, the dividend is likely the reason why investors would be interested in buying Gladstone stock, and from that perspective investors should view the shares more favorably. Gladstone pays a monthly dividend of $0.125 per share, for an annualized payout of $1.50 per share. The distribution has also been flat at $1.50 for the past 10 years as the trust has struggled to grow FFO-per-share, although the dividend (yielding 6.6%) remains covered by FFO.

8. Inter Pipeline Ltd. (IPPLF)

• Dividend Yield: 6.8%

Inter Pipeline is an energy infrastructure company, based in Canada. Its assets transport, process, and store energy products largely in Western Canada, and at a much smaller scale in Europe.

Source: Investor Presentation

Inter Pipeline has paid a cash distribution since 1997, and it has paid an increasing distribution for 10 consecutive years. The stock trades on the Toronto Stock Exchange with the ticker TSX:IPL. It also trades over-the-counter in the U.S. under the ticker IPPLF.

Inter Pipeline operates in four segments. The company estimates 2019 EBITDA diversification as follows: 54% Oil Sands Transportation, 24% Natural Gas Liquids Processing, 12% Conventional Oil Pipelines, and 10% Bulk Liquid Storage.

Inter Pipeline reported its second-quarter results on August 8, 2019. In Q2, Inter Pipeline generated revenue of $642 million, up 2% versus the same period a year ago. Funds from operations (FFO) fell 8% to $240 million and was down 13% to $0.59 on a per-share basis. Pipeline volumes (including Oil Sands Transportation and Conventional Oil Pipelines) fell 3%, natural gas liquids processing volumes increased 18%, and bulk liquid storage declined about 1% to 83% capacity. FFO for NGL processing fell 29% year over year and was the biggest drag on FFO.

For the quarter, growth capital spending roughly doubled to $364 million as the company continued its multi-year investment in the Heartland Petrochemical Complex, which is scheduled to complete by late 2021, for a total investment of $3.5 billion.

In July, Inter Pipeline completed the Kirby North Connection project, which is underpinned by a long-term take-or-pay agreement with Canadian Natural Resources (CNQ). It invested $110 million in the project ahead of schedule and under budget. In August, it announced a $100 million conventional pipeline project to connect its Bow River and Central Alberta pipeline systems. This project is expected to complete in the first half of 2020.

With a 2019 projected dividend payout ratio of 71%, Inter Pipeline’s dividend appears to be safe. The company’s strong credit rating of BBB+ further helps boost its dividend safety.

7. British American Tobacco (BTI)

• Dividend Yield: 7.1%

British American Tobacco is a consumer staples company, operating in tobacco products. The company is based in the United Kingdom. With a market capitalization of $82 billion, it is one of the largest tobacco companies in the world. It has a large portfolio of leading brands, including Kool, Benson & Hedges, Dunhill, Kent, and Lucky Strike.

As a tobacco company, British American Tobacco generates strong cash flow and operates a recession-resistant business. These qualities allow it to distribute a consistently high dividend payout to investors each year. In 2018, British American Tobacco grew revenue by over 25%, thanks in large part to the Reynolds American Tobacco acquisition. On an adjusted basis, revenue increased 3.5% in constant currency last year, while adjusted diluted EPS increased 12%.

The company expects 2019 to be another growth year. British American Tobacco reported its first half pre-close trading update on June 12. For 2019, British American Tobacco expects currency-neutral revenue growth of 3% to 5%. Despite the continuing headwind of falling smoking rates, expected to reduce global volumes by 3.5%, the company plans to offset this with price increases.

It also has a wide range of new products that are expected to fuel its future growth. The company expects its new products category to generate 30% to 50% revenue growth for the current year. New products are expected to lead the company to a 3%-5% annual revenue growth rate over the next five years.

Source: Investor Presentation

British American Tobacco is a strong dividend stock. Based on its past four quarterly dividend payments of $2.53 per share, the stock offers a high dividend yield of 7.1% right now. The company maintains a dividend payout ratio in a range of 55%-75%. With a dividend ratio below 75% projected for 2019, British American Tobacco’s dividend appears to be secure, and very attractive for income investors.

6. Altria Group Inc. (MO)

• Dividend Yield: 7.7%

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

In late July, Altria reported strong second-quarter earnings. Revenue increased 5% year-over-year to $6.6 billion, beating expectations by $110 million. Revenue net of excise taxes saw a 6.4% increase in Q2. Adjusted earnings-per-share came in at $1.10, which met expectations, and represented an 8.9% gain over the year-ago period.

Adjusted earnings-per-share is guided for $4.15 to $4.27 for this year, in line with prior guidance, and a 4% to 7% growth rate from last year. Altria said it was on track to achieve $575 million in annual cost savings this year as it combats lower smoking rates in its markets. The company also bought back $195 million of its own stock in Q2 and added a new $1 billion authorization that is good for a year, replacing the now-expired prior program

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. Altria expects cigarette volumes will continue to decline at a 4% to 6% annual rate over the next five years.

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.

Source: 2019 CAGNY Presentation

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.

In the meantime, Altria reaffirmed its guidance for 2019 full-year adjusted diluted EPS to be in a range of $4.15 to $4.27, which would be 4% to 7% growth from 2018.

The video below examines Altria’s dividend safety in detail following its most recent quarterly results.

Altria receives top marks in terms of safety, due to its 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.

5. Micro Focus International (MFGP)

• Dividend Yield: 8.6%

Micro Focus International’s high dividend yield is the result of its plunging share price over the course of 2019. Indeed, shares of Micro Focus have declined 36% year-to-date. Still, the company receives a strong dividend risk score in the Sure Analysis Research Database.

Micro Focus International is a global enterprise software corporation. The company’s products include IT infrastructure and enterprise applications. Micro Focus International’s operating segments include Security, IT Operations Management, Application Delivery Management, Information Management & Governance, and Application Modernization & Connectivity. Micro Focus is based in the U.K. The ADRs have traded on the New York Stock Exchange since 2017.

On 7/9/2019, Micro Focus International reported financial results for the first half of 2019. Adjusted earnings-per-share from continuing operations increased 8.4% to $0.86. Revenue declined 5.3% to $1.7 billion, which was in-line with what the company had anticipated. Adjusted EBITDA increased 1.8% to $662.3 million. EBITDA margins improved 280 bps to 40% for the first half of the year. Free cash flow doubled to $430 million.

The company also continued its deleveraging efforts in the most recent quarter.

Source: Earnings Slides

In late August, Micro Focus International adjusted its full-year guidance. The company announced it now expects a revenue decline of 6% to 8% for the full year, compared with previous expectations of a 4% to 6% decline. The company attributed the weaker outlook to a deteriorating macro-economic outlook, in which cautious customers are delaying orders.

Still, Micro Focus International has a positive long-term growth outlook. It has an established presence in high demand technology platforms, including artificial intelligence, IT management, security, and data analytics. Also, as Micro Focus noted in its most recent interim financial release, 70% of company revenue is now recurring, which provides it with the ability to invest recurring cash flows into growth opportunities.

Micro Focus International pays a semi-annual dividend. Its last two dividend payments totaled 91.88 pence, equal to roughly US$1.14 at today’s exchange rates. This results in a current dividend yield of 8.6%.

The stock has a projected dividend payout ratio below 50% for 2019, implying that the dividend payout is sustainable.

4. Energy Transfer LP (ET)

• Dividend Yield: 8.8%

Energy Transfer is a midstream oil and gas Master Limited Partnership, or MLP. Energy Transfer’s business model is storage and transportation of oil and gas. Its assets have total gathering capacity of nearly 13 million Btu/day of gas, and a transportation capacity of 22 million Btu/day of natural gas and over 4 million barrels per day of oil.

Energy Transfer’s diversified and fee-based assets provide the company with steady cash flow, even when oil and gas prices decline. As a midstream operator, Energy Transfer’s cash flow relies heavily upon volumes, and less so on commodity prices.

Source: Investor Presentation

ET reported 2019 second-quarter results on August 8th. In addition to distribution coverage reaching 2x for the second straight quarter, the company reported a record $2.82 billion of adjusted EBITDA and $1.6 billion of distributable cash flow to partners, backed by significant growth in four of its five core businesses, with record operating performance achieved in the natural gas liquids and refined products segment.

Looking ahead, the partnership expects to reach its leverage targets within the next few quarters and will then consider growing the distribution, as well as buying back units with its significant amount of excess distributable cash flow.

The company is also making strong progress on several growth projects which should be adding to cash flows in the coming quarters and years. For example, Energy Transfer announced it will construct a seventh natural gas liquids (NGL) fractionation facility at Mont Belvieu, Texas, with 150,000 barrels per day of capacity. Fractionator VII is scheduled to be operational in the first quarter of 2020 and is fully subscribed by multiple long-term contracts.

The company is also progressing with plans on a Bakken pipeline optimization project, which is expected to start up in 2020. And, Energy Transfer is currently expanding its Permian Express pipeline system by an additional 120,000 barrels per day. The Permian Express 4 expansion is expected to be in-service by the 2019 third quarter.

The company’s new projects will help secure its attractive distribution, which currently yields nearly 9%. Energy Transfer anticipates a distribution coverage ratio of ~1.7x to ~1.9x for 2019, which is better than average for an MLP.

We believe Energy Transfer is capable of delivering distributable cash flow per share of around $2.20 for 2019. Energy Transfer has a very high yield and a secure payout, which makes it an attractive stock for income investors.

3. Gladstone Capital (GLAD)

• Dividend Yield: 8.9%

Gladstone Capital is a Business Development Corporation, or BDC. It invests primarily in debt and equity instruments. Debt investments consist of senior term loans, senior subordinated loans, and junior subordinated loans, made to small and medium-sized businesses. Loans are typically made in the $7 million to $30 million range, in terms of up to seven years.

It is primarily a debt fund with a target portfolio mix of 90% debt and 10% equity.

On August 5th, the company reported second-quarter earnings results. Total investment income increased 2.9% from the previous quarter, to $12.9 million. Net investment income per share was flat from the previous quarter, at $0.21 per share. This was exactly in-line with the company’s quarterly dividend paid in the three-month period, for a dividend payout ratio of 100% in the most recent quarter.

The company’s portfolio characteristics over the past several quarters can be seen in the video below.

Source: Investor Presentation

As a BDC focused primarily on debt investments, Gladstone’s future NII growth could be restrained by the recent drop in interest rates. The Federal Reserve recently moved to cut the Fed Funds rate for the first time since 2008. Falling interest rates are a headwind for Gladstone, as the company’s rate of return on its debt investments could decline.

Gladstone’s dividend has been at $0.07 monthly, or $0.84 annually, since 2010. Prior to that, the distribution was $1.26 per share, and unsustainable. However, after the cut, Gladstone has been able to pay the dividend reliably and we see the distribution as remaining at $0.84 annually for the foreseeable future.

Gladstone has already appeared to struggle with covering its dividend, as the company reported a 100% payout ratio in the most recent quarter. As a result, while Gladstone’s high yield near 9% is certainly attractive on the surface, it carries a high level of risk as well.

2. Tanger Factory Outlets (SKT)

• Dividend Yield: 9.0%

Tanger Factory Outlet Centers is a Real Estate Investment Trust. Tanger operates, owns, or has an ownership stake in a portfolio of 40 shopping centers. Properties are located in Canada and 20 U.S. states, totaling approximately 14.4 million square feet, leased to over 500 different tenants.

Tanger’s diversified base of high-quality tenants has led to steady growth for many years.

Source: Earnings Slides

Tanger released 2019 second-quarter results on July 31st. It announced adjusted funds from operations (FFO) of $0.57 per share, a decrease of 5% compared with $0.60 per share in the same quarter last year. Tanger grew its occupancy by 60 basis points from the previous quarter, to 96%. Another positive note was that traffic increased 2.3% for the quarter.

Occupancy is expected to decline somewhat in 2019 to a range of 94.0% to 94.5%, due to anticipated store closures by certain tenants. Fortunately, the company has maintained an occupancy rate of 95%+ for 25 consecutive years.

The dip in occupancy this year will negatively impact the company’s AFFO, but Tanger will still be able to cover its hefty dividend payment.

Tanger has a current dividend payout of $1.42 per share annually, which represents a current yield of 8.6%. This is a very high yield and is clearly attractive for income investors. The biggest concern with a yield this high is sustainability. Fortunately, Tanger appears to have a secure dividend payout.

We expect Tanger will generate AFFO-per-share of $2.25 for 2019. With an expected dividend payout of $1.47 per share, Tanger’s expected 2019 dividend payout ratio is 65%. This is a manageable payout ratio, which leaves room for modest annual hikes. For example, in February Tanger raised its dividend by 1.4%.

1. Imperial Brands (IMBBY)

• Dividend Yield: 9.3%

Imperial Brands is a tobacco company that was founded in 1901. Today, it is headquartered in the United Kingdom and has a market capitalization of $25 billion.

The company manufactures and sells a variety of tobacco products, including cigarettes, tobaccos, cigars, rolling papers, and tubes. Some of its core brands include Winston, Davidoff, Gauloises, L&B, Bastos, Fine, Gitanes, Kool, Jade, and many more.

Source: 2019 CAGNY Presentation

Imperial Brands reported first half of fiscal 2019 results on May 8th. Net revenue increased 2.3% mostly due to the core tobacco group. Tobacco revenue grew 2.5% in constant currency as a 6.5% increase in prices offset volume declines. The company increased its cigarette share in the U.S.

Adjusted earnings-per-share declined 1.3% in constant currency as market loss in the e-cigarette category in the U.S. was partially offset by cost cuts. Imperial Brands expects revenue to grow at the upper end of its 1%-4% range for the fiscal year and reiterated its expectation for adjusted earnings-per-share.

Imperial Brands reported a volume decline of 4.5% in the first half of fiscal 2019. Going forward, the company will need to address the long-running trend of declining smoking rates. Imperial Brands’ future growth will be fueled by its next-generation product line, including vapor and heated tobacco products, such as blu.

To help finance its growth investments, the company is launching an aggressive cost reduction program, targeting up to US$2.6 billion in cost savings over the next one to two years. We expect 3% annual earnings growth through 2024. Share buybacks will also help boost EPS growth. The company recently announced a US$250 million share repurchase by the end of fiscal 2019.

Imperial Brands is expected to maintain a dividend payout of $2.45 per share for 2019, which equals an impressive 9.3% dividend yield at the current share price. The company recently announced a revised dividend policy going forward, in which its future dividend growth will vary and depend on the underlying business performance.

Imperial Brands’ dividend appears secure, with a projected payout ratio of 67% for 2019.

Final Thoughts

Interest rates are on the decline once again. After two years of the Federal Reserve raising rates, the central bank announced a recent interest rate reduction, and rates are broadly on the decline once again. Investors might scramble to search for suitable income in a low-rate environment, but these high-yield stocks are still presenting strong yields.

The 10 stocks on this list have high yields above 6%. And importantly, these securities receive have generally have better risk profiles than the average high yield security. Investors should continue to monitor each stock to make sure their fundamentals and growth remain on track, but investors comfortable with owning individual stocks should consider these 10 high yielders.