Sure Dividend

Updated on November 9th, 2020 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 200+ 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 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. Furthermore, these stocks are large-caps with 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. Stocks were further screened based on a qualitative assessment of business model strength, competitive advantages, and debt levels. Lastly, a maximum of three stocks were allowed for any single market sector to ensure diversification.

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

• W.P. Carey (WPC)
• People’s United Financial (PBCT)
• Navient Corporation (NAVI)
• Universal Corporation (UVV)
• AT&T Inc. (T)
• British American Tobacco (BTI)
• Altria Group (MO)
• Enterprise Products Partners (EPD)
• Magellan Midstream Partners (MMP)
• Sunoco LP (SUN)

10. W.P. Carey (WPC)

• Dividend Yield: 6.4%

W.P. Carey is a commercial real estate focused 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.

W.P. Carey has a highly diversified real estate property portfolio across multiple various industry groups.

Source: Investor Presentation

W. P. Carey reported its third-quarter earnings results on October 30th. Revenues totaled $300 million, down 2% year-over-year. Funds-from-operation, or FFO, increased 3% on a per-share basis to $1.15 for the quarter. W.P. Carey benefited from 99% rent collection in October, fueling hopes that the worst is behind it.

W. P. Carey also reinstated its guidance for 2020, now forecasting FFO-per-share in a range of $4.65 to $4.75. Importantly, this should be sufficient to fully cover the annualized dividend payout of $4.18 per share.

W. P. Carey generated FFO-per-share growth at a rate of 6% annually between 2009 and 2019, which was a very solid growth rate for a real estate investment trust. The growth rate has slowed down over the years, as W. P. Carey’s FFO-per-share growth rate has averaged just 3% between 2014 and 2018. Still, this is a decent growth rate, and we expect a similar growth rate of 3%-4% annually 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.

9. People’s United Financial (PBCT)

• Dividend Yield: 6.8%

People’s United Financial is a diversified financial services company that provides commercial and retail banking and wealth management services via its network of over 400 branches in the Northeast. It has total assets of $59 billion and trades with a market capitalization of approximately $4.5 billion.

The company has more than doubled its total assets during the last decade thanks to organic growth, geographic expansion, and a series of acquisitions. In the last six years, it has grown its loans and its deposits at a 9% average annual rate.

Source: Investor Presentation

In 2019, People’s United Financial completed the acquisition of United Financial, which will enhance the presence of the company in central Connecticut and western Massachusetts.

Just like all the other banks, People’s United Financial has faced a strong headwind, namely the outbreak of the coronavirus. As a result, all the banks increased their provisions for loan losses. But People’s United performed surprisingly well in the most recent quarter.

In the 2020 third quarter, pre-provision net revenue of $198.9 million increased 4% from the previous quarter, and 15% from the same quarter a year ago. The company’s efficiency ratio of 53.8% rose 300 basis points year-over-year. Provision for credit losses totaled $27.1 million for the quarter, a decrease of $53.7 million from the previous quarter.

Despite the difficult near-term environment, we still expect 4% earnings-per-share growth over the next five years. Growth will be fueled primarily by the recent acquisitions and our expectations for somewhat higher interest rates in the long run, which will enhance People’s net interest margin.

8. Navient Corporation (NAVI)

• Dividend Yield: 6.9%

Navient Corporation is a student loan management and business processing company that sells its services to clients from industries such as education & healthcare, and also provides business processing solutions to government clients at federal, state, and local levels. Navient operates through the Federal Education Loans segment, the Consumer Lending segment, and the Business Processing segment.

Source: Investor Presentation

Navient Corporation reported its third-quarter earnings results on October 24th. Revenue of $240 million declined 5% year-over-year. Earnings-per-share of $1.03 were strongly above analyst estimates by $0.24 per share. Guidance for 2020 is forecasting earnings-per-share in a range of $2.95 to $3.00, which would be a meaningful increase versus 2019. The current coronavirus crisis is thus not impacting the company to a large degree

Navient’s loans business, in both the Federal Education Loans segment and in the Consumer Lending segment, is under pressure. Declining loan balances are a headwind for the company’s profits, although rising interest margins have a positive impact on Navient’s interest margins. Navient forecasts that the loan business will remain a huge source of cash flows over the coming years.

Navient will use some of its cash flows to retire debt –the company has paid down unsecured debt totaling more than $2 billion during 2019. Management plans to return a significant portion of that cash to the company’s shareholders via dividends and share repurchases. Buybacks will help boost future EPS growth.

Navient has paid a quarterly dividend of $0.16 per share over the last few years. The annual payout of $0.64 is equal to roughly one-fifth of the company’s net profits, which results in a quite low dividend payout ratio. Investors do not have much visibility on Navient’s performance during future recessions, though, as shares were not publicly traded during the last financial crisis. It is possible that Navient would be under pressure during future downturns, which is why we do not rate the dividend as extremely safe.

That said, the current dividend payout is covered by earnings, and Navient’s fundamentals have held up so far in 2020. The high yield near 7% is attractive for income investors willing to accept a higher level of company risk.

7. Universal Corporation (UVV)

• Dividend Yield: 7.6%

Universal Corporation is the world’s largest leaf tobacco exporter and importer. The company is the wholesale purchaser and processor of tobacco that operates between farms and the companies that manufacture cigarettes, pipe tobacco, and cigars.

Source: Investor Presentation

Universal recently increased its dividend for the 50th consecutive year, meaning it now qualifies for the exclusive list of Dividend Kings.

Universal Corporation recently reported its fiscal 2021 second-quarter results. Net income of $0.30 per diluted share, were a significant decline from $1.11 per share in the year-ago quarter.

In fiscal 2020, profits were down due to the impact of lower sales, coupled with some margin pressures on Universal’s operations. However, the company generated adjusted earnings-per-share of $3.49 during fiscal 2020, which allowed it to raise its dividend for the 50th consecutive year.

Still, Universal needs to find avenues for future growth. The company believes it has found an avenue for future growth in the form of acquisitions to diversify its business model. Last year, Universal acquired FruitSmart, an independent specialty fruit and vegetable ingredient processor. FruitSmart supplies a juices, concentrates, blends, purees, fibers, seed and seed powders, and other products to food, beverage and flavor companies around the world.

More recently, on October 1st Universal announced the acquisition of Silva International, a privately-held dehydrated vegetable, fruit, and herb processing company. Silva procures over 60 types of dehydrated vegetables, fruits, and herbs from over 20 countries around the world.

Universal’s profits generated in fiscal 2020 sufficiently covered the forward dividend payout of $3.08 per share. Investors will need to continue monitoring the company’s results to make sure its financial results do not deteriorate further, but for the time being the dividend appears covered.

6. AT&T Inc. (T)

• Dividend Yield: 7.6%

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). The company generates $180+ billion in annual revenue.

In the 2020 third quarter, AT&T generated revenue of $42.3 billion, along with operating cash flow of $12.1 billion. Among the highlights, AT&T recorded more than 5 million total domestic wireless net adds along with over 1 million postpaid net additions. The company’s postpaid churn was an impressive 0.69% for the quarter.

AT&T still expects free cash flow of at least $26 billion for the full year. This will help the company continue to invest in growth, pay dividends to shareholders, and also pay down debt. AT&T’s net debt-to-EBITDA ratio was ~2.66x at the end of the quarter.

Source: Investor Presentation

AT&T is a colossal business, but it is not a fast grower. From 2007 through 2019 AT&T grew earnings-per-share by 2.2% per year. While the company is picking up growth opportunities, notably in its recent acquisitions of DirecTV and Time Warner, we are cognizant of both the premiums paid and the fact that the company’s legacy businesses are steady or declining.

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 and generated 90,000 mobile downloads on its first day. HBO Max is priced at $15 per month and offers subscribers approximately 10,000 hours of programming.

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.

5. British American Tobacco (BTI)

• Dividend Yield: 8.1%

British American Tobacco is among world’s largest tobacco companies, with a market capitalization of $92 billion. British American Tobacco owns many tobacco brands, including Kool, Benson & Hedges, Dunhill, Kent, and Lucky Strike. The company also acquired the remaining 48% stake in Reynolds American Tobacco that it did not already own in July of 2017.

In fiscal 2019, British American Tobacco generated adjusted earnings-per-share of US$4.38, up 9% from the previous year.

British American Tobacco announced first-half results on July 31st. Through the first half of the year, revenue increased 0.8%, while operating profit rose 16.4% from the same quarter a year ago. In addition, a lower tax rate and margin expansion led to 23% growth in diluted earnings-per-share.

The company’s future growth will come primarily from its newer non-combustible product lines, such as Vuse and Vype. These products are seeing strong uptake across multiple markets.

Source: Investor Presentation

Cost savings following the integration of Reynolds American will also be a driver for British American Tobacco’s earnings. Other factors include ongoing organic growth due to rising cigarette prices and the rise of vaping products, and declining interest expenses as long as British American Tobacco is able to lower its debt load due to ongoing debt pay downs.

Interest rates are at all-time lows, especially in Europe, which should also help drive further interest savings as well. We believe that the company will grow its earnings-per-share at a low-single-digit pace going forward.

British American Tobacco has kept its dividend payout ratio in a range of 55%-75% throughout the last decade. Compared to other tobacco stocks, this is not a high payout ratio. Other tobacco companies, such as Altria, pay out ~80% of their profits in the form of dividends. We believe that the dividend is safe for the foreseeable future.

4. Altria Group Inc. (MO)

• Dividend Yield: 9.1%

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.

In late October, Altria reported financial results for the 2020 third quarter. Revenue (net of excise taxes) of $5.7 billion increased 5% year-over-year, and beat analyst estimates by $140 million. Smokeable volumes declined 0.2% for the quarter, much better than the 4% predicted drop. Better-than-expected declines in smokeable volumes helped Altria’s third-quarter performance.

Source: Investor Presentation

On a GAAP basis, Altria reported a loss of -$0.51 per share, as the company took a non-cash pre-tax impairment charge of $2.6 billion related to its investment in JUUL.

However, adjusted earnings-per-share came to $1.19 per share, beating estimates by $0.03 per share. Altria also raised the low end of its full-year guidance for adjusted earnings-per-share, now expecting a range of $4.30 to $4.38, from prior guidance of $4.21 to $4.38.

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.

3. Enterprise Products Partners (EPD)

• Dividend Yield: 10.7%

Enterprise Products Partners was founded in 1968. It operates as an oil and gas storage and transportation company. Enterprise Products has a tremendous asset base which consists of nearly 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. These assets collect fees based on materials transported and stored.

In the most recent quarter, adjusted EBITDA increased 1.8% for the third quarter, year-over-year. Distributable cash flow increased 0.4% for the period. Growth was fueled by volume increases and new assets placed in service. In the third quarter, gross operating profits was flat in the NGL Pipelines & Services segment, and declined 2% in Crude Oil Pipelines & Services. The Natural Gas Pipelines & Services saw gross operating profit decline 20%, while Petrochemical & Refined Products Services grew 9%.

Enterprise Products expects 2020 growth capital expenditures of $2.9 billion. The company plans to significantly curtail growth capital spending over the next two years to preserve cash flow. For 2021 and 2022, Enterprise Products expects to allocate $1.6 billion and $800 million, respectively, for growth capital expenditures.

Despite the weak performance over the course of 2020, we believe Enterprise Products still has positive long-term growth potential moving forward, thanks to new projects and exports. For example, Enterprise Products has benefited from higher cash flows associated with the completion of two NGL fractionators that began service during 2020.

Enterprise Products has $3.9 billion of major capital projects currently under construction.

Source: Investor Presentation

Exports are also a key growth catalyst. Demand for liquefied petroleum gas and liquefied natural gas, or LPG and LNG respectively, is growing at a high rate across the world, particularly in Asia.

In terms of safety, Enterprise Products Partners is one of the strongest midstream MLPs. It has credit ratings of BBB+ from Standard & Poor’s and Baa1 from Moody’s, which are higher ratings than most MLPs. It also had a high distribution coverage ratio of 1.7x in the 2020 third quarter, meaning the company generated approximately 70% more distributable cash flow than it needed for distributions in the most recent quarter.

Another attractive aspect of Enterprise Products is that it is a recession-resistant company. Enterprise Products’ high-quality assets generate strong cash flow, even in recessions. As a result, Enterprise Products has raised its distribution for 21 consecutive years.

In addition, it has world-class assets and a very long history of regular distribution increases. Combined with a high yield above 10%, Enterprise Products is built to outlast even a deep recession.

2. Magellan Midstream Partners (MMP)

• Dividend Yield: 12.0%

Magellan Midstream Partners has the longest pipeline system of refined products in the U.S., which is linked to nearly half of the total U.S. refining capacity. Its network of assets includes 9,800 miles of pipeline, 54 storage terminals, and 46 million barrels of storage capacity.

Refined products generate approximately 59% of its total operating income while crude oil and marine storage represents the remaining 41%. Magellan has a market capitalization above $8 billion.

Source: Investor Presentation

The demand for refined products remained suppressed due to the pandemic but distributable cash flow fell only -16% in the 2020 third quarter. MMP expects comparable shipped volumes in the fourth quarter just 7% lower over last year’s period and thus it still expects distributable cash flow of$1.025 billion ($4.50 per share) this year. MMP is the most resilient oil company to the pandemic and thus it intends to maintain its quarterly distribution constant next year. The distribution coverage ratio currently stands at 1.11x.

Magellan’s extensive and diversified network of pipeline and storage assets is a significant competitive advantage. Another competitive advantage is its fee-based model in which the company generates fees based on volumes transported and stored and not on the underlying commodity price. This helps insulate Magellan from sharp declines in commodity prices. Only ~10% of its operating income depends on commodity prices.

Magellan has promising growth prospects in the years ahead, as it has several growth projects under way. During the last decade, the company invested $5.4 billion in growth projects and acquisitions and has exhibited much better performance than the vast majority of MLPs.

Magellan has an excellent track record of steadily growing its distribution, and strong distribution safety. Magellan has increased its distribution 71 times since its initial public offering in 2001, including a 3% year-over-year increase in January. Magellan also has a strong debt profile, with a high credit rating of BBB+ from Standard & Poor’s.

Therefore, Magellan earns a high ranking on this list for its combination of a double-digit yield, but also its strong credit rating and long history of distribution increases.

1. Sunoco LP (SUN)

• Dividend Yield: 13.3%

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. 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 billion.

Source: Investor Presentation

On November 4th, 2020 Sunoco LP released third-quarter results that beat on the bottom line. Sunoco reported quarterly revenue of $2.81 billion, down 35% from the same quarter last year, missing analyst estimates by $380 million. However, earnings-per-share of $0.96 beat by $0.16 per share. Adjusted EBITDA for the quarter totaled $189 million, down 1.5% from $192 million in the same quarter last year.

Sunoco is one of the largest fuel wholesalers in Texas, which provides competitive advantages in terms of size and scale. It is also a key distributor for Exxon and Chevron branded fuels, and the company has good relationships with these energy giants. Via tuck-in acquisitions, Sunoco could increase its scale advantage further over the coming years.

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. Still, the distribution remains covered, with third-quarter cash coverage of 1.61x and trailing twelve-months coverage of 1.56x. For the full year, adjusted EBITDA is expected to be at or above $740 million.

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.

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 generations ability.

The 10 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.