Updated on June 5th, 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.
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 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.
- Prudential Financial (PRU)
- AT&T Inc. (T)
- Unum Group (UNM)
- Universal Corporation (UVV)
- Urstadt Biddle Properties (UBA)
- British American Tobacco (BTI)
- Altria Group (MO)
- Enterprise Products Partners (EPD)
- Magellan Midstream Partners (MMP)
- Energy Transfer LP (ET)
10. Prudential Financial (PRU)
- Dividend Yield: 6.4%
Prudential Financial is a financial services company operating in the United States, Asia, Europe and Latin America, with $1.5 trillion in assets under management. The company provides financial products –including life insurance, annuities, retirement-related services, mutual funds and investment management.
Prudential operates in four divisions: PGIM (formerly Prudential Investment Management), U.S. Workplace Solutions, U.S. Individual Solutions, and International Insurance. It has a diversified investment portfolio.
Source: Investor Presentation
On May 4th, 2020 Prudential released Q1 2020 results. For the quarter Prudential reported a net loss of $271 million ($0.70 per share) compared to net income of $932 million ($2.22 per share) in Q1 2019. However, these results included substantial investment losses.
On an adjusted basis, operating income totaled $939 million ($2.32 per share) compared to $1.259 billion ($3.00 per share) in the year ago period. Results were helped by a lower share count. Adjusted book value per share totaled $99.71, against $96.76 in the year-ago quarter.
Prudential has a long history of generating growth. From 2007 through 2019, Prudential grew earnings-per-share by approximately 4.0% per year. Higher interest rates and general economic improvement could be positives for the company’s growth prospects over the long-term. Of course, there are offsetting factors; chief among them being lower rather than higher rates in the short-term.
The majority of Prudential’s business is in the U.S. and Japan, both of which are mature markets where we do not anticipate above-average growth. In addition, the current COVID-19 pandemic is set to impact the business. We have reduced our expectation for 2020 earnings and presume a 4% growth rate.
We believe Prudential’s dividend is secure. With expected EPS of $10.50 for 2020, the stock has a projected payout ratio below 50%, which generally indicates a sustainable dividend payout.
9. AT&T Inc. (T)
- Dividend Yield: 6.5%
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.
On April 22nd, 2020 AT&T reported Q1 2020 results for the period ending March 31st, 2020. For the quarter the company generated $42.8 billion in revenue, down from $44.8 billion in Q1 2019, as growth in domestic wireless services and business services partially offset declines in domestic video, legacy wireline services and WarnerMedia.
Net income equaled $4.6 billion or $0.63 per share compared to $4.1 billion or $0.56 per share in the year ago quarter. On an adjusted basis earnings-per-share equaled $0.84 compared to $0.86 previously, including a -$0.05 impact from the COVID-19 crisis. AT&T’s net debt-to-EBITDA ratio was ~2.6x at the end of the quarter.
Source: Investor Presentation
AT&T is a colossal business, easily generating profits of $20+ billion annually, but it is not a fast grower. From 2007 through 2019 AT&T grew earnings-per-share by 2.2% per annum. 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.
8. Unum Group (UNM)
- Dividend Yield: 6.8%
Unum Group is an insurance holding company providing a broad portfolio of financial protection benefits and services. The company operates through its Unum US, Unum UK, Unum Poland and Colonial Life businesses, providing disability, life, accident, critical illness, dental and vision benefits to millions of customers. Unum generated revenue of approximately $12 billion in 2019.
Source: Investor Presentation
On May 4th, 2020 Unum reported first-quarter financial results. For the quarter, Unum generated $2.87 billion in revenue, a 3.9% decline compared to the same quarter last year. Premium income increased 1.4%, but this was offset by $144 million in net investment losses. Net income equaled $161.0 million ($0.79 per share) compared to $280.9 million ($1.31 per share) previously.
However, on an adjusted basis, which excludes investment gains or losses, operating income equaled $274.1 million ($1.35 per share) compared to $1.31 in the year-ago quarter. Despite adjusted income being down slightly, adjusted earnings-per-share grew 3.1% as a result of a lower share count. Book value per share was $48.21 at the end of the quarter, compared with $42.68 at the end of Q1 2019
Unum has developed a top position in its industry with a long track record of providing reliable service and establishing deep relationships with customers.
These qualities have served the company well during recessions. Unum performed surprisingly well in the Great Recession of 2008-2009. Unum posted earnings-per-share of $2.19, $2.51, $2.57 and $2.71 from 2007 through 2010. Furthermore, the dividend kept increasing during this time as well. Therefore, we expect Unum’s profits and dividend to hold up again, should another recession occur.
Over the past decade, Unum grew its earnings-per-share by approximately 8% per year on average. Results were helped by rising premium income, as well as aggressive share repurchases which retired 5% of the share count each year. We believe Unum can continue to grow via reasonable improvement in premium and investment income, expense management, and continued share repurchases.
While the company suspended its share buyback due to coronavirus, it should resume share repurchases in 2021. We believe 3% annual EPS growth is a reasonable expectation through 2025. With a projected dividend payout ratio of 25% for 2020, we believe Unum’s payout is secure.
7. Universal Corporation (UVV)
- Dividend Yield: 7.0%
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 will soon join the exclusive list of Dividend Kings.
Universal Corporation reported its fourth quarter (fiscal 2020) earnings results on May 27. The company generated revenues of $632 million during the quarter, which was 6% less than the revenues that Universal Corporation generated during the previous year’s quarter.
Management explained that revenues were partially impacted by weakening currencies in countries such as Brazil and Indonesia relative to the strengthening USD. Nevertheless, this revenue decline was much less severe compared to the revenue decline reported during the previous quarter.
Universal’s adjusted earnings-per-share totaled $1.08 during the fourth quarter, which was down about 20% from the earnings-per-share that the company generated during the previous year’s quarter. Profits were down due to the impact of lower sales during the quarter, coupled with some margin pressures on Universal’s operations.The company generated adjusted earnings-per-share of $3.49 during fiscal 2020.
Still, profits generated in fiscal 2020 appear to sufficiently cover 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. Urstadt Biddle Properties (UBA)
- Dividend Yield: 7.4%
Urstadt Biddle Properties is a real estate investment trust that owns a collection of more than 80 properties containing grocery and convenience stores. Urstadt Biddle Properties cover more than 5 million square feet of retail space.Most of the trust’s properties are in New York, Connecticut,and New Jersey. Properties are primarily located in densely populated areas, giving the REIT’s tenants access to a large number of potential consumers. Urstadt Biddle Properties generates annual revenues of more than $135 million.
Urstadt Biddle Properties reported financial results for the first quarter of fiscal year 2020 on 3/9/2020. FFO came in at $0.34 per share, missing consensus estimates by a penny as well as the year-ago results by $0.02. Occupancy also slipped by 20 basis points to 91.2%. Same-store NOI increased by 1.9% year-over-year during Q1, reflecting growth momentum moving forward. The company was also able to issue $110 million in a new series of preferred stock at a 5.875%, reflecting strong market confidence in the company’s durability.
Urstadt Biddle Properties grew its annual Funds From Operation by approximately 2% annually from 2009 through 2019. FFO will likely take a big hit this year due to the coronavirus. That said, given that the vast majority of its properties are grocery anchored and in high-density, barrier-to-entry markets, we believe Urstadt Biddle will rebound fairly well and will be able to resume growth in the years to come without having to cut its dividend.
Urstadt Biddle Properties kept growing its dividend in the Great Recession because so many of its properties are considered a necessity to consumers. While e-commerce has grown in importance in recent years, most consumers still purchase food, beverages and everyday items in person,either at a grocery or convenience store. Like most REITs, Urstadt Biddle Properties has a high payout ratio, though that ratio has declined in recent years.
Urstadt Biddle Properties’ key competitive advantage are its types of tenants and property locations. More than 80% of Urstadt Biddle Properties’ tenants are grocery stores. Consumers need to shop for everyday grocery items,even in adverse economic conditions. Another factor contributing to the REIT’s success is that the median income surrounding its properties is more than $95,000, well above the national average of $54,000.
With 25 years of dividend growth to go along with uninterrupted dividend payments for 49 years, the dividend payout appears secure barring a deep and prolonged recession.
5. British American Tobacco (BTI)
- Dividend Yield: 8.2%
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.
British American Tobacco announced its fourth quarter earnings results on March 26th. Full-year revenue increased 5.7% at constant forex rates, as revenues came in at US$33 billion. Due to margin pressures, operating profits declined 3% at constant forex rates. On an adjusted basis, however, operating profits were up year-over-year, rising 7.6% to US$14.6 billion.
Growth in the core combustible brands propelled the company’s growth last year.
Source: Investor Presentation
British American Tobacco continued to lower its leverage during the year, paying down around $3 billion in debt during fiscal 2019. British American Tobacco generated adjusted earnings-per-share of US$4.38, up 9% from the previous year.
British American Tobacco’s earnings-per-share grew by ~6% annually from 2009 through 2019. Profits tend to fluctuate from year to year, in part because of foreign exchange translations. The company reports its results in Pound Sterling.
Cost savings following the integration of Reynolds American will 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 players, 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: 8.3%
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).
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.
Altria reported surprisingly strong first-quarter results. Revenue of $5.1 billion increased 15% from the same quarter a year ago, while adjusted earnings-per-share of $1.09 increased 18.5%. Revenue and adjusted earnings-per-share both beat analyst estimates. Altria benefited from 6.1% growth in smokeable products shipment volume, or 3.5% adjusting for industry trade movements, calendar differences, and other factors.
The company has taken precautions to shore up its financial positions, including drawing $3 billion on its revolving credit facility, suspended its share repurchases, and it withdrew its full-year guidance due to coronavirus uncertainty. That said, the company maintained its target dividend payout ratio of 80%, in terms of adjusted EPS.
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 through 2023.
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.
Source: Investor 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.
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. Magellan Midstream Partners (MMP)
- Dividend Yield: 8.8%
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 9,700 miles of pipeline, 53 storage terminals, and 45 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 $6.6 billion.
Source: Investor Presentation
In early May, Magellan reported (5/1/20) financial results for the 2020 first quarter. Distributable cash flow declined 3.6% to $306.5 million. Refined products operating margin increased 47%, due primarily to hedging activities. However, crude oil operating margin declined 16% year-over-year. The company now expects full-year distributable cash flow in a range of $1 billion to $1.075 billion, down from prior expectations of $1.2 billion.
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.
It also sold 3 marine terminals to Buckeye Partners (BPL) for $250 million. After the sale, the company intends to buy back up to $750 million of its own stock. This buyback could help boost future per-unit earnings and FFO growth. It is also raising cash to support its balance sheet, such as the issuance of $500 million in notes due 2030 on May 7th.
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 recent 3% year-over-year increase.
The company expects to maintain a distribution coverage ratio of at least 1.2x over the next several years, which will be sufficient to raise the payout each year. 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 very high 8%+ yield, but also its strong credit rating and long history of distribution increases.
2. Enterprise Products Partners (EPD)
- Dividend Yield: 8.8%
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 late April (4/29/20), Enterprise Products reported first quarter financial results. Adjusted EBITDA was flat for the quarter, while distributable cash flow declined 4.5% from the same quarter last year. Gross operating margin increased 9% in NGL Pipelines & Services and 7% in Natural Gas Pipelines & Services, but this was more than offset by a 31.5% decline in Crude Oil Pipelines & Services.
The company is taking decisive action to withstand the coronavirus crisis, such as reducing its 2020 capital expenditures budget by $1 billion. Despite the weak performance in the first quarter, we believe Enterprise Products still has positive long-term growth potential moving forward, thanks to new projects and exports.
Source: Investor Presentation
For example, Enterprise Products has started construction of the Mentone cryogenic natural gas processing plant in Texas, which will have the capacity to process 300 million cubic feet per day of natural gas and extract more than 40,000 barrels per day of natural gas liquids. The facility is expected to begin service in the first quarter of 2020.
Enterprise Products is also developing the Shin Oak NGL Pipeline, which is scheduled to be placed into service next year. The Shin Oak NGL Pipeline is expected to have total capacity of 600,000 barrels per day. 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 1.6x in the 2020 first quarter, meaning the company generated approximately 60% 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 been able to raise its distribution to unitholders for 62 out of the past 63 quarters. It has raised its distribution for 21 consecutive years.
Like Magellan, Enterprise Products has a high credit rating of BBB+. In addition, it has world-class assets and a very long history of regular distribution increases. Combined with a high yield above 8%, Enterprise Products is built to outlast even a deep recession.
1. Energy Transfer LP (ET)
- Dividend Yield: 14.3%
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
Energy Transfer reported first-quarter results in May. Energy Transfer reported a net loss of $855 million for the quarter, primarily due to non-cash goodwill impairments of $1.3 billion as a result of decreases in commodity prices and market demand.
On an adjusted basis, EBITDA of $2.64 billion represented a decrease of $100 million year over year, primarily due to crude oil, NGL and refined products inventory valuation adjustments totaling $213 million. Stripping out these inventory adjustments, adjusted EBITDA would have been $2.85 billion for the quarter.
Distributable cash flow was $1.42 billion on an adjusted basis, a decrease of $177 million compared to the same quarter a year ago. On a positive note, Energy Transfer had a distribution coverage ratio of 1.72x for the quarter, resulting in excess coverage of $594 million of DCF in excess of unitholder distributions. This indicates a secure distribution.
In response to the coronavirus, the company reduced its 2020 growth capital outlook by at least $400 million, to $3.6 billion, with another $300 million to $400 million of capital expenditures under evaluation. This will help the company maintain a strong financial position in anticipation of a likely recession in the U.S.
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, in February Energy Transfer completed its seventh natural gas liquids (NGL) fractionation facility at Mont Belvieu, Texas. This brought total fractionation capacity at Mont Belvieu to over 900,000 barrels per day. The company is also progressing with plans on a Bakken pipeline optimization project, which is expected to start up in 2020.
Separately, the $5 billion acquisition of SemGroup Corp. will also fuel Energy Transfer’s growth. This will expand its natural gas liquids and crude oil capabilities with the addition of 18.2 million barrels of storage capacity. The gathering assets are in the DJ Basin in Colorado and the Anadarko Basin in Oklahoma and Kansas, as well as oil and NGL pipelines connecting the DJ and Anadarko basins with crude oil terminals in Oklahoma.
The company’s new projects will help secure its attractive distribution, which currently yields 14%. Debt remains ain issue, as the company ended the first quarter with a leverage ratio of 4.1x. Energy Transfer has a very high yield and appears to have a secure payout, which makes it an attractive stock for income investors.
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.