Updated on March 10th, 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.
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)
- Prudential Financial Inc. (PRU)
- Office Properties Income Trust (OPI)
- Superior Plus Corp. (SUUIF)
- Carnival Cruise Lines (CCL)
- Altria Group (MO)
- Enterprise Products Partners (EPD)
- Invesco Ltd. (IVZ)
- Tanger Factory Outlet Centers (SKT)
- Energy Transfer LP (ET)
10. Enbridge Inc. (ENB)
- Dividend Yield: 7.2%
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 acquisition in 2016 (Spectra Energy, for $28 billion) and currently trades with a market capitalization of $85 billion. Enbridge was founded in 1949 and is headquartered in Calgary, Canada. Today, the company owns a highly impressive infrastructure of energy assets.
Source: Investor Presentation
Enbridge reported its fourth-quarter earnings results on February 14. Enbridge grew its adjusted EBITDA to a record level of CAD$13.3 billion during fiscal 2019, up from CAD$12.8 billion during the previous year. Growth was mainly thanks to higher transportation volumes and the start-up of newly completed projects, such as the Gray Oak pipeline in Texas. Enbridge’s distributable cash flows grew to CAD$9.2 billion during the year, up from CAD$7.6 billion during 2018. This equates to US$1.33 on a per-share basis, which easily covered Enbridge’s dividend payments.
Enbridge maintained its guidance for distributable cash flow-per-share of ~CAD$4.65 for 2020. Beyond 2020, Enbridge forecasts that its growth rate will be in the 5%-7% range. The company has guided for meaningful dividend growth throughout the next couple of years, at a rate that will likely be a bit higher than the cash flow growth rate. Enbridge’s cash generation is not very cyclical, thus the dividend would likely be safe even during a recession.
Enbridge is one of the largest pipeline operators in North America. Its vast asset footprint serves as a tremendous competitive advantage, as it would take many billions of dollars of investments from new market entrants if they wanted to be able to compete with Enbridge. Due to its fee-based nature Enbridge’s business is not cyclical, and therefore not dependent on commodity prices.
The company’s future growth and competitive advantages will help the company continue to increase its dividend. On December 10th, Enbridge increased its quarterly dividend by 10%. It has increased its dividend for 25 consecutive years, in its home currency.
9. Prudential Financial (PRU)
- Dividend Yield: 7.5%
Prudential Financial operates in the United States, Asia, Europe and Latin America, with more than $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.
On February 4th, 2020 Prudential released Q4 and full year 2019 results for the period ending December 31st, 2019. For the quarter Prudential reported net income of $1.128 billion ($2.76 per share) compared to $842 million ($1.99 per share) in Q4 2018. After-tax Adjusted Operating Income totaled $950 million ($2.33 per share) compared to $1.035 billion ($2.44 per share) in the year ago period.
Source: Investor Presentation
For the year Prudential reported net income of $4.186 billion ($10.11 per share) compared to $4.074 billion ($9.50 per share) in 2018. After-tax Adjusted Operating Income equaled $4.845 billion ($11.69 per share) compared to $5.019 billion ($11.69 per share) in 2018. Adjusted book value per share totaled $101.04, against $96.06 in the year-ago quarter. At quarter-end Prudential held $1.551 trillion in assets under management compared to $1.377 trillion in Q4 2018.
In addition, Prudential declared a $1.10 quarterly dividend representing a 10.0% year-over-year increase. Due to the recent sell-off caused by coronavirus fears, Prudential’s yield now exceeds 7%. The dividend appears sustainable, with an expected dividend payout ratio of 35% for 2020.
While Prudential is highly profitable, it would be exposed to a severe global recession. During the last recession, Prudential generated earnings-per-share of $7.31 in 2007 followed by $2.69, $5.58 and $6.27 in 2008 through 2010. It wasn’t until 2014 that earnings finally eclipsed their pre-recession peak. Similarly, the dividend was slashed from $1.15 in 2007 down to $0.58 in 2008 and did not recover until 2010.
Still, the company has a reasonable payout ratio and financial position, but investors should note its performance during the last recession.
8. Office Properties Income Trust (OPI)
- Dividend Yield: 7.7%
Office Properties Income Trust is a REIT that currently owns 189 buildings, which are primarily leased to single tenants with high credit quality. The REIT’s portfolio currently has a 92.4% occupancy rate and an average building age of 17 years. It has a market capitalization of $1.5 billion.
On 12/31/2018, the predecessor company – Government Properties Income Trust – merged with Select Income REIT (SIR) and the combined company was renamed Office Properties Income Trust. The aggregate transaction value was $2.4 billion, including the assumption of $1.7 billion of debt from SIR. The combined company has enhanced geographic diversification and one of the highest percentages of rent paid by investment-grade rated tenants in the REIT universe.
Source: Investor Presentation
The U.S. Government is the largest tenant of OPI, as it represents 39% of the annual rental income of the REIT. After acquiring First Potomac Realty Trust (FPO) in 2017 and merging with SIR, OPI is now in the process of selling assets to reduce its leverage to a healthy level. In 2019, it sold or agreed to sell nearly $1.0 billion of assets.
In mid-February, OPI reported (2/20/2020) financial results for the fourth quarter of fiscal 2019. During the quarter, the REIT completed 779,000 square feet of leasing at weighted average rents that were 4.2% above prior rents for the same space and posted funds from operations of $1.38 per unit, which exceeded analysts’ consensus by $0.03. For the year, occupancy rate improved from 91.0% to 92.4%.
Nevertheless, due to the extensive asset divestment program, we expect normalized funds from operations (FFO) per unit to decrease from $6.01 in 2019 to approximately $5.50 for 2020. Still, this is expected to sufficiently cover the annualized dividend payout of $2.20 per share, for a 2020 payout ratio of 40%.
OPI generates 63% of its annual rental income from investment-grade tenants. This is one of the highest percentages of rent paid by investment-grade tenants in the REIT sector. Moreover, U.S. Government tenants generate about 39% of total rental income and no other tenant accounts for more than 3% of annual income. This exceptional credit profile constitutes a meaningful competitive advantage.
On the other hand, OPI has greatly increased its debt load after its latest acquisition. Its net debt is excessive, as it stands at $2.3 billion, which is about 8 times the annual funds from operations and almost 50% higher than the current market capitalization of the REIT. OPI is in the process of selling more than $1.0 billion of its assets to help pay down debt, but investors should keep tabs on the company’s deleveraging process.
7. Superior Plus (SUUIF)
- Dividend Yield: 8.1%
Superior Plus Corp is a relatively small gas utility company, but it is one of the larger propane delivery companies. Superior operates a specialty chemical (chlorates) operation, which generates about 25% of total revenue.
The company is the dominant distributor in Canada, and has significant operations in the U.S. (1/3 of total revenues). Superior Plus had 2018 revenues of $2.7 billion and has a current market cap of $1.5 billion.
Source: Investor Presentation
Superior Plus performed well in 2019. For the fourth quarter, it reported revenue of C$821 million, down 8% against Q4 2018. However, adjusted EBITDA climbed 15% to C$177 million. Importantly, its per share adjusted operating cash flow was up 11% to C$0.80.
For the year, the company generated 4% revenue growth, while adjusted EBITDA increased 40%. Per share adjusted operating cash flow was up 30%. Particularly to highlight, it had multiple acquisitions, including NGL Propane during the year, that helped boost EBITDA in its U.S. and Canadian Propane operations.
In January, Superior Plus acquired Western Propane Service, a Southern California retail propane distribution company. In the last year it also made six retail propane distribution acquisitions. For example, the acquisitions of NGL Propane and Canwest Propane, along with 12 tuck-in deals, represent the company’s aggressive acquisition strategy. Separately, Superior Plus is investing heavily in its own organic initiatives, including an expansion of its operations in California.
These measures should help improve the company’s dividend safety. The company maintains a target dividend payout ratio of 40%-60% over the long-term. It also monitors the health of its balance sheet, with a long-term target debt-to-EBITDA ratio of 3.0x. With a 2020 expected dividend payout ratio of 35%, in terms of cash flow per share, the dividend appears to be secure barring a major recession.
Superior Plus currently pays a monthly dividend of CAD$0.06; in U.S. dollars its annualized payout translates to approximately US$0.54 per share. Based on this, Superior Plus stock has an attractive dividend yield of 8.1%.
6. Carnival Cruise Lines (CCL)
- Dividend Yield: 9.2%
Carnival Cruise Lines is a major cruise ship operator. It has 11 different brands that generate about $22 billion in annual revenue. The stock trades with a market capitalization above $14 billion.
Carnival posted Q4 and full-year earnings on 12/20/19 and results significantly beat consensus estimates, which had been weighed down by weaker prior guidance from the company. Carnival faced significant external events in Q4, including weather-related cancellations and weaker demand from Europe, but earnings were quite strong anyway. Gross revenue yields were up 4%, but net revenue yields in constant currency fell -1.8%. This was, however, better than guidance of -2% to -3%.
Full-year earnings-per-share came to $4.40, up from $4.26, and significantly better than prior guidance, as well as our estimate. Management is bullish on 2020 given early booking trends, and our initial estimate is for earnings of $4.50 per share. Carnival has forecast revenue growth of 5% and tailwinds from currency translation, as well as fuel prices, to drive earnings-per-share in the range of $4.30 to $4.60.
Investors should note the elevated uncertainty facing the cruise lines, due to the global coronavirus outbreak which could be a major drag on the entire travel and leisure industry. It is highly likely the company will not meet its earnings guidance for 2020 as a result.
The company is also highly exposed to a global recession. Cruise lines suffer during recessions, as Carnival did in 2009. The next recession will be tough as well, so that is something for investors to keep in mind. In total, Carnival’s earnings-per-share fell 24% from the 2007 high to the 2009 low. And, the company eliminated its dividend in 2009 due to the Great Recession. Carnival is at risk of a dividend cut during another protracted recession.
The heightened level of risk could represent outsized return potential however, if the coronavirus fears turn out to be only temporary in nature. The long-term growth outlook remains bright, due to the company’s leadership position in the industry and long historical track record of growth.
With all this in mind, Carnival stock is tempting on a valuation and dividend yield basis, but only the most risk tolerant investors should consider buying.
5. Altria Group Inc. (MO)
- Dividend Yield: 8.2%
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.
In late January, Altria reported strong fourth-quarter earnings. Revenue (net of excise taxes) increased 0.3% for the fourth quarter, and 0.9% for 2019 as price increases more than offset volume declines. Adjusted earnings-per-share increased 7.4% for the fourth quarter.
For 2019, adjusted earnings-per-share increased 5.8% to $4.22, due to cost controls and share repurchases. Altria exceeded its target of $575 million in cost reductions. Separately, Altria took a non-cash impairment charge of $4.1 billion related to its investment in Juul, bringing total Juul-related charges to $8.6 billion for 2019.
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.
Source: Earnings Slides
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 reaffirmed its guidance for 2020 full-year adjusted diluted EPS to be in a range of $4.39 to $4.51, which would be 4% to 7% growth from 2019. The company also expects 4% to 7% annual adjusted EPS growth from 2020-2022.
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.
4. Enterprise Products Partners (EPD)
- Dividend Yield: 9.8%
Enterprise Products Partners was founded in 1968. It is structured as a Master Limited Partnership, or MLP, and 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 January (1/30/20), Enterprise Products reported fourth-quarter and full-year 2019 financial results. Adjusted EBITDA increased 8.1% for the fourth quarter, and 12.4% for 2019 ($3.69 on a per-unit basis.) Distributable cash flow increased 1% for the fourth quarter, and 10.6% for the full year. Growth was fueled by volume increases and new assets placed in service.
In the fourth quarter, gross operating profits increased 17% in the NGL Pipelines & Services segment, and increased marginally in Crude Oil Pipelines & Services excluding non-cash items. Growth was somewhat offset by a 9.5% decline in Natural Gas Pipelines & Services, and an 8.2% decline in Petrochemical & Refined Products Services. Enterprise Products $2.7 billion of distributable cash flow in 2019, an increase of 27% from the previous year.
Enterprise has positive 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 1.7x for 2019, meaning the company generated approximately 70% more distributable cash flow than it needed for distributions last year.
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 quarters in a row.
3. Invesco Ltd. (IVZ)
- Dividend Yield: 10.7%
Invesco is a global investment management firm. It has more than 7,000 employees and serves customers in more than 150 countries. Invesco currently trades with a market capitalization of $5.2 billion and has over $1.1 trillion of assets under management (AUM).
In the 2019 fourth quarter, Invesco generated revenues of $1.27 billion, up 38.2% compared to the prior year’s quarter. Invesco’s revenue increase was primarily based on an increase in the company’s assets under management, to more than $1.2 trillion, with the majority of that AUM growth stemming from the Oppenheimer Funds acquisition.
Invesco saw long-term net outflows of $14 billion during the quarter, which offset some of the growth from the Oppenheimer Funds takeover. Earnings-per-share of $0.64 for the fourth quarter rose 45% year-over-year, again mainly from Oppenheimer.
Source: Earnings Slides
For the year, adjusted net revenue increased 15.6% to $4.4 billion, while adjusted EPS increased 4.9% to $2.55.
Invesco’s future growth will depend largely on its recent acquisitions. Invesco acquired Oppenheimer Funds for ~$5.7 billion. Acquiring Oppenheimer Funds grew Invesco into becoming the 6th-largest U.S. retail investment management company.
Separately, Invesco also acquired the ETF business from Guggenheim Investments for $1.2 billion. Invesco also made a significant investment in financial technology with its acquisition of Intelliflo, a leading technology platform for financial advisors that supports approximately 30% of all financial advisors in the U.K.
Share buybacks will also help boost earnings-per-share growth. During 2019, the company purchased $670 million of its common shares. Since it announced its $1.2 billion stock repurchase plan in October 2018, the company has repurchased $973 million of its common shares. It expects to utilize the remaining ~$227 million by the first quarter of 2021.
Invesco ranks well in terms of dividend safety with an expected payout ratio of 48% for 2020. This should allow the company to maintain its dividend payout. Invesco also has a strong balance sheet, with a credit rating of BBB+ from Standard & Poor’s.
2. Tanger Factory Outlet Centers (SKT)
- Dividend Yield: 13.8%
Tanger Factory Outlet Centers is a Real Estate Investment Trust. Tanger Factory Outlet Centers is one of the largest owners and operators of outlet centers in the United States. It operates and owns, or has a stake in, a portfolio of 39 upscale outlet shopping centers.
Tanger’s operating properties are located in 20 states and in Canada, totaling approximately 14.3 million square feet, leased to over 2,800 stores which are operated by more than 510 different brand name companies.
Tanger’s diversified base of high-quality tenants has led to steady growth for many years.
Source: Earnings Slides
Tanger released 2020 fourth-quarter and full-year financial results on January 27th. Fourth-quarter revenue of $121 million declined by 5% year over year, while adjusted funds from operations (AFFO) fell 7.8% year-over-year. For the full year, AFFO declined 6.9% to $2.31 per share. Tanger’s occupancy rate stood at 97% in the most recent quarter, up from 95.9% in the previous quarter.
For 2019, blended average rental rates increased 2.7% on a straight-line basis but decreased 1.3% on a cash basis for all renewals and re-tenanted leases. Same-center net operating income, or NOI declined 0.7% for 2019, due to the impact of tenant bankruptcies, lease modifications, and store closures. Tanger also increased its annual dividend by $0.01 per share, for the 27th consecutive year of dividend growth.
Tanger has a current dividend payout of $1.43 per share annually, which represents a current yield of 13.8%. This is a very high yield and is clearly attractive for income investors. The biggest concern with a yield this high is sustainability. Tanger appears to have a secure dividend payout.
We expect Tanger will generate AFFO-per-share of $2.39 for 2020. With a current annual dividend payout of $1.43 per share, Tanger’s expected 2020 dividend payout ratio is 72%. This is a manageable payout ratio, which leaves room for modest annual hikes.
Investors should closely monitor Tanger’s financial results each quarter, to ensure the company remains on track. The difficulties facing malls in the U.S. are significant, and Tanger’s declining revenue and AFFO are valid concerns. The dividend payout appears secure for now, but continued deterioration in the company’s financial results could put the dividend in danger of being cut.
1. Energy Transfer LP (ET)
- Dividend Yield: 16.6%
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 fourth-quarter results on February 19th. For the fourth quarter, adjusted EBITDA continued its streak of strong growth on the back of another record operating performance in the Partnership’s NGL and refined products segment, increasing 5% year-over-year to $2.81 billion. Distributable cash flow increased by 2% to $1.56 billion, reflecting improving cash flow generation efficiencies.
This led to $725 million in retained cash flow and a 1.88x distribution coverage ratio, making the company’s double-digit yield appear to be secure barring a major downturn in the oil industry or a severe recession. The company ended 2019 with a leverage ratio of 3.96x.
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.
The company’s new projects will help secure its attractive distribution, which currently yields nearly 10%. 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.
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. It is possible additional rate cuts are in store in 2020. 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 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 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.