Sure Dividend

Updated on January 12th, 2021 by Bob Ciura

Spreadsheet data updated daily

When a person retires, they no longer receive a paycheck from working. While traditional sources of retirement income such as Social Security help investors make up the gap, many could still face an income shortfall in retirement.

This is where high-yield dividend stocks can be of assistance. We have compiled a full downloadable list of stocks yielding above 5%.

You can download your full list of all 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 of 5% and greater, these securities all offer high dividends (or distributions). And with Dividend Risk Scores of C or better, they don’t suffer from the usual excessive riskiness of truly high yielding securities. Furthermore, these are large-cap stocks with sufficient size, as well as leadership positions in their respective industries.

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

Table Of Contents

All stocks in this list have dividend yields above 5%, making them highly appealing in an environment of falling interest rates. A maximum of three stocks were allowed for any single market sector to ensure diversification.

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

• Navient Corporation (NAVI)
• PPL Corporation (PPL)
• W.P. Carey (WPC)
• H&R Block, Inc. (HRB)
• AT&T Inc. (T)
• British American Tobacco (BTI)
• Altria Group (MO)
• ONEOK, Inc. (OKE)
• Sunoco LP (SUN)
• MPLX LP (MPLX)

10. Navient Corporation (NAVI)

• Dividend Yield: 5.7%

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 6% is attractive for income investors willing to accept a higher level of company risk.

9. PPL Corporation (PPL)

• Dividend Yield: 6.0%

Pennsylvania Power & Light Company, or PPL, was started in 1920 and can trace its roots back to Thomas Edison. PPL Corporation distributes power to more than 10 million people in the U.S and the U.K. The company is the parent company of seven regulated utility companies and provides electricity to customers in the U.K., Pennsylvania, Kentucky, Virginia and Tennessee. PPL also delivers natural gas to customers in Kentucky.

Source: Investor Presentation

PPL announced third quarter earnings results on 11/5/2020. Adjusted earnings-per-share of $0.58 was 4.9% lower than the previous year. Revenue decreased 2.1% to $1.9 billion, which was $130 million lower than expected. Earnings from ongoing operations for the Pennsylvania regulated segment improved 6.3% due to returns on additional capital investments.

PPL stated that it remains on track to sell its U.K. segment, with a goal of announcing a transaction in the first half of 2021. PPL now expects earnings-per-share of $2.40 to $2.50 for 2020, compared with $2.40 to $2.60 previously.

We maintain our earnings-per-share growth forecast of 2% for PPL. This accounts for the company’s historical growth, as well as likely substantial share dilution. One reason that PPL shares have lost value while many utility companies have grown is the uncertainty about operations in the United Kingdom. Investors have feared that regulators would reduce the allowed return on equity for electric companies starting in 2023.

After announcing a 0.6% increase for the 4/1/2020 payment, PPL has now increased its dividend for the past 20 years. The stock has a high dividend yield of 6% right now. With an estimated payout ratio of ~68%, the dividend appears secure.

8. W.P. Carey (WPC)

• Dividend Yield: 6.3%

W.P. Carey is a commercial real estate focused Real Estate Investment Trust, or REIT. These are companies that own real estate properties and lease them to various tenants to generate cash flow. You can see our full REIT list here.

WPC operates two segments: real estate ownership and investment management. The REIT operates more than 1,200 single tenant properties on a net lease basis, across the US and Northern and Western Europe.

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

Source: Investor Presentation

W. P. Carey reported its 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 REIT. 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.

7. H&R Block, Inc. (HRB)

• Dividend Yield: 6.4%

H&R Block is a global consumer tax services provider. It offers comprehensive tax return preparation through approximately 12,000 company owned and franchised H&R Block locations around the world. H&R Block also offers tax software. The company generates annual revenue of more than $3.5 billion and prepares over 20 million tax returns annually.

The company announced financial results for the fiscal 2021 second quarter on December 8th, 2020. Revenue increased 10% to $177 million for the quarter. Its pretax loss improved by $24 million for the quarter, to $237 million. Still, the company reported a GAAP loss per share from continuing operations of $1.17 per share.

H&R Block is facing a difficult environment, as continued adoption of do-it-yourself tax software remains a competitive threat from the likes of TurboTax and others. H&R Block has invested in its own digital platforms, and has also pursued acquisitions such as the takeover of Wave Financial.

Another of H&R Block’s future growth catalysts is small business, an area it has generated steady growth from in recent years.

Source: Investor Presentation

In addition, H&R Block benefits from durable competitive advantages. It is the leading brand in the tax preparation industry and provides a necessary service to taxpayers. H&R Block remained profitable each year during the Great Recession, and the company should be expected to remain profitable if and when another recession occurs in the United States.

H&R Block scores fairly well when it comes to safety and quality metrics. The company has a large amount of debt, but also generates strong interest coverage. It also has a normalized dividend payout ratio below 50%, which indicates the dividend is secure. H&R Block has paid quarterly dividends consecutively since the company went public in 1962.

6. AT&T Inc. (T)

• Dividend Yield: 7.2%

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 2021. 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 third 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: 7.2%

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.

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 its pre-close trading update on December 9. These types of reports do not include any exact numbers, those are only available for British American Tobacco’s H1 and FY earnings releases, while the trading updates at the end of Q1 and Q3 provide less material data.

British American Tobacco’s revenue performance during the most recent quarter was solid, which is why the company is now expecting that its revenue growth will come in at the upper end of the 1%-3% guidance range for the current year, at constant currency rates.

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: 8.4%

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. ONEOK Inc. (OKE)

• Dividend Yield: 8.7%

ONEOK is an energy company that engages in the gathering and processing of natural gas, as well as a natural gas liquids business and natural gas pipelines (interstate and intrastate). ONEOK also owns storage facilities for natural gas. ONEOK reported its third-quarter earnings results on October 27. The company reported that it generated revenues of $1.85 billion during the quarter, which was 5% less than the revenues that ONEOK generated during the previous year’s quarter.

Despite a revenue decline compared to the prior year’s quarter,which can be explained by commodity price movements, ONEOK managed to remain quite profitable, which can be explained by the fact that its input costs declined as well. During the most recent quarter, ONEOK generated adjusted EBITDA of $750 million, which was up 15% versus the previous year’s quarter, therefore easily outperforming the top line number.

Recovery in its natural gas liquids business has fueled ONEOK’s steady performance over the course of 2020.

Source: Investor Presentation

Distributable cash flows, which is operating cash flow minus maintenance capital expenditures, totaled $540 million during the quarter, up 12% on a year-over-year basis. Distributable cash flows came in at $1.21 on a per-share basis.

ONEOK sees 2020’s distributable cash flows declining slightly versus 2019, to ~$1.95 billion, or roughly $4.65 per share. ONEOK forecasts improving results going forward on a sequential basis. Still, DCF-per-share of $4.65 would cover the current annualized dividend payout of $3.74 per share.

A key advantage for ONEOK is that a significant portion of its revenue, especially after the roll-up of its MLP, are fee-based or hedged, which makes the company less sensitive to commodity price swings. This is why ONEOK can operate with considerable leverage without being in dangerous territory, as its cash flows are not very cyclical. The fee-based nature of ONEOK’s revenues and non-cyclical demand for natural gas, e.g. for heating, is what has made ONEOK recession-proof in the past.

2. Sunoco LP (SUN)

• Dividend Yield: 11.0%

Sunoco is a Master Limited Partnership that distributes fuel products through its wholesale and retail business units. You can see our entire MLP list here.

Sunoco’s wholesale unit purchases fuel products from refiners and sells those products to both its own and independently-owned dealers. The retail unit operates stores where fuel products as well as other products such as convenience products and food are sold to customers.

Sunoco was founded in 2012, is headquartered in Dallas, and currently trades with a market capitalization of ~$2.4 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.

1. MPLX LP (MPLX)

• Dividend Yield: 11.1%

MPLX, LP is a master limited partnership that was formed by the Marathon Petroleum Corporation (MPC) in 2012. The business operates in two segments: Logistics and Storage – which relates to crude oil and refined petroleum products – and Gathering and Processing – which relates to natural gas and natural gas liquids (NGLs). In 2019, MPLX acquired Andeavor Logistics LP.

On November 2nd, 2020 MPLX released Q3 2020 results for the period ending September 30th, 2020. For the quarter distributable cash flow (DCF) equaled $1.067 billion (~$1.02 per unit) versus $1.027 billion (~$1.05 per unit) in Q3 2019. MPLX ended the quarter with a consolidated debt to adjusted EBITDA ratio of 4.0x (unchanged from Q3 2019). Distribution coverage equaled 1.44x compared to 1.42x in the prior year quarter. MPLX also announced a unit repurchase program of up to $1 billion.

Source: Investor Presentation

MPLX has positive growth prospects, due primarily to its projects currently under development. Pipelines tend to have a stronghold in terms of extracting economic rents, and natural gas is cleaner than coal.

In the last decade, natural gas has overtaken coal as the leading source of electricity generation in the U.S. Building pipelines requires years of approvals and ongoing regulation. MPLX in particular has a strong position in the Marcellus / Utica region, with long-term contracts from Marathon.

MPLX is an attractive stock for yield and distribution growth. MPLX has so far maintained its quarterly distribution at a rate of $0.6875 per unit. With a forward yield above 11%, future returns could be extremely high, although a yield this high is sometimes a precursor to a dividend cut.

Final Thoughts

Interest rates have seriously declined. After two years of the Federal Reserve raising rates, the central bank announced immediate and profound interest rate reductions. Investors might scramble to search for suitable income in a low-rate environment, but these high-yield stocks are still presenting strong income generation ability.

The 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.