Sure Dividend

Updated on August 12th, 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 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.

• Bank of Nova Scotia (BNS)
• People’s United Financial (PBCT)
• Great-West Lifeco (GWLIF)
• Universal Corporation (UVV)
• AT&T Inc. (T)
• Altria Group (MO)
• British American Tobacco (BTI)
• Enterprise Products Partners (EPD)
• Magellan Midstream Partners (MMP)
• Energy Transfer LP (ET)

10. Bank of Nova Scotia (BNS)

• Dividend Yield: 6.1%

Bank of Nova Scotia (often called Scotiabank) is the third-largest financial institution in Canada behind the Royal Bank of Canada (RY) and the Toronto-Dominion Bank (TD). Scotiabank reports in 5 segments – Canadian Banking, International Banking, Global Wealth Management, Global Banking & Markets, and Other.

Scotiabank reported fiscal Q2 2020 results on 5/26/20. Revenue increased 2% to C$8.0 billion year-over-year, thanks to a 5.3% gain in net interest income, offset by a 2% decline in non-interest income. Net income fell 41% to C$1.3 billion, due to C$1.85 billion in provision for credit losses, which more than doubled from the year-ago period. On an adjusted basis, earnings-per-share fell 39%.

You can see a snapshot of Scotiabank’s capital and liquidity position at quarter-end in the image below:

Source: Investor Presentation

In the core Canadian Banking segment, revenue was flat as 4% growth in net interest income was offset by an 11% decline in non-interest income. Loans and deposits each increased 4% for the quarter, while net interest margin contracted by 7 basis points.

Other segments performed better for Scotiabank in the fiscal second quarter. For example, adjusted net income rose 3% in the Global Wealth Management segment, as revenue increased 4% excluding divestitures thanks to strong results in brokerage fees and retail mutual fund sales.

The best-performing segment for the company last quarter was its Global Banking & Markets business, which registered 25% year-over-year net income growth. Strong trading revenue led to 27% revenue growth for the most recent quarter.

Despite slowing economic growth, we believe the bank is capable of growing EPS by 5% annually on average through 2025. The bank’s consistent organic and acquired revenue growth will likely drive the top and bottom lines higher in the long run. Scotiabank has a noticeably differentiated growth strategy when compared to its peers in the Canadian banking industry.

While other banks have focused on expanding into the United States, Scotiabank’s future growth should come primarily from its rapidly-expanding International Banking segment, which provides banking services in emerging economies like Mexico, Peru, Chile, and Colombia. These markets are appealing because net interest margins there are significantly higher and their longer-term economic growth is also higher.

Bank of Nova Scotia pays an annual dividend of $3.60 in Canadian currency; in U.S. dollars, the annual payout of $2.65 per share yields 6.4% right now. We view the dividend as secure, as the company continues to generate sufficient profits.

9. People’s United Financial (PBCT)

• Dividend Yield: 6.2%

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 $4.8 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 is now facing a strong headwind, namely the outbreak of the coronavirus. As a result, all the banks will increase their provisions for loan losses.

In late July, People’s United Financial reported (7/23/20) financial results for the second quarter of fiscal 2020. The net interest margin of the company slipped from 3.12% to 3.05% sequentially but the amount of loans grew 3% and thus net interest income grew 2% sequentially. On the other hand, non-interest income slumped -28%, from $123.8 million to $89.6 million, due to the decreased customer activity caused by the pandemic and the numerous fee waivers related to the pandemic.

As a result, operating earnings-per-share fell -27% sequentially, from $0.33 to $0.24. It is also remarkable that the provision for credit losses increased from $8.5 million to $80.8 million due to the pandemic.

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. Great-West Lifeco (GWLIF)

• Dividend Yield: 6.3%

Great-West Life is an international financial services holding company with interests in life insurance, health insurance, investment and retirement services, asset management and reinsurance businesses. Great West was founded in 1891 and is a member of the Power Financial Group. It has a market cap of ~$16 billion USD and operations in North America, Europe, and Asia.

The company reported strong second-quarter financial results. Base earnings of CAD$706 million increased 13% from the same quarter last year. On a per-share basis, base earnings also increased 13% year-over-year. Assets under administration increased to CAD$1.7 trillion.

Source: Investor Presentation

Growing their business has been a challenge for GWLIF over the past several years as low interest rates have had a
negative impact on most of their fixed rate annuity and insurance businesses. Increasing rates would have a positive
impact on revenue and drive margin expansion as lower risk tolerance investors seek the security of fixed rate
investments. Today, interest rates appear to be stable after recent cuts in the US and Canada but are practically zero.

The company is targeting growth through acquisition and product expansion in Europe, and investing for significant
growth and consolidation opportunities in the United States. For example, the company’s subsidiary Empower Retirement recently acquired Personal Capital for US$825 million, along with deferred consideration of up to US$175 million if it achieves certain growth objectives. Personal Capital is a hybrid wealth manager that combines a digital and human adviser experience. We expect 4% total earnings-per-share growth over the next five years.

With a projected dividend payout slightly above 70% for 2020, we view Great-West Lifeco’s dividend as secure. The stock has an attractive yield of 6.3%.

7. Universal Corporation (UVV)

• Dividend Yield: 6.7%

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 fiscal 2021 first-quarter results, in which revenue of $316 million increased 6% year-over-year. Revenue growth was due to higher volumes, offset partly by lower sales and leaf prices as well as less favorable mix. Operating income grew by 13% for the 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.

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: 6.9%

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.

AT&T reported second-quarter 2020 financial results on July 23rd. For the quarter, the company generated $40.95 billion in revenue, down 9% year-over-year. The coronavirus pandemic led to declines across the business, including lower content and advertising revenue for WarnerMedia, as well as lower domestic video and legacy wireless revenue. On an adjusted basis, earnings-per-share declined 6.7% to $0.83.

Still, AT&T generated $7.6 billion of free cash flow, which was used to pay down debt, return cash to shareholders, and invest in future growth. 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 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. Altria Group Inc. (MO)

• Dividend Yield: 7.8%

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.

On July 28th, Altria reported financial results for the 2020 second quarter. Revenue of $5.06 billion fell 2.5% year-over-year. Smokeable product volume declined 8.7% year-over-year, a full percentage point better than expectations. Smokeless product volume dropped 1%, far better than the 2.7% drop that was anticipated. Adjusted earnings-per-share came to $1.09, up 1% year-over-year. Altria also announced a 2.4% dividend increase.

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.

4. British American Tobacco (BTI)

• Dividend Yield: 7.9%

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 quarterly earnings results on March 26th. 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.

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.

3. Enterprise Products Partners (EPD)

• Dividend Yield: 9.7%

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.

Source: Investor Presentation

In the most recent quarter, Enterprise Products reported a relatively mild 6% decline in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and an 8% decline in distributable cash flow. Lower volumes were responsible for the declines, especially in the company’s Natural Gas Pipelines & Services business which saw operating margin decline by 30%. However, operating margin held flat in the NGL Pipelines & Services segment, and increased 24% in the Crude Oil Pipelines & Services segment.

Enterprise Products expects 2020 growth capital expenditures in a range of $2.5 billion to $3 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 $2.3 billion and $1.0 billion, respectively, for growth capital expenditures.

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. For example, Enterprise Products recently placed the 10th fractionator into service at Mont Belvieu, with an 11th expected to be placed into service in the third quarter. 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 total, Enterprise Products has $4.7 billion of projects under construction expected to be placed into service in 2021 and beyond.

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 second 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 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 near 10%, Enterprise Products is built to outlast even a deep recession.

2. Magellan Midstream Partners (MMP)

• Dividend Yield: 10.0%

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 $9 billion.

Source: Investor Presentation

In late July, the company reported (7/30/20) financial results for the second quarter of fiscal 2020. Distributable cash flow fell by one-third, from $314.8 million to $209.5 million, due to the reduced demand for refined products and the suppressed commodity prices caused by the pandemic. While MMP has a resilient business model, it is not immune to the coronavirus crisis. On the other hand, it essentially kept its guidance intact for distributable cash flow of $1.0-$1.05 billion this year. MMP intends to maintain its quarterly distribution constant for the rest of the year and expects a distribution coverage ratio of 1.10-1.14.

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 recent 3% year-over-year increase. 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. Energy Transfer LP (ET)

• Dividend Yield: 18.7%

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 second-quarter results in May. Adjusted EBITDA of $2.44 billion represented a decline of 14% year-over-year, a direct result of the coronavirus pandemic and related economic slowdown, which caused volumes and market prices to decline. Distributable cash flow of $1.27 billion fell by 21%. However, the company achieved a strong distribution coverage ratio of 1.54x for the quarter, which generated excess cash flow of $448 million beyond distributions for the quarter.

In response to the coronavirus, the company further reduced its growth capital expenditures by an additional $200 million. Energy Transfer expects growth capital expenditures to be approximately $1.3 billion in 2021 and $500 million to $700 million in 2022 and 2023.

The company is also making strong progress on several growth projects which should be adding to cash flows in the coming quarters and years.

Source: Investor Presentation

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 nearly 19%. Debt remains an issue, as the company ended the first quarter with a leverage ratio of 4.29x. Energy Transfer has a very high yield and appears to have a secure payout, although such a high yield indicates at least some doubt as to the sustainability of the distribution.

Investors should be aware that stocks with extremely high yields are often signs of an unsustainable payout. Therefore, risk-averse income investors may want to look elsewhere. But for investors who accept the risk, Energy Transfer is an attractive stock for income.

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.