Sure Dividend

Updated on July 7th, 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 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 100+ 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 dividend stocks for you to consider adding to your retirement or pre-retirement income portfolio.

Table Of Contents

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

The 7 high dividend stocks with Dividend Risk scores of C or better are listed in order by dividend yield, from lowest to highest.

• High Dividend Stock #7: PPL Corp. (PPL)
• High Dividend Stock #6: AT&T Inc. (T)
• High Dividend Stock #5: Altria Group (MO)
• High Dividend Stock #4: British American Tobacco (BTI)
• High Dividend Stock #3: Magellan Midstream Partners LP (MMP)
• High Dividend Stock #2: Sunoco LP (SUN)
• High Dividend Stock #1: MPLX LP (MPLX)

High Dividend Stock #7: PPL Corp. (PPL)

• Dividend Yield: 5.9%
• Dividend Risk Score: C

PPL is a utility with over 10 million customers in the U.S and the U.K. PPL 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.

PPL recently sold its U.K. business to National Grid plc (NGG) for $10.4 billion after taxes and fees. In a separate transaction, PPL will acquire the Narragansett Electric Company from a subsidiary of National Grid for $3.8 billion. This transaction should close in Q1 2022.

The company has performed well to start 2021, with the steady growth that investors typically expect from utilities.

Source: Investor Presentation

In the 2021 first quarter, PPL’s revenue grew 4% to $1.5 billion. Earnings from ongoing operations of $219 million, or $0.28 per share, compared favorably to earnings from ongoing operations of $206 million, or $0.27 per share, in the previous year’s quarter.

Earnings from ongoing operations for the Pennsylvania regulated segment were flat as returns on capital investments, higher volumes and lower operation and maintenance expenses were offset by lower peak transmission demand.

Analysts expect PPL to earn $2.40 in 2021, down from $2.45 previously. We expect 2% annual EPS growth for PPL over the next five years. With a ~69% dividend payout ratio expected for 2021, PPL’s dividend payout appears safe, although the major divestiture adds an element of uncertainty for the dividend.

High Dividend Stock #6: AT&T Inc. (T)

• Dividend Yield: 7.2%
• Dividend Risk Score: B

AT&T is a telecommunications giant, as its core Communications segment provides mobile, broadband and video to 100 million U.S. consumers and 3 million businesses.

On April 22nd, 2021 AT&T reported Q1 2021 results for the period ending March 31st, 2021. For the quarter the company generated $43.9 billion in revenue, up 2.7% from $42.8 billion in Q1 2020, as higher mobility and WarnerMedia revenue more than offset declines in domestic video, business wireline and Latin America.

Source: Investor Presentation

Reported net income equaled $7.5 billion or $1.04 per share. On an adjusted basis, earnings–per–share equaled $0.86 compared to $0.84 in the year-ago quarter. AT&T ended the quarter with a net debt–to–EBITDA ratio of 3.1x.

AT&T is undergoing massive changes as it seeks to unload its satellite TV and media assets. On February 25th, AT&T announced it will spin off multiple assets into a separate company called New DIRECTV that will own and operate the DirecTV satellite TV business, as well as AT&T TV and U-verse video. AT&T will own 70% of the company, and will sell 30% ownership to TPG for approximately nearly $8 billion, which will be used to pay down debt.

On May 17th, 2021 AT&T announced an agreement to combine WarnerMedia with Discovery, Inc. (DISCA) to create a new global entertainment company. AT&T will receive $43 billion in a combination of cash, securities and retention of debt. AT&T shareholders receive stock representing 71% of the new company, with Discovery shareholders owning 29%.

We believe these various deals with allow AT&T to simplify its operations, become more efficient, and return to its core focus on telecom services. Indeed, 5G is a major area of focus for AT&T. The company continues to expand 5G to more cities around the country. AT&T’s 5G service now covers more than 120 million people.

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. AT&T also has a long history of increasing dividends each year (AT&T is currently a Dividend Aristocrat).

High Dividend Stock #5: Altria Group Inc. (MO)

• Dividend Yield: 7.4%
• Dividend Risk Score: B

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.

Altria reported first-quarter results on April 29th. Revenue net of excise taxes declined 3.3% year-over-year. Adjusted earnings-per-share declined 1% year-over-year. Declines were mostly driven by lower revenue in the smokeable products segment.

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. The company purchased a 55% equity stake in Canadian marijuana producer Cronos Group, invested nearly $13 billion for a 35% equity stake in e-vapor manufacturer Juul Labs, and recently acquired the remaining 20% ownership stake in Switzerland-based Burger Söhne Group it didn’t already own, for its on! oral nicotine pouch brand.

It has also invested in its own heated tobacco product line called IQOS, which the company continues to expand.

Source: Investor Presentation

We expect new products to fuel the company’s long-term growth. We forecast 3% annual EPS growth going forward, driven by revenue growth as well as share repurchases. Altria utilized $325 million for share repurchases in the first quarter, and has $1.7 billion remaining on its current repurchase program which it expects to complete by June 30th 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.

High Dividend Stock #4: British American Tobacco (BTI)

• Dividend Yield: 7.6%
• Dividend Risk Score: C

British American Tobacco is one of the world’s largest tobacco companies. 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 most recent trading update, the UK equivalent to quarterly results, on June 8. BTI’s trading updates do not include specific earnings numbers, but they tell investors about the performance of the company during the last couple of months.

The company’s portfolio of new, non-combustible products is leading the way.

Source: Investor Presentation

In the most recent update, BTI stated that the revenue performance was above previous expectations, which is why the company has raised its full year 2021 revenue guidance, at constant currency rates, to more than 5%from a previous level of 3%–5%.

This can be explained by success in its New Categories (reduced risk products) segment, where British American Tobacco has been able to grow its market share in 2020 and 2021. BTI grew its non–combustible product consumer count by 10% during the first quarter alone, driven in part by rollouts of the product in new markets.

The company expects mid-single-digit revenue and earnings–per–share growth for 2021, which points to earnings–per–share of about US$4.80 in 2021. This should cover the company’s dividend payment.

High Dividend Stock #3: Magellan Midstream Partners LP (MMP)

• Dividend Yield: 8.4%
• Dividend Risk Score: C

Magellan Midstream Partners is a Master Limited Partnership, or MLP. You can see our entire MLP list here.

Magellan has the longest pipeline system of refined products, which is linked to nearly half of the total U.S. refining capacity. This segment generates ~65% of its total operating income while the transportation and storage of crude oil generates ~35% of its operating income. MMP has a fee-based model; only ~10% of its operating income depends on commodity prices.

Source: Investor Presentation

In late April, MMP reported (4/29/21) financial results for the first quarter of 2021. The MLP recovered from the pandemic thanks to improved demand for refined products, while it also benefited from the winter storms. As a result, distributable cash flow per share fell only 9% over last year’s first quarter, from $1.36 per unit to $1.24 per unit.

The distribution coverage ratio improved sequentially from 1.13 to 1.21. MMP also raised its guidance for its annual distributable cash flow by 5%, from $1.02 billion to $1.07 billion.

MMP has promising growth prospects ahead, as it has several growth projects under way. The company invested $1.0 billion in these projects in 2019, and $355 million in 2020. It also has more than $500 million of potential growth projects under consideration.

We expect DCF-per-unit of $4.70 for 2021, which would sufficiently cover the distribution. MMP’s fee-based model (~85% of operating margin is comprised of fee-based activities) help insulate the company’s cash flows from volatile swings in commodity prices.

MMP also has a relatively healthy balance sheet for an MLP, with an investment-grade credit rating of BBB+ from Standard & Poor’s, and a debt-to-EBITDA ratio of 3.75x at of the end of the 2021 first quarter.

High Dividend Stock #2: Sunoco LP (SUN)

• Dividend Yield: 8.7%
• Dividend Risk Score: C

Sunoco is a Master Limited Partnership that distributes fuel products through its wholesale and retail business units. The wholesale unit purchases fuel products from refiners and sells those products to both its own and independently-owned dealers. Sunoco is the largest fuel distributor in the U.S, but also operates a small number of retail stores, and a terminal facility in Hawaii.

Sunoco reported its first-quarter earnings results on May 6th. The company reported that its revenues totaled $3.5 billion during the quarter, which was 6% more than the revenues that Sunoco generated during the previous year’s quarter. Fuel prices were up compared to the previous year’s quarter, but that was offset by lower sales volumes, as consumers drove less.

Fuel prices are mostly a flow–through item for Sunoco, as a wholesaler Sunoco’s costs increase as well when fuel prices rise. The revenue increase does thus not go hand in hand with an earnings increase of the same magnitude.

Sunoco reported that its adjusted EBITDA was down year over year, to $157 million during the first quarter. Sunoco’s distributable cash flows totaled $108 million during the quarter, which was roughly one–third lower compared to the previous year’s quarter. DCF came to $1.29 per share, which covered the distribution easily.

High Dividend Stock #1: MPLX LP (MPLX)

• Dividend Yield: 9.4%
• Dividend Risk Score: C

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.

The company’s Logistics and Storage segment has pipeline capacity of 4.7 million barrels per day.

Source: Investor Presentation

On May 4th, 2021 MPLX released Q1 2021 results for the period ending March 31st, 2021. For the quarter Net Income equaled $739 million compared to a loss of –$2.72 billion in Q1 2020. Distributable cash flow (DCF) equaled $1.137 billion (~$1.10 per unit) versus $1.078 billion (~$1.02 per unit).

Results were slightly better on a per unit basis as a result of a lower unit count. MPLX ended the quarter with a consolidated debt to adjusted EBITDA ratio of 3.9x (down from 4.1x in Q1 2020). Distribution coverage equaled 1.56x compared to 1.44x in the year ago period.

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 MLP 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 9%.

Final Thoughts

Interest rates are very low right now. 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 dividend stocks are still presenting strong income generation ability.

The 7 high dividend stocks on this list have 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 dividend 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 extremely high dividend yields.