High dividend stocks appeal to many investors in retirement because they provide substantial passive income. And unlike the fixed interest paid from bonds, dividends can grow each year to help combat inflation.
But not all of the highest dividend stocks are safe. From aggressive payout ratios to risky debt loads and businesses in secular decline, stocks with high dividends require extra research to avoid investing in yield traps.
We reviewed the universe of high dividend stocks to identify companies capable of paying safe dividends. These businesses maintain prudent dividend policies, strong balance sheets, and operations that generate predictable cash flow.
The top 25 high dividend stocks analyzed below possess these traits and have:
- A dividend yield above 4% (some as high as 10%)
- A Borderline Safe, Safe, or Very Safe Dividend Safety Score™
- An investment-grade credit rating (except for two unrated stocks)
- An ability and desire to protect their dividends during downturns
Let’s check out 25 of the best highest-paying dividend stocks that can help investors produce dependable income in retirement.
Top 25 High Dividend Stocks
The high-yield dividend stocks below are ordered by how many consecutive years they have maintained or increased their dividends, starting with the shortest streaks.
High Dividend Stock #25: International Paper
Sector: Materials – Paper Packaging
Dividend Yield: 5.3%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 1 year
Formed in 1898, International Paper (IP) generates around 85% of its sales from making linerboard and heavy-duty cardboard boxes used to move food and beverages, other non-durables such as chemicals and tissues, and durable goods used in e-commerce and shipping.
Source: International Paper
The containerboard market has consolidated over time to be dominated by just a handful of companies, and International Paper is the largest player with over 30% share in North America.
As a result, nearly all of the company’s production capacity is positioned in the first quartile on the global cost curve, and the shrinking number of competitors has helped the industry’s operating rates and pricing discipline.
These qualities have helped International Paper generate positive free cash flow in all manner of economic environments.
Aside from a 10% dividend reduction related to International Paper’s 2021 divestiture of its lower-margin printing papers business, which accounted for about 20% of sales, the company has only cut its dividend once since making its first payout in 1946.
That cut took place in 2009 and was caused by the firm’s highly leveraged balance sheet, which swelled in 2008 after completing a $6 billion deal to buy Weyerhaeuser’s packaging assets.
International Paper looks poised to be a more dependable high dividend stock today. For example, the company’s BBB rated balance sheet is the healthiest it has been in at least a decade, reflecting management’s debt reduction efforts and avoidance of major acquisitions.
Looking ahead, long-term box demand will likely grow slowly but steadily thanks to increased e-commerce activity and stable shipments in key markets like food manufacturing.
While pricing and operating rates will remain sensitive to the broader economy, International Paper can hold its ground as a top high dividend stock for investors comfortable with the industry’s cyclicality.
High Dividend Stock #24: AT&T
Sector: Communications – Wireless and Internet Services
Dividend Yield: 6.0%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 1 year
AT&T (T) has frustrated investors for years. From overpaying for acquisitions to overextending the company’s balance sheet and cutting the dividend in 2021, management has found no shortage of ways to destroy shareholder value.
But the future looks brighter. After shedding DirecTV and its media business, wireless and internet services now drive the bulk of AT&T’s profits.
Source: AT&T
These businesses enjoy high barriers to entry due to their capital intensity, and they generate predictable cash flow over an economic cycle thanks to the essential needs they serve.
With increased focus from management on the core business, AT&T has shown steady growth in wireless services and broadband revenue while also improving margins.
Coupled with a more sustainable payout ratio near 50% and consistent free cash flow generation to further strengthen its BBB rated balance sheet, AT&T’s high dividend looks safe.
As the company continues returning to its communication roots and no longer focuses on empire-building, investors interested in the highest paying dividend stocks may consider giving AT&T another look.
High Dividend Stock #23: Kinder Morgan
Sector: Energy – Oil and Gas Storage and Transportation
Dividend Yield: 6.1%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 5 years
Kinder Morgan (KMI) has grown since its formation in 1997 to become of the largest midstream infrastructure companies in North America. The firm makes most of its money from natural gas pipelines, with remainder balanced between refined products and oil pipelines, storage, and sales of carbon dioxide used in oil production.
Kinder Morgan’s pipelines, storage facilities, and terminals are integrated into almost all parts of the U.S. energy industry, including every major gas and oil shale formation and export markets along the Gulf Coast.
Source: Kinder Morgan
Despite generating stable cash flow from its essential infrastructure assets, Kinder Morgan burned high-yield investors in 2015 by slashing its dividend by 75%. (The firm had a Very Unsafe Dividend Safety Score™ prior to its cut announcement.)
The payout reduction was caused by the company’s high leverage and dependence on issuing equity to fund large expansion projects.
Management prioritized growth spending and preserving Kinder Morgan’s investment-grade credit rating over the dividend when oil prices crashed in 2015 and caused investors to sour on the midstream industry, cutting off access to equity financing.
Kinder Morgan has since de-risked its business profile by implementing a self-funding business model (no need to issue equity), scaling down its growth ambitions, reducing its debt, and improving its credit rating by one notch to BBB.
Coupled with a conservative payout ratio near 50% and a durable cash flow stream backed primarily by long-term contracts and fee-based, take-or-pay contracts, Kinder Morgan should be one of the more reliable stocks with high dividends going forward.
High Dividend Stock #22: Crown Castle
Sector: Real Estate – Wireless Infrastructure REIT
Dividend Yield: 4.6%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 7 years
Founded in 1994, Crown Castle (CCI) is the largest provider of shared wireless infrastructure in the country with thousands of towers, small cell nodes, and miles of fiber supporting communications networks in every major U.S. market.
Source: Crown Castle
T-Mobile, AT&T, and Verizon account for around 70% of Crown Castle’s revenue. These carriers deploy communications equipment on the REIT’s towers to transmit signals between the tower and nearby mobile devices.
Crown Castle’s small cell antennas and the fiber cables connecting them are typically attached to utility poles and street lights in denser areas to augment the network capacity provided by towers.
Carriers have no substitutes for wireless infrastructure, which is mission-critical for their businesses to operate. Leasing space on towers is also more cost-effective than owning them since Crown Castle colocates equipment from multiple customers on a single piece of infrastructure.
The end result is a recurring revenue stream backed by long-term leases with renewal rates near 100%. With wireless data demand continuing to grow, carriers need to deploy more spectrum and densify their networks as well, providing more business for Crown Castle over time.
Management sees potential to deliver 7% to 9% annual dividend growth as this plays out. Backed by a BBB- credit rating as well, Crown Castle is a high-yield REIT offering attractive income and growth.
High Dividend Stock #21: Physicians Realty Trust
Sector: Real Estate – Health Care REITs
Dividend Yield: 6.4%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 8 years
Founded in 2011, Physicians Realty Trust (DOC) owns around 300 medical office buildings (MOBs) in over 30 states. The REIT’s portfolio is balanced across MOBs located on campus with a hospital and off-campus properties closer to where patients live.
Source: Physicians Realty
This is a recession-resistant business. Physicians Realty generates a stable rental income stream thanks to its long-term triple net leases with tenants such as physicians and health care delivery systems, which benefit from an ongoing need for their medical services.
A strong, diversified tenant profile further reduces risk. Over 60% of the REIT’s tenants are considered investment-grade caliber, and no tenant exceeds 6% of annual rent. Physicians Realty’s MOBs are spread across many markets as well with no metropolitan area topping 7% of leasable square footage.
These traits kept Physicians Realty’s rent collection rate at 98% or higher each month during 2020 despite many medical providers seeing their business disrupted by pandemic-related restrictions. The REIT’s occupancy rate has consistently remained over 90%, too.
Coupled with a BBB credit rating and demand tailwinds from higher health care spending driven by an aging population, Physicians Realty seems likely to maintain its streak of paying uninterrupted dividends since making its first payout in 2013.
While the REIT’s dividend has remained frozen since mid-2017, Physicans Realty’s payout ratio has improved from nearly 100% to around 90% over this period. Low single-digit dividend growth could begin in the next couple of years as coverage continues improving.
Either way, DOC’s high dividend looks like a good bet for conservative income investors.
High Dividend Stock #20: LyondellBasell
Sector: Materials – Commodity Chemicals
Dividend Yield: 5.7%
Dividend Safety Score: Borderline Safe
Uninterrupted Dividend Streak: 9 years
LyondellBasell’s (LYB) history traces back to the 1950s when breakthrough discoveries were made in synthesizing petrochemicals. Today, the company is one of the largest chemical suppliers and refiners in the world.
Source: LyondellBasell
LyondellBasell converts fossil fuels into plastic resins and other petrochemicals. Downstream manufacturers turn these materials into food packaging, home furnishings, clothing, tires, fertilizers, and many other products. Petrochemicals are everywhere in modern society.
Despite the essential nature of commodity chemicals, stiff competition and little differentiation in quality between producers limit LyondellBasell’s pricing power. Demand is highly sensitive to the economy as well.
Despite these challenges, which result in cyclical profits for LyondellBasell, the company has paid higher dividends every year since 2012.
This reflect’s the firm’s scale, feedstock flexibility (including cost-advantaged natural gas in the U.S.), solid balance sheet (BBB credit rating), and ability to reduce capital spending and costs during downturns.
As one of the best operators in its industry, LyondellBasell and its high dividend may appeal to income investors who are comfortable owning cyclical stocks.
High Dividend Stock #19: Arbor Realty Trust
Sector: Financials – Mortgage REITs
Dividend Yield: 12.1%
Dividend Safety Score: Borderline Safe
Uninterrupted Dividend Streak: 9 years
Formed in 2003 with a small portfolio of structured real estate loans, Arbor Realty Trust (ABR) has grown to become one of the most diversified mortgage REITs in the industry.
Today, structured loans continue to account for around one-third of Arbor’s earnings. This business provides floating-rate bridge loans to real estate owners and developers so they can buy properties until the obtain permanent financing (e.g. a conventional mortgage).
Arbor mitigates some of the risk associated with lending to subprime borrowers by focusing on recession-resistant apartments, securing its bridge loans with first mortgage liens on the properties, and requiring borrowers to post reserves. These strategies reduce the risk of major credit losses.
Source: Arbor Realty
Outside of bridge loans, Arbor has a large agency business. This segment earns fees by originating, selling, and servicing multifamily mortgages, most of which are guaranteed by government-sponsored organizations such as Fannie Mae.
While mortgage originations have plunged with interest rates shooting higher, Arbor generates most of its revenue from recurring fees tied to collecting mortgage payments and sending them to the originator.
This annuity-like business provides more reliable cash flow and reduces Arbor’s sensitivity to interesting rates in its highly-leveraged lending business.
Overall, Arbor’s diversified earnings stream, relatively conservative payout ratio, and focus on a more defensive area of real estate make the mortgage REIT one of the best high dividend stocks in this volatile, complex industry.
High Dividend Stock #18: Dow
Sector: Materials – Commodity Chemicals
Dividend Yield: 5.6%
Dividend Safety Score: Borderline Safe
Uninterrupted Dividend Streak: 12 years
With a history tracing back to 1897, Dow (DOW) is one of the oldest and largest chemical companies in the world with over 3,500 product families that touch thousands of customers in more than 150 countries.
Source: Dow
About half of the conglomerate’s cash flow comes from producing plastics and chemical building blocks used primarily in packaging, as well as in other products such as artificial turf, pipe, and power transmission cables.
Intermediate chemicals and performance materials used in paints, personal care products, insulation, furniture, and many other applications account for the rest of the business.
While many parts of the economy could not function without Dow’s chemicals, the industry is also cyclical with profits driven by oil and gas prices and global supply-demand balances across different products.
Dow has little pricing power to mitigate these uncontrollable risk factors. Instead, the firm relies on its scale, low-cost feedstock position (U.S. natural gas is a major input), diversified portfolio, and vertical integration to generate cost advantages over smaller rivals.
This has helped the company generate cash flow throughout various economic cycles and pay reliable dividends since 1912 outside of a 2009 cut driven by plunging chemicals demand, high leverage, and an ill-timed transformative acquisition.
Dow has since strengthened its balance sheet considerably to earn a BBB credit rating. While profits generated from commodity chemicals will remain volatile over a full cycle, Dow seems more likely than not to defend its dividend.
Investors interested in the high-yield stock just need a strong stomach for price swings whenever the economic outlook sours.
High Dividend Stock #17: Ares Capital
Sector: Financials – Business Development Companies
Dividend Yield: 10.4%
Dividend Safety Score: Borderline Safe
Uninterrupted Dividend Streak: 12 years
Ares Capital (ARCC) formed in 2004 when alternative investment manager Ares created the firm to engage in corporate lending activities. Today, Ares Capital is the largest business development company (BDC) in America.
Source: Ares Capital
As a BDC, Ares Capital provides high-yield loans to relatively small, highly levered companies that can’t access traditional financing from banks.
This is a risky, cyclical industry. But Ares Capital represents one of the best high dividend stocks in the space thanks in part to its size.
As the biggest BDC, Ares Capital’s vast capital base enables the company to serve businesses of all sizes and provide financing over a firm’s entire life cycle, creating longer-term relationships.
Ares Capital’s large size also makes it easier to maintain a well-diversified portfolio. The BDC’s investments span more than 400 companies, none greater than 2% of the portfolio. This reduces the firm’s dependence on any single investment.
Management targets less cyclical businesses as well, focusing on service-oriented companies that generate steady cash flow, such as software and health care.
The portfolio’s risk is further reduced by Ares Capital’s focus on first-lien secured loans, which account for around half of the BDC’s investments and get paid first when a borrower defaults. This reduces the chance of major loan losses during downturns.
Ares Capital also uses less leverage than is allowed by regulators, earning the firm a BBB- credit rating.
These qualities have helped Ares Capital pay steady dividends since its founding in 2004, with the only blemish being a 17% dividend cut in 2009 when management opted to strengthen the balance sheet in the face of uncertain credit market conditions.
Ares Capital is bigger today with access to a wider variety of capital sources, providing more support for the dividend in future downturns. For investors seeking the highest paying dividend stocks, Ares Capital is a well-run BDC to consider, though it is not immune from the industry’s cyclicality.
High Dividend Stock #16: Philip Morris International
Sector: Consumer Staples – Tobacco
Dividend Yield: 5.0%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 13 years
Philip Morris International (PM) formed in 2008 when Altria spun off the international rights to its most famous cigarette brands, including Marlboro. Today, Philip Morris serves more than 150 million customers in over 180 countries, with a strong focus on emerging markets.
The tobacco market has served income investors well for decades. Warren Buffett described the business best when he once remarked, “It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty.”
Thanks to these qualities and its portfolio of premium brands that have pricing power to offset volume declines, Philip Morris has raised its dividend annually since separating from Altria in 2008. Altria has increased its dividend for more than 50 straight years, too.
However, the tobacco world is headed toward a smoke-free future in the long term. Compared to its rivals, Philip Morris has a lead in transitioning its portfolio from combustible cigarettes to so-called reduced-risk products.
Since 2008 the firm has invested over $8 billion in R&D, with the majority of that spending focused on smoke-free offerings spanning heated tobacco (pictured below) and vapor products. These products grew from 0.2% of net revenues in 2015 to nearly 30% in 2021.
Source: Philip Morris
It is hard to say which types of products (vaping, heat-not-burn tobacco, etc.) will see the greatest adoption worldwide.
But Philip Morris’s technology investments, global distribution network, geographic diversification, A credit rating, and recession-resistant cash flow should keep the company a reliable high dividend stock.
High Dividend Stock #15: Main Street Capital
Sector: Financials – Business Development Companies
Dividend Yield: 7.3%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 14 years
Main Street Capital (MAIN), founded in Texas in 1997, is one of the oldest and largest business development companies (BDCs) in the industry. The stock is also the only monthly dividend payer on our list.
As a BDC, Main Street provides debt and equity capital to relatively small, highly leveraged companies that can’t tap traditional financing from banks.
This is a cyclical business since loan defaults spike during economic downturns. Paired with the high leverage and aggressive payout ratios maintained by most BDCs, few firms have shown an ability to defend their dividends when the tide goes out.
Main Street is an exception. The firm has never reduced its regular dividend since making its first payout in 2007, a stretch that includes two recessions.
To keep its high dividend safe, Main Street maintains a well-diversified loan portfolio with around 150 companies represented.
No investment tops 5% of the portfolio’s income, and industry exposures are kept beneath 10% of the portfolio’s value. This provides protection from distress at any single company or sector.
Source: Main Street
Main Street focuses on first-lien secured loans as well. This debt is paid back first in the even of a default, reducing the potential for major loan losses during recessions.
Management also runs the business with much less debt than regulators allow, helping the firm earn a BBB- credit rating.
That said, investors considering Main Street for its high dividend need a strong stomach for volatility given the risks associated with its investments in subprime debt securities. But Main Street is arguably the most conservative high dividend stock in the industry.
High Dividend Stock #14: Highwoods Properties
Sector: Real Estate – Office REITs
Dividend Yield: 7.2%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 17 years
Founded in 1978 in North Carolina, Highwoods Properties (HIW) owns over 100 offices primarily in Sun Belt markets, which have enjoyed above-average economic growth. Properties in Raleigh, Nashville, Atlanta, Charlotte, and Tampa generate over 80% of the REIT’s rent.
Source: Highwoods Properties
Since going public in 1994, the office landlord has only cut its dividend once. In 2003, a payout reduction was necessary after occupancy fell from 93% in 2001 to 82%. Driven partly by tenants WorldCom and U.S. Airways going bankrupt, this pushed Highwoods’ payout ratio above 100%.
Highwoods’ high dividend appears more reliable today despite uncertainties created by remote and hybrid work.
The REIT has a well-diversified portfolio with no tenant in excess of 4% of rent. Only around 10% of leases expire annually over the next few years as well, protecting cash flow while office fundamentals stabilize.
Coupled with a moderate payout ratio near 80%, a BBB credit rating, and a focus on Class A properties more likely to remain in demand, Highwoods represents an appealing high-yield dividend stock in the office sector.
High Dividend Stock #13: Best Buy
Sector: Consumer Discretionary – Computer and Electronics Retail
Dividend Yield: 4.4%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 18 years
Founded in 1966 as a small electronics shop focused on stereos, Best Buy (BBY) now has more than 1,000 stores selling computers, mobile phones, digital cameras, home theater systems, appliances, and more.
Source: Best Buy
Best Buy enjoys a leadership position as America’s last remaining national brick-and-mortar electronics retailer. Although the convenience and price competitiveness of online shopping have put many retailers out of business, many customers still prefer an in-store experience.
Knowledgeable employees can help shoppers make better-informed buying decisions, especially for pricey, experiential purchases like home theater systems. And for some consumers, there’s added comfort in buying electronics from a trusted source with tech-support options.
Additionally, Best Buy’s price match guarantee, online presence (e-commerce now accounts for 40% of U.S. sales), and fast shipping options (over 70% of Americans live within 10 miles of a Best Buy store) have narrowed its online peers’ competitive advantages.
Along with the firm’s BBB+ credit rating and solid free cash flow generation with few new big-box stores being opened, Best Buy should remain a reliable stock paying high dividends.
High Dividend Stock #12: Magellan Midstream Partners
Sector: Energy – Oil and Gas Storage and Transportation
Dividend Yield: 8.3%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 20 years
Founded in 2000, Magellan Midstream Partners (MMP) owns the longest refined products pipeline system in the U.S. The master limited partnership generates most of its cash flow from helping move gasoline and diesel fuel from refineries to gas stations, truck stops, airports, and other end users.
Magellan also owns oil pipelines that provide long-haul transportation for energy producers, which need to move their oil production to trading and demand centers.
Source: Magellan Midstream Partners
Both of Magellan’s core businesses generate predictable cash flow. This reflects fee-based revenue streams (rather than direct exposure to commodity prices) and built-in volume protection due to steady demand for transportation fuels and take-or-pay contracts common in the oil pipeline business.
Management runs the publicly traded partnership conservatively as well. Low debt levels earn Magellan a BBB+ credit rating, and modest capital requirements to maintain the mature business result in healthy free cash flow.
These qualities have enabled Magellan to pay uninterrupted dividends since going public in 2001. But increased fuel efficiency and adoption of electric vehicles could result in a more challenging environment going forward.
While Magellan’s refined products pipelines are directly exposed to these risks, a decline in transportation fuel demand seems likely to happen gradually over the course of decades.
Gasoline remains cheaper and more scalable than “green” alternatives, and demand should continue being supported by a growing global population and expanding middle-class.
Overall, Magellan is one of the best high dividend stocks for income. Investors considering the stock just need to believe in the staying power of transportation fuels and be comfortable receiving a K-1 form at tax time.
High Dividend Stock #11: W.P. Carey
Sector: Real Estate – Diversified REITs
Dividend Yield: 5.5%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 23 years
Named after its founder and formed in 1973, W.P. Carey (WPC) owns over 1,400 single-tenant properties primarily spanning industrial, warehouse, office, retail, and self-storage markets.
The REIT’s diverse portfolio is leased to more than 350 tenants operating in over 25 industries across the U.S. and Europe. No tenant exceeds around 3% of sales, and W.P. Carey is not overly dependent on any single market.
Source: W.P. Carey
W.P. Carey’s risk profile is strengthened by the firm’s focus on buildings that serve critical functions for tenants. Examples include key distribution facilities, profitable manufacturing plants, corporate headquarters, and top-performing retail stores.
These operationally essential properties are also occupied mostly by larger companies, such as U-Haul and Marriott, which are better equipped to weather economic downturns.
Coupled with an average lease duration in excess of 10 years, W.P. Carey has historically maintained strong occupancy rates near 100% and collected nearly all of its rent through the pandemic of 2020.
Further backed by a BBB credit rating and reasonable payout ratio near 80%, W.P. Carey is an appealing high-yield dividend stock that should continue its streak of paying higher dividends every year since going public in 1998.
High Dividend Stock #10: Enterprise Products Partners
Sector: Energy – Oil and Gas Storage and Transportation
Dividend Yield: 7.9%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 23 years
Enterprise Products Partners (EPD) began in 1968 as a wholesale marketer of natural gas liquids and has expanded over the decades to become one of the largest MLPs in America.
Energy producers depend on the partnership’s network of pipelines, processing plants, storage facilities, and terminals to get raw fossil fuels from their wellheads to end consumers in a ready-to-use state.
.png)
Source: Enterprise Product Partners
With hard-to-replicate assets connected to nearly every major U.S. shale basin, Enterprise enables many energy producers to enter a single relationship to move their products to downstream buyers.
These essential services, backed by long-term, fixed-fee contracts with minimum volume guarantees, have insulated Enterprise’s cash flow from volatile oil and gas prices over the years.
Coupled with a BBB+ credit rating, self-funded business model, and diversified base of customers working with a variety of commodities, Enterprise has paid higher distributions every year since going public in 1998.
As long as fossil fuels remain an important component of the world’s energy mix, Enterprise’s high yield should continue to be a good bet for investors who are comfortable with investing in MLPs and receiving the K-1 forms they send at tax time.
High Dividend Stock #9: Pembina Pipeline
Sector: Energy – Oil and Gas Storage and Transportation
Dividend Yield: 5.7%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 25 years
Founded in Alberta’s Pembina oilfield in 1954, Pembina Pipeline (PBA) provides midstream services throughout western Canada. The company’s infrastructure consists primarily of oil and gas pipelines, storage facilities, and processing plants.
Source: Pembina
Pembina’s network of assets acts as a one-stop shop for energy producers to help move their oil, gas, and natural gas liquids from Canada to the highest value markets worldwide.
This essential business generates stable revenue from fee-based activities backed by long-term contracts with minimum volume protections, insulating cash flow from volatile energy prices.
Management runs the company conservatively as well, with Pembina earning a BBB credit rating and maintaining a self-funded business model that requires no equity issuances to fund growth.
In addition to its well-supported payout, Pembina appeals to income investors thanks to the firm’s unblemished track record of no dividend cuts since going public in 1997.
Investors considering the stock should note that as a Canadian company, dividends paid by Pembina to U.S. investors are subject to a 15% withholding tax unless shares are held in retirement accounts.
However, with an additional form at tax time, U.S. investors can generally claim a foreign tax credit to offset withholding taxes.
High Dividend Stock #8: Pinnacle West
Sector: Utilities – Electric Utilities
Dividend Yield: 4.6%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 28 years
Pinnacle West’s (PNW) roots trace back to 1884 when a small municipal utility formed to provide electricity and heating to the people of Phoenix. Today, the regulated utility is the largest electricity provider in Arizona, serving over 25% of the state’s households.
Source: Pinnacle West
Regulated utilities have several qualities that can make them appealing high dividend stocks.
Most are essentially government-sanctioned monopolies with locked-in customer bases, exclusive operating rights within their service areas, and guaranteed returns on capital set by regulators to incentivize continued investment into their asset base.
This results in a predictable earnings stream which has enabled Pinnacle to pay stable or higher dividends every year since 1994.
However, Pinnacle’s high dividend yield reflects the recent deterioration in the firm’s relationship with the Arizona Corporation Commission (ACC), the state utility regulator.
A ruling in 2021 by the ACC significantly reduced Pinnacle’s allowed return on equity. This atypical profit reduction sent the utility’s payout ratio towards 80% and resulted in a credit rating downgrade to BBB+.
Despite this setback, Pinnacle expects to achieve 5% to 7% annual EPS growth through 2026 and return its payout ratio to its target range between 65% and 75%. Investors should expect low single-digit dividend increases during this time.
While regulatory battles can cause challenges, they are likely to be smoothed out in the long run since a utility’s services are essential to keeping families safe and economies running.
Pinnacle also has one of the strongest underlying growth profiles in the sector thanks to Arizona’s solid population growth rate and influx of data centers, which require a lot of electric power to run.
Coupled with the essential nature of utility services and a hopefully more constructive relationship with the ACC in future years, Pinnacle represents one of the highest dividend stocks in the utilities sector with a payout that seems likely to be sustained.
High Dividend Stock #7: National Retail Properties
Sector: Real Estate – Retail REITs
Dividend Yield: 4.8%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 34 years
National Retail Properties (NNN) began in 1984 when restaurant chain Golden Corral formed a REIT to acquire its properties and lease them back. Today, National Retail owns over 3,000 single-tenant, freestanding properties across America, leased to more than 350 tenants in over 30 industries.
Source: National Retail
The retail REIT has delivered predictable results for decades, thanks in part to its triple-net leases that require tenants to pay for insurance, maintenance, utilities, and property taxes. National Retail thus serves purely as a landlord, collecting a recurring stream of high-margin rent.
The REIT’s cash flow stream is further protected by a well-diversified portfolio. No industry exceeds 20% of rent, no tenant tops 5% of rent, and the portfolio is spread across the U.S. with no major geographic concentration.
Management has also prioritized avoiding retail categories that are most susceptible to the threat posed by e-commerce, such as departments and malls.
Experiential or service businesses such as convenience stores, automotive service, restaurants, gyms, and entertainment centers are the REIT’s largest exposures and drive around 60% of rent.
These traits have helped National Retail maintain high occupancy rates and stable cash flow over time, enabling shareholders to enjoy higher dividends each year since 1990.
With a diversified property portfolio, BBB+ credit rating, and conservative payout ratio policy, the company’s high dividend seems likely to remain safe and growing for years to come.
High Dividend Stock #6: Verizon
Sector: Communications – Wireless and Internet Services
Dividend Yield: 6.6%
Dividend Safety Score: Very Safe
Uninterrupted Dividend Streak: 38 years
Verizon (VZ) formed in 2000 when Bell Atlantic and GTE merged, creating America’s largest wireless company. Wireless services continue to generate nearly all of Verizon’s profits today.
Source: Verizon
This capital-intensive business has high barriers to entry. Verizon, AT&T, and T-Mobile dominate the industry with massive subscriber bases, which provide the cash flow necessary to maintain their nationwide networks.
Verizon historically maintained superior network reliability, speed, and performance, allowing the telecom giant to charge premium rates and enjoy lower churn.
But there is now far more network coverage parity between the major telecoms. Coupled with a saturated smartphone market and more aggressive promotions from AT&T and T-Mobile, this has made for a challenging competitive environment.
Verizon’s high yield reflects the company’s more muted subscriber growth in the recent years. The firm has also had to invest heavily in next-generation network technologies such as 5G, resulting in higher debt and uncertain returns as growth opportunities such as 5G home internet and higher plan rates remain fuzzy.
That said, Verizon and its predecessors have paid uninterrupted dividends since 1984, a streak that seems likely to continue.
The BBB+ rated company maintains a healthy payout ratio near 50% and will retain more free cash flow in the years ahead as 5G network spending peaked in 2022.
This will enable deleveraging and support Verizon’s high dividend for investors who believe in the firm’s recession-resistant services and staying power.
High Dividend Stock #5: Ennis
Sector: Industrials – Commercial Printing
Dividend Yield: 4.5%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 49 years
Founded in 1909 as a single print shop in Texas, Ennis (EBF) is the largest provider of business forms, labels, tags, envelopes, and presentation folders to independent distributors in the U.S.
Source: Ennis
Many print-based products have been in decline for decades as cost-effective electronic distribution of documents and other customer communications have driven an increasingly paperless business environment.
Ennis has navigated these challenges in part by acquiring smaller rivals to ensure it maintains the widest variety of products and capabilities in the industry.
The company has also carved out a niche in products that are tailor-made to a customer’s specifications for size, color, number of parts, and quantities. These custom and semi-custom products account for over 90% of the business.
With leading scale and geographic reach, and as the industry’s only major wholesale left, Ennis enjoys sticky relationships with customers such as print distributors, commercial printers, direct mail companies, and ad agencies.
While the broader industry may continue to gradually contract, Ennis sees growth opportunities as major direct manufacturers abandon older product lines as they redefine their business models.
The company’s largest distributors have also had more success capturing business from Fortune 500 companies, who previously were only willing to buy from direct manufacturers such as Staples before the pandemic disrupted supply chains.
With consistent free cash flow generation and a debt-free balance sheet, Ennis remains well positioned to continue consolidating the industry with acquisitions to offset industry revenue declines, too.
Ennis may not have an attractive growth profile, but the firm has paid reliable dividends every year since 1973. The high-yielding stock may appeal to income investors who are comfortable owning a relatively small company that has historically delivered safe payouts with little excitement.
High Dividend Stock #4: V.F. Corp
Sector: Consumer Discretionary – Apparel Goods
Dividend Yield: 7.4%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 50 years
Founded in 1899, V.F. Corp (VFC) owns a dozen fashion brands focused primarily on outerwear, footwear, and workwear. Vans and The North Face each account for around one-third of sales, with Timberland and Dickies representing the next largest brands.
Source: V.F. Corp
Consumer apparel is highly discretionary and marked by ever-changing fashion tastes, making the industry a less dependable space for sustainable dividends.
But V.F. Corp is an exception. Unlike many of its peers, the company has done a remarkable job reinventing its portfolio of brands to stay relevant and pay higher dividends for 50 consecutive years.
The company’s core logos remain well-aligned with the growing outdoors and active lifestyle apparel trends. And with nearly half of total sales derived from international markets, V.F. Corp is not overly exposed to shifting style preferences in any region.
So, why do shares of V.F. Corp have such a high dividend yield, especially since the business usually generates solid free cash flow and earns a BBB+ credit rating?
Exiting the pandemic, consumer spending habits have shifted from goods to experiences, and high inflation has led to a reduction in spending on discretionary apparel.
V.F. Corp and others have been left with far too much inventory, resulting in a highly promotional environment that has sapped margins. V.F. Corp’s largest brand, Vans, has also experienced disappointing growth.
None of these headwinds seem permanent, though. And if all goes well, management believes V.F. Corp can deliver low double-digit EPS growth over the next five years, giving the high dividend stock a combination of income and fast growth potential.
Overall, we believe V.F. Corp’s brands will support solid cash flow and modest dividend growth in the years ahead as profits recover from challenging industry conditions.
High Dividend Stock #3: Leggett & Platt
Sector: Consumer Discretionary – Home Furnishings
Dividend Yield: 5.5%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 55 years
Founded in 1883, Leggett & Platt (LEG) generates around half of its revenue from manufacturing bedding components such as mattress springs and foams. The remainder of the business makes engineered components primarily used in cars, furniture, flooring underlayment, and fabrics.
Source: Leggett & Platt
Despite operating in cyclical markets driven by discretionary consumer spending, Leggett & Platt has paid higher dividends every year since 1972. This impressive track record reflects the company’s focus on dominating niches that can deliver predictable cash flow.
The markets Leggett & Platt competes in generally have a slow pace of change. While the processes and materials used to produce certain goods evolve over time (e.g. foam mattresses), the problems solved by mattresses and furniture are timeless.
About two-thirds of bedding and furniture purchases are also made to replace existing products, making it more difficult for new entrants to take market share or capitalize on emerging trends.
Most of Leggett & Platt’s products have long life cycles as well, so the company doesn’t have to continuously redesign them to maintain its long-standing relationships with customers.
Coupled with its entry into key markets many decades ago and cost-efficient vertical integration advantages over smaller rivals (including ownership of a steel mill), Leggett & Platt maintains No. 1 or No. 2 market share positions in most of its product categories.
Further backed by a BBB credit rating, consistent profitability in all manner of economic environments, and a conservative capital allocation policy, Leggett & Platt should have a long runway to continue paying high dividends.
High Dividend Stock #2: Whirlpool
Sector: Consumer Discretionary – Household Appliances
Dividend Yield: 5.0%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 67 years
With roots tracing back to 1911, Whirlpool (WHR) has grown from a maker of simple electric motor-driven wringer washers to the world’s largest appliance manufacturer with around $20 billion in annual sales.
The company’s product portfolio includes washers and dryers, refrigerators and freezers, ovens, cooktops, and dishwashers. These appliances are sold under leading brand names such as Whirlpool, KitchenAid, and Maytag.
Source: Whirlpool
The home appliance market is mature in developed countries, where Whirlpool earns most of its sales because population growth rates there are very low.
As a result, we estimate Whirlpool earns at least half of its revenue from replacement sales as consumers often replace worn out appliances with the same brand in order to match the other appliances in their house.
Coupled with Whirlpool’s large installed base, the company has historically remained profitable even when discretionary purchases of new appliances and housing construction have slowed.
Whirlpool’s consistent cash flow and prudent use of debt, including a BBB credit rating, have enabled the firm to pay consistent annual dividends since going public in 1955.
While shares of Whirlpool can get hit hard during recessions, the high-yield stock seems likely to remain a reliable dividend payer for income investors.
High Dividend Stock #1: Enbridge
Sector: Energy – Oil and Gas Storage and Transportation
Dividend Yield: 6.7%
Dividend Safety Score: Safe
Uninterrupted Dividend Streak: 69 years
Established in 1949, Enbridge (ENB) is the largest midstream company in North America with a network of pipelines, terminals, storage facilities, and processing plants connecting the continent’s most vital energy-producing regions.
Source: Enbridge
The economy could not function without Enbridge’s energy infrastructure. For example, the firm moves around 30% of the crude oil produced in North America and transports almost 20% of the natural gas consumed in the U.S.
In addition to the essential nature of its services, Enbridge generates nearly all of its revenue from long-term contracts with fixed fee provisions and often minimum volume commitments, resulting in minimal direct exposure to commodity prices.
This annuity-like business model results in a steady cash flow stream that has helped Enbridge pay stable or higher dividends every year since 1953.
The company’s impressive dividend track record also reflects management’s conservative approach to running the business. Enbridge maintains a BBB+ credit rating, has a self-funded business model which requires no equity issuances to fund growth, and does not depend on any single supply basin.
As one of the best-run midstream companies, Enbridge may appeal to high-yield investors who believe in the staying power of fossil fuels and the infrastructure necessary to help move them from energy producers to downstream consumers.
Note that as a Canadian company, dividends paid by Enbridge to U.S. investors are subject to a 15% withholding tax. Investors can avoid this tax by holding Enbridge in retirement accounts. Otherwise, with some additional paperwork, investors can generally claim a tax credit with the IRS to offset the withholding tax.
Closing Thoughts on High Dividend Stocks
The highest-paying dividend stocks appeal to investors seeking current income, but many sky-high yields end up being too good to be true.
Maintaining a well-diversified portfolio and focusing on high-quality companies with strong financial health can help avoid the potential pitfalls of this strategy.
By the way, many of the investors interested in high dividend stocks are retirees looking to generate dependable income from dividend stocks.
If that sounds like you, you might enjoy trying our online product, which lets you track your portfolio’s income, dividend safety, and more.
You can learn more about our suite of portfolio tools and research for dividend investors by clicking here. Thanks for reading!
— Simply Safe Dividends
Sponsored Link: Simply Safe Dividends provides a monthly newsletter and a comprehensive, easy-to-use suite of online research tools to help dividend investors increase current income, make better investment decisions, and avoid risk. Whether you are looking to find safe dividend stocks for retirement, track your dividend portfolio’s income, or receive guidance on potential stocks to buy, Simply Safe Dividends has you covered. Our service is rooted in integrity and filled with objective analysis. We are your one-stop shop for safe dividend investing. Brian Bollinger, CPA, runs Simply Safe Dividends and previously worked as an equity research analyst at a multibillion-dollar investment firm. Check us out today, with your free 10-day trial (no credit card required).
Source: Simply Safe Dividends