High Yield Dividend Stocks

High Yield Dividend Stocks – Top 5 Dividend Stocks to Buy April 2019

high yield dividend stocksHigh yield dividend stocks appeal to many investors, particularly those living in retirement.  You are paid a portion of the company’s earnings for every share of a dividend stock that you own. In addition to capital appreciation if the stock price rises, you also get paid simply for owning the stock.  The highest dividend yield stocks offer a payout in excess of 4%.  Some even yield 10% or more, however, not all high yield dividend stocks are safe.

Cash Dividends

The highest paying dividend stocks distribute regular cash dividends.  These dividends are paid out of a company’s profits to its shareholders.

Special One-Time Dividends

There are times a company may pay a special one-time dividend. These are unusual and can occur for a variety of reasons and can take the form of cash or stock.

Stock Dividends

A stock dividend is a proportionate distribution of additional shares of a company’s stock to owners of the common stock. The term “stock split” can also apply to stock dividends.

Are High Yield Dividend Stocks a Good Investment?

High dividend stocks can be a good investment, but not necessarily and not always.  One of the first things new investors is dividend stocks are a good thing.  You get to keep the number of shares you buy and still you get cash back each year.  A company has to be solid and making money to pay dividends each year, right?  Clearly, that is not always the case.

A high dividend yield is not always a good thing.  It is easy to fall into the misconception that if a dividend is a good thing, a high dividend is an even better thing. Do not be tempted to simply choose a collection of the highest dividend paying stock and hope for the best. This is not always a good idea.  Some sectors of the market are required to pay dividends as part of their tax structure. Real estate investment trusts and master limited partnerships are two examples. These companies have high payout ratios and high dividend yield because they have a tax incentive to do so.  As long as REITs pay out at least 90% of their earnings in the form of dividends, the companies are not required to pay income taxes.

Are Dividend Stocks Safe?

Dividend stocks are known for being safe, reliable investments. Many of them are top value companies.  Dividend Aristocrats are over 50 that have increased their dividend annually over the past 25 years. These stocks are from companies that are often described as safe companies. The S&P 100 is a list of some of the largest and most established companies in the U.S. Within this list you will find many safe and growing dividend paying stocks.  It is important to do your homework and research any stock you are considering.  Just because a company is producing dividends doesn’t always make it a safe bet. Investing in stocks that pay dividends can be a good strategy, especially if you want a regular source of cash coming in on a reliable time schedule. Remember those words – regular and reliable.  Reliability is more important than a high payout. Dividends aren’t guaranteed. A company that paid a huge amount of money last year but may not pay it again this year.  Do your homework and beware.

The Highest Paying Dividend Stocks Can Be Risky

High yield dividend stocks are not your basic blue chip corporations like Coca-Cola, Disney, Intel, and IBM. Many of them have unique business structures and risks to consider.  For instance, some of these high yield stocks must distribute almost all of their cash flow to investors to maintain their favorable tax status.  Others must constantly raise external capital (i.e. debt and equity) to expand and  grow.

  • Real Estate Investment Trusts (REITs): Are pass-through entities that pay no federal income tax as long as they pay out at least 90% of their taxable income as dividends.
  • Master Limited Partnerships (MLPs): MLPs were created to encourage investment in certain capital-intensive industries. Most MLPs operate in the energy sector and own expensive, long-lived assets such as pipelines, terminals, and storage tanks.
  • Business Development Companies (BDCs): Are closed-end investment funds that are structured similarly to  REITs, meaning they avoid paying corporate taxes if they distribute at least 90% of their taxable income in the form of dividends.

What are the Best Dividend Stocks to Buy?

The safest and best dividend stocks to buy should offer a dividend yield greater than 4%, have increased their dividends for at least five consecutive years, and maintain healthy Dividend Safety Scores. The market’s strength over the past decade has reduced the number of safe high dividend stocks with high yields, but there are still several dozen worth reviewing.

Top 5 Dividend Stocks to Buy 

Dividend Stocks to Buy – ExxonMobil (XOM)   

Dividend Yield: 3.8%  Dividend Safety Score: 77   Dividend Growth Streak: 35 years

Exxon Mobil Corporation was founded in 1870 and is one of the world’s oldest oil companies. It is engaged in the exploration, production, transportation and sale of crude oil and natural gas, and the manufacture, transportation and sale of petroleum products.  It’s also the world’s largest publicly traded integrated oil conglomerate, with nearly 30,000 oil & gas wells on six continents.  Exxon has paid an uninterrupted quarterly dividend since 1882 and has increased its payout for more than 30 consecutive years.  If energy prices remain depressed, Exxon will arguably be the last oil company still standing and paying dividends.

Dividend Stocks to Buy Now – General Mills (GIS)

Dividend Yield: 4.5%  Dividend Safety Score: 70   Dividend Growth Streak: 14years

General Mills, Inc. is a manufacturer and marketer of branded consumer foods and pet food products sold through retail stores.  The company maintains a diversified sales mix of packaged meals, cereal, snacks, baking products, yogurt, and more. The company’s largest brands are Cheerios, Betty Crocker, Yoplait, Pillsbury, Nature Valley, Old El Paso, and Haagen-Dazs. Each of these brands generates over $1 billion in annual sales.  General Mills has paid dividends without interruption or reduction for more than 115 years, which is an amazing accomplishment.

Best Dividend Stocks Buy – Duke Energy (DUK)

Dividend Yield: 4.6%  Dividend Safety Score: 80   Dividend Growth Streak: 13 years

Duke Energy Corporation (Duke Energy), operates through three segments: Electric Utilities and Infrastructure; Gas Utilities and Infrastructure, and Commercial Renewables.  The Company has become the largest electric utility in the United States, with operations spanning across the Southeast and Midwest to serve approximately 7.6 million electric customers and 1.6 million gas customers.  With nearly all of its profits generated from core regulated operations, Duke Energy’s business is very safe and predictable with high entry barriers.  Duke Energy has paid quarterly dividends for more than 90 years and has increased its dividend each year since 2005, including a 4.2% raise in July 2018.

Dividend Stocks Buy – National Retail Properties (NNN)

Dividend Yield: 4.6%  Dividend Safety Score: 93   Dividend Growth Streak: 28 years

National Retail Properties, Inc. (NNN), is a real estate investment trust (REIT) with real estate being held as the primarily assets. The Company owns and develops properties and leases them under long-term contracts to retail tenants. It has more than 2,500 properties spread across 48 U.S. states which are leased to more than 400 diverse tenants across 37 lines of trade.  National Retail Properties has a strong competitive advantage in the form of its geographically diversified and well-located properties. The company’s occupancy rate has never dipped below 96.4% over the last 13 years.  National Retail Properties has paid higher dividends for the last 28 consecutive years and has increased its dividend by 2.1% per year over the last two decades. Management most recently boosted the firm’s dividend by 4.2% in July 2018.

Best Dividend Stocks to Buy – Philip Morris International (PM)

Dividend Yield: 5.4%  Dividend Safety Score: 70   Dividend Growth Streak: 10 years

Philip Morris International is engaged in the manufacture and sale of cigarettes, other tobacco products and other nicotine-containing products in markets outside of the United States. It is one of the largest tobacco companies in the world, selling cigarettes in over 180 countries.  Philip Morris sells cigarettes to more than 150 million consumers worldwide and owns six of the world’s top 15 international brands. Marlboro is both the company’s and the world’s number one brand.  Philip Morris has grown dividends every year since 2008, averaging 7.9% annual income growth over the last five years.

Penny Stocks To Buy Now

Learn more about penny stocks and our top picks here