5 Best High Dividend Stocks for All in Economic Conditions

Dividend investors are willing to sacrifice growth for regular income from dividend payments. This makes dividend stocks a stable and long term investment.

Strong dividend stocks tend to pay smaller dividends as their stock prices rise. For those willing to take on more risk, allocating part of the portfolio to high dividend yield stocks can be an attractive option.

These stocks provide high yields due to their volatility and their prices reflect that risk. If you are risk-tolerant and looking for higher income with growth potential, proceed with caution.

Overview of High Dividend Yield Stocks

High dividend yield can be defined as stocks with an annual percentage of (APR) higher than the average benchmark index. For example, the S&P 500 index has a dividend yield of 1.48%.

The increase in interest rates has made money market accounts and deposits attractive, with yields above 4%. High dividend stocks should have yields higher than the S&P 500, and the best ones even higher than fixed income instruments.

Of course, all of this comes with risks. The yield of the S&P 500 is relatively low because the index has risen by more than 15%. The higher the stock price, the lower the yield percentage. Therefore, high dividend yield stocks tend to have weaker stock prices.

Why Invest in High Dividend Yield Stocks?

The answer is simple: they provide higher income. These stocks pay a higher percentage of income compared to blue-chip stocks. Dividends can be reinvested, taking advantage of the compounding effect.

There is also the potential for stock price appreciation to complement your high dividends. Dividends also provide tax benefits if they include dividends that meet the specifications from the tax authorities.

5 Best High Dividend Yield Stocks

Here is a list of the top five high dividend yield stocks. It is important to do research if you are considering investing in these stocks. Many of these stocks have performed poorly or even negatively this year, resulting in high dividend yields.

1. Verizon Communications Inc.

Verizon is the largest wireless operator in the country with over 100 million customers. The company offers internet packages through the Fios brand, including fiber optic, DSL, and mobile hotspot.

Q2 2023 revenue decreased by 3.5% to $32.6 billion, but EPS of $1.21 exceeded estimates. Verizon has a debt burden of $126 billion with a leverage ratio of 2.6x, better than many of its competitors. VZ shares are down 17% this year with an annual dividend yield of 7.89%.

2. Altria Group Inc.

Altria is the world's largest tobacco parent company, Phillip Morris. Although smoking rates are declining, the company still generates strong profits and strengthens its non-cigarette segment. Altria continues to record annual growth of 2% with a wide free cash flow margin.

The company has consistently carried out share buyback programs and has a solid dividend history. Altria has also entered the electronic cigarette market by acquiring NJOY. MO shares are down 5.6% this year with an annual dividend yield of 8.83%.

3. Realty Income Inc.

Realty Income is a REIT ( real estate investment trust ) that allows investors to participate in property income without having to own it. The company invests in single-tenant commercial properties leased to well-known brands.

Realty Income has over 11,200 properties with more than 213 million square feet available for rent. The stock is down 10.66% this year with an annual dividend yield of 5.39%, paid monthly.

4. Enbridge Inc.

Enbridge is a Canadian-based energy infrastructure company operating in several segments. The company operates the largest natural gas distribution network in Canada and 17,809 miles of crude oil and liquid pipelines in North America.

Most of its revenue comes from the liquid pipeline segment, which contributes 57% of total revenue. Enbridge transports 30% of the crude oil produced in North America. The stock is down 10.7% this year and pays an annual dividend yield of 7.5%, having paid dividends for more than 67 years.

5. Walgreens Boots Alliance Inc.

Walgreens is the second largest pharmacy chain in the US with over 9,200 stores in 50 states. The company continues to expand its healthcare services from the synergy of pharmacy services.

His health portfolio includes shares in Walgreens Health, Acrocentric, Shields Health Solutions, and VillageMD. The revenue of his health portfolio reached $1.98 billion in Q3 2023, up 22% YoY. WAG shares are down 28.5% this year and pay an annual dividend yield of 7.07%.

High Dividend Yield Stock Risks

Investing in high dividend yield stocks carries several important risks:

• Weakening of company fundamentals and stock prices: All five stocks on our list have underperformed the benchmark index, decreasing by 5% to 29% compared to the S&P 500, which has risen by 15% this year.

• Dividend cuts or suspensions: One of the biggest issues is the possibility of dividends being cut or suspended if the company needs to conserve cash.

• Impact of interest rates: REITs can be sensitive to changes in interest rates because they borrow capital to acquire properties.

• Too focused on yield: It is easy to focus solely on high dividend payments and ignore poor fundamentals. Fundamentals remain important.

Diversification is the best protection when holding a high dividend yield stock portfolio. Each stock on the list is from a different sector or industry, and all are sustainable businesses with minimal chances of bankruptcy.