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In my 20-plus years of investing, I’ve learned that you can never be too greedy, even when it comes to dividend stocks. What I mean by this is that some companies offer unrealistic high dividends. This inflates their stock price as investors flock to get a piece of the action, but then eventually, they announce that they have to make cut because—surprise, surprise—it’s not sustainable.
We’ve seen it as recently as last year when Leggett & Platt cut their dividend payouts by almost 90%, resulting in its stock price taking a short dive off a high cliff. Though, it’s not always that way. Dividend King 3M had to cut following its healthcare spinoff and other litigation that resulted in its dividend being chopped in half.
But is there any way to get high-yielding stocks that aren’t running the risk of cutting their payouts anytime soon? Well, there is, and today, I’ll show you how I do it.
How I Came Up With The Following Stocks
As usual, I used Barchart’s Stock Screener tool to get the results. Here are the filters I used:
- Dividend Payout Ratio: 35% to 90% for REITS and BCDs, 35% to 55% for the rest. There will be a manual adjustment in this filter. The dividend payout ratio indicates how much the company pays out of its earnings to pay dividends to its shareholders. Typically, the safe values are between 35% to 55%, but real estate investment trusts (REITs) and business development companies (BCDs) must pay 90% of their earnings as dividends. So, any non-REIT or non-BCD company not meeting the 55% ceiling will not be considered.
- Market Cap: 10 billion and above (large to mega-cap). While not an exact science, I feel like bigger companies have fewer chances to implode over minor setbacks.
- Number of Analysts and Current Analyst Rating: 8 or more and 4.5 to 5 (Strong Buy). I like this combination of filters. A strong buy rating indicates Wall Street is confident about the stock, while the increased number of analyst coverage gives me confidence that its high score isn’t just because a single firm gave it a 5 out of 5 rating.
- Annual Dividend Yield: 4.5% and above. 4.5% is roughly where people say the stock has high yields, so we’ll start there.
Last but not least, I’ll try to get a diversified list by not choosing two stocks in the same sector. And so I got the following results, arranged from highest to lowest yields:
I’ve highlighted the stocks I will cover in green. For clarity, I skipped ET because it has a high dividend payout ratio. In any case, let’s discuss the top three, starting with:
Ares Capital Corp (ARCC)
Ares Capital Corporation is a business development company that provides debt financing and equity investments to middle-market companies across various industries. Managed by Ares Management Corporation, it focuses on generating attractive returns through loans and equity investments while offering stable income to shareholders through dividends.
Ares Capital pays 48 cents per share quarterly, reflecting a $1.92 annual rate and an 8.19% yield. While payouts are variable, they have generally trended upwards, especially in the last few years, giving me more reason to like ARCC.
Analysts like the stock, too, rating it a strong buy with a 4.53 average score and a modest high target price of $26.
Vici Properties Inc (VICI)
VICI is a real estate investment trust (REIT) primarily investing in gaming, entertainment, and hospitality properties. If I were to summarize their holdings, I’d say the company is focused on properties that provide experiences. It has several notable holdings in the Las Vegas Strip, casinos in other states, golf clubs, and hotels at scenic locations.
Source: Vici Properties
The company pays 43.25 cents quarterly, translating to a $1.73 annual rate and a 5.84% yield based on VICI stock’s current trading price. It’s also been increasing its payouts every year since 2018. If things continue going how they are—and analysts think they’ll even get better, given their strong buy rating—VICI might be a great addition to your long-term dividend portfolio.
Telenor ASA ADR (TELNY)
Telenor ASA is a Norwegian multinational telecommunications company that provides mobile, broadband, and digital services to customers in Scandinavia, Eastern Europe, and Asia. The company’s offerings are available in 8 markets across the locations mentioned earlier, and it provides services to 209 million subscribers.
The company typically approves and announces dividend payments in May for the current year, but for reference, 2024’s dividend payouts totaled 60.1 cents USD. This reflects a 5.01% yield based on current prices. And, of course, it wouldn’t be on this list if analysts hadn’t given it a strong buy rating.
Final Thoughts
Having a few high-yielding dividend stocks in your portfolio can greatly help build your wealth over longer periods. Indeed, during downturns, I find myself keeping quality dividend stocks for their income alone.
However, like any equity, you never know what could happen in the future. That’s why investing in quality companies with long histories of paying dividends is a good place to start. So, keep your eyes on the news and if unsure, always consult with your licensed investment adviser.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.