Investors love dividend stocks, especially those with high yields, because they provide a substantial income stream and offer significant total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. At 24/7 Wall St., we consistently emphasize the potential of total return. It is one of the most effective ways to enhance the prospects of overall investing success. Once again, total return refers to the collective increase in a stock’s value, including dividends.
The reason the Federal Reserve has not been more aggressive in its rate-cutting cycle is that inflation, while much lower than a few years ago when it mooned to 9.1%, is still trading almost a whole percentage point higher than the Fed’s 2% target. Falling oil prices have been a big help, but ask consumers how things are going at the grocery store, and you will likely get an earful. Meat prices have stayed high all through the summer, and while eggs are lower, many mainstay products that families rely on have either remained higher or have been pushed higher, in some cases by the tariffs that have been imposed.
One group of stocks that could benefit is dividend-paying stocks, especially those with yields over 5%. We screened out our favorite list for companies paying those big dividends, and five of the top picks are waiting for growth and income investors to step up to the plate. All are rated Buy at the top firms on Wall Street that we cover.
Why do we cover high-yielding dividend stocks?
Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciation has contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations. A study by Hartford Funds, in collaboration with Ned Davis Research, found that dividend stocks delivered an annualized return of 9.18% over the past 50 years (1973 to 2023). Over the same timeline, this was more than double the annualized return for non-payers (3.95%).
Alexandria Real Estate Equities
With a hefty yield and a unique niche in the real estate arena, this is an outstanding company trading at a very reasonable valuation. Alexandria Real Estate Equities Inc. (NYSE: ARE) is an owner, operator, and developer of collaborative life science, agricultural technology, and advanced technology mega campuses in AAA innovation cluster locations.
Alexandria yields 6.99% and specializes in owning medical offices, with a focus on medical research facilities. The REIT has increased its dividend annually for 15 straight years and maintains a robust balance sheet with no material near-term debt maturities. In addition, the company’s adjusted funds from operations comfortably cover its dividend payments.
The company’s locations include:
- Greater Boston
- San Francisco Bay Area
- New York City
- San Diego
- Seattle
- Maryland
- The Research Triangle
The company, through its venture capital platform, provides strategic capital to life science, agrifoodtech, climate innovation, and technology companies.
Its tenants include:
- Multinational pharmaceutical companies
- Public and private biotechnology companies
- Life science product
- Service and medical device companies
- Digital health
- Technology
- Agtech companies
- Academic and medical research institutions
- United States government research agencies
- Non-profit organizations
- Venture capital firms
The company has a Labspace asset base predominantly concentrated in markets with barriers to entry.
Robert Baird has a Buy rating and a $102 target price.
Altria
Altria Group Inc. (NYSE: MO) is one of the world’s largest producers and marketers of cigarettes and other tobacco-related products. This stock offers value investors a compelling entry point and a generous dividend yield of 6.35%. Altria manufactures and sells smokable and oral tobacco products in the United States.
The company’s dividend payout is based on free cash flow, ranging from about 64% to 80% depending on the quarter. In recent quarters, free cash flow has exceeded dividend payments, providing a solid buffer. Altria generates strong cash flow from its core tobacco business, which provides a stable base, albeit with regulatory risk, and yields are among the highest in the S&P 500, at least for now.
The company provides cigarettes primarily under the Marlboro brand, as well as:
- Cigars and pipe tobacco, principally under the Black & Mild and Middleton brands
- Moist smokeless tobacco and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands
- on! Oral nicotine pouches
- e-vapor products under the NJOY ACE brand
It sells its tobacco products primarily to wholesalers, including distributors and large retail organizations, such as chain stores.
Altria used to own over 10% of Anheuser-Busch InBev N.V. (NYSE: BUD), the world’s largest brewer. Last year, the company sold 35 million of its 197 million shares through a global secondary offering. That represents 18% of its holdings but still leaves 8% of the outstanding shares in its back pocket. Altria also announced a $2.4 billion stock repurchase plan partially funded by the sale.
Goldman Sachs has a> Buy rating with a $72 target price.
Bristol-Myers Squibb
This global biopharmaceutical company is committed to discovering, developing, and delivering innovative medicines. It remains a solid pharmaceutical stock to own long-term, offering an outstanding entry point and a rich 5.67% dividend. Bristol-Myers Squibb Co. (NYSE: BMY) discovers, develops, licenses, manufactures, and markets pharmaceutical products worldwide.
The company offers products in these therapeutic classes:
- Hematology
- Oncology
- Cardiovascular
- Immunology
Bristol-Myers Squibb products include:
- Revlimid, an oral immunomodulatory drug for the treatment of multiple myeloma
- Opdivo for anti-cancer indications
- Eliquis, an oral inhibitor indicated for the reduction in risk of stroke/systemic embolism in NVAF and for the treatment of DVT/PE
- Orencia for adult patients with active RA and psoriatic arthritis, as well as reducing signs and symptoms in pediatric patients with active polyarticular juvenile idiopathic arthritis
- Sprycel for the treatment of Philadelphia chromosome-positive chronic myeloid leukemia
- Yervoy for the treatment of patients with unresectable or metastatic melanoma
- Abraxane, a protein-bound chemotherapy product
- Implicit for the treatment of multiple myeloma
- Reblozyl for the treatment of anemia in adult patients with beta-thalassemia
Jefferies has a Buy rating with a $68 target price.
Enterprise Products Partners
Enterprise Products Partners L.P. (NYSE: EPD) is an American midstream natural gas and crude oil pipeline company headquartered in Houston, Texas. This company is one of the most extensive publicly traded energy partnerships, paying a very reliable 7.07% dividend. The company’s debt-to-EBITDA ratio ranges from 3.1x to 3.4x, which is moderate for a midstream energy company, and the interest coverage ratio is 5 times.
The company generates strong free cash flow, with an operating cash flow of approximately $8.8 billion, resulting in around $4.2 billion in free cash flow annually, after deducting capital expenditures. Another significant benefit for shareholders is that most of the corporate debt is fixed-rate, thereby limiting the risk of rising interest rates.
Enterprise Products Partners provides various midstream energy services, including:
- Gathering
- Processing
- Transporting and storing natural gas, natural gas liquids (NGL), and fractionation
- Import and export terminalling
- Offshore production platform services
The company has four reportable business segments:
- Natural Gas Pipelines and Services
- NGL Pipelines and Services
- Petrochemical Services
- Crude Oil Pipelines and Services
One reason many analysts like the stock might be its distribution coverage ratio. The company’s coverage ratio is well above 1x, making it relatively less risky among the MLPs.
J.P. Morgan has an Overweight rating with a $38 target price.
Verizon
Verizon Communications Inc. (NYSE: VZ), commonly known as Verizon, is an American multinational telecommunications conglomerate that still offers tremendous value, trading at 8.4 times the estimated 2026 earnings and with a 6.71% dividend. Verizon provides a range of communications, technology, information, and entertainment products and services to consumers, businesses, and government entities worldwide.
Its Consumer segment provides wireless services across the United States through Verizon and TracFone networks, as well as through wholesale and other arrangements. It also provides fixed wireless access (FWA) broadband through its wireless networks and related equipment and devices, such as:
- Smartphones
- Tablets
- Smartwatches and other wireless-enabled connected devices
The segment also offers wireline services in the Mid-Atlantic and northeastern United States through its fiber-optic network, Verizon Fios product portfolio, and copper-based network.
The Business segment provides wireless and wireline communications services and products, including:
- FWA broadband
- Data
- Video and conferencing
- Corporate networking
- Security and managed network
- Local and long-distance voice
Network access services to deliver various IoT services and products to businesses, government customers, and wireless and wireline carriers in the United States and internationally.
Goldman Sachs has a Buy rating and a price target of $49.
Interest Rates Tumble: Grab Our All-Time Favorite Safe 6%+ Dividend Stocks
Top Gaining Stocks
Top Losing Stocks