Retire on Dividends: 5 High-Yield Stocks Boomers Are Buying and Holding Forever
Treasury yields near 5% make dividend stocks work harder to justify their risk, yet five companies spanning tobacco, pipelines, telecom, pharma, and net-lease real estate have kept raising their payouts through every rate spike in recent memory.
Bonds pay a fixed coupon until they mature. A dividend stock with real cash behind its payout can raise retirees’ income year after year, and that difference matters more now that the 10-year Treasury yield sits at 4.96%. The five stocks below cover tobacco, net-lease real estate, telecom, pipelines, and pharma. Each pays its dividend from earnings or distributable cash, has paid shareholders consistently for years, and four of the five yield more than the 10-year. For each one, we look at dividend safety first and yield second.
Altria: Pricing Power Keeps the Payout Growing
Altria (NYSE:MO | MO Price Prediction) pays an annualized forward dividend of $4.44. At a share price of $74.33, that’s a yield of about 5.97%, putting it just below ultra-high-yield territory.
Dividend safety: Management narrowed full-year adjusted EPS guidance to $5.61 to $5.72, so the dividend uses roughly 78% of earnings at the midpoint. That is a high payout ratio, but it is normal for a mature cash generator. In the first half, Altria returned nearly $3.9B through dividends and buybacks, and it still had $665M left on its buyback authorization. Shareholders’ equity is negative at −$2.6 billion, a result of years of capital returns, so reliable cash flow matters more than book value. The payment record shows a raise every year since at least 2010, when the quarterly payout went from $0.35 to $0.38. The latest increase lifted it from $1.06 to $1.11.
The case for Altria: prices rise faster than volumes fall. Smokeable products revenue grew 2.0% in the second quarter. Nicotine pouches now make up 59.9% of the total oral tobacco category, and on! PLUS is expanding to 120,000 stores. Investors have rewarded the story: the stock is up 35.13% year to date.
Risk: Combustibles are in long-term decline. Domestic cigarette volume fell about 5% after adjusting for trade, and Marlboro’s retail share slipped to 39.5%.
Realty Income: Monthly Checks Backed by an A-Rated Balance Sheet
Realty Income (NYSE:O) pays a monthly dividend of $0.2715, or $3.258 annualized. At $56.89 a share, the yield is about 5.73%. Its next payment is scheduled for November 13.
Dividend safety: REITs are best measured on adjusted funds from operations (AFFO), and Realty Income raised its AFFO guidance to $4.44 to $4.45 per share. That means the dividend uses roughly 73% of AFFO at the midpoint. The company carries ratings of A3 from Moody’s, A- from S&P, and A from Fitch, and its net debt-to-EBITDA ticked up to 5.4x. Its payout history runs longer than any other in this group. The company just announced its 676th consecutive monthly dividend, has posted its 115th consecutive quarterly increase, and is a member of the S&P 500 Dividend Aristocrats with over 31 consecutive years of dividend increases.
Bull case: Occupancy stands at 98.8%, and re-leased properties recovered 102.7% of prior rent. Realty Income put about $2.6B to work in the second quarter at a 7.3% initial cash yield and announced a $6 billion hyperscale data center JV. The 10-year Treasury yield has also eased from 5.31% on October 5, which helps rate-sensitive REITs.
Risk: Tenant credit quality is mixed. Investment-grade clients account for only 34.3% of annualized base rent, which leaves 65.7% exposed to weaker tenants if the economy slows.
Verizon: An Ultra-High Yield With Plenty of Free Cash Flow
Verizon Communications (NYSE:VZ) pays $0.7075 per quarter, or $2.83 annualized. At $44.63, the yield is about 6.34%, making Verizon the only ultra-high-yield stock in this group.
Dividend safety: Verizon raised adjusted EPS guidance to $4.99 to $5.04, so the dividend uses roughly 56% of earnings at the midpoint. The cash flow picture is stronger still. Free cash flow guidance is $21.94 billion to $22.14 billion, and second-quarter free cash flow rose 27.1% to $6.43 billion. Net unsecured debt stands at 2.5x adjusted EBITDA. The payment record shows a higher quarterly dividend every year since 2007, when it rose from $0.405 to $0.43.
The case for Verizon: the turnaround is showing up in subscriber numbers. Verizon added 184,000 postpaid phone customers, compared with a loss of 9,000 a year earlier. Churn improved to 0.92%, and the adjusted EBITDA margin expanded to 40.1%. Management has raised guidance for the second consecutive quarter.
Risk: Competition is getting tougher. Telecom stocks sold off on news that Elon Musk is entering the wireless market, according to Barron’s. That total unsecured debt of $136.5B after the Frontier deal limits Verizon’s room to use a price war.
Enbridge: Contracted Pipeline Cash Covers a Big Canadian Dividend
Enbridge (NYSE:ENB) announces a quarterly dividend of C$0.97. Converted to U.S. dollars, the annualized forward payout is $2.784. At $48.14 a share, that’s about 5.78%.
Dividend safety: Pipeline companies cover their dividends with distributable cash flow (DCF). Enbridge reaffirmed DCF guidance of C$5.70 to C$6.10 per share against an annualized dividend of about C$3.88, a payout of roughly 66% at the midpoint. Leverage is high at 5.1x debt-to-EBITDA, which is typical for regulated infrastructure with long-term contracts. Enbridge has paid quarterly distributions at a record rate since 1999.
Bull case: Enbridge has a secured growth backlog of C$41 billion and expects adjusted EBITDA, DCF per share, and EPS to grow at an average of about 5% a year. Rising LNG exports are driving demand for projects like the 2.6 Bcf/d Bay Runner Twin Pipeline, and management called this the best macro environment for energy infrastructure growth in the last 10 years.
Risk: U.S. investors take on currency risk. The May and August dividends were both C$0.97, yet the U.S. dollar amounts fell from $0.707 to $0.696 because of exchange rates. Third-quarter results are due November 6.
AbbVie: The Fastest-Growing Dividend in the Group
AbbVie (NYSE:ABBV) has the lowest yield here. Its $6.92 annualized dividend on a $285.59 price works out to about 2.42%. AbbVie earns its place through dividend growth.
Dividend safety: Full-year adjusted EPS guidance is $13.87 to $14.07, so the dividend uses roughly 50% of earnings at the midpoint. That is the lowest payout ratio in this group. Net debt to EBITDA is 2.26x, and interest coverage is 6.94x. The quarterly dividend has grown from $0.40 in 2013 to $1.73, increasing every year on record. The latest raise was 5.5%. As the chief executive put it, “Based upon the strength of our business and its promising outlook, we are once again raising our quarterly cash dividend.”
Bull case: Newer drugs are replacing Humira’s lost sales. Skyrizi grew 24.4% to $5.505 billion, and Rinvoq grew 24.5% to $2.525 billion, which lifted second-quarter revenue 10.2% to $16.99 billion. Adjusted EPS of $3.65 beat expectations.
Risk: AbbVie leans heavily on immunology. Humira sales fell 35.9% to $756 million, and the $10.9 billion Apogee acquisition, which adds to that concentration, cuts $0.14 from this year’s EPS.
Five Payouts Built to Last Through Retirement
All five companies pay their dividends out of real earnings or cash flow, with payout ratios ranging from about 50% at AbbVie to roughly 78% at Altria. Verizon offers the highest yield, Realty Income pays every month, Enbridge’s dividend rests on contracted pipeline cash, Altria relies on pricing power, and AbbVie brings the fastest dividend growth. A retiree’s income thus spreads across five industries, each with its own cash source to support the payout.
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Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad, diverse career, including a stint as creative services director at an NBC affiliate in Austin, Texas, gives him unique insight into the financial industry.
Lee Jackson's journey in the financial industry spans more than 30 years, including nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career spanned pivotal sell-side Wall Street events, from the dot-com rise and bubble to the Long-Term Capital Management debacle, 9/11, and the Great Recession of 2008. This reflects his resilience and adaptability amid market volatility.
Lee Jackson’s practical financial industry experience, gained through a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing across various platforms. This unique combination allows him to shed light on the intricacies of Wall Street in a way only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.
Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.
