5 High-Yield Dividend Stocks That Can Actually Afford Their Payouts
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A dividend has to earn its place in a portfolio right now. In late September, CNBC’s Jim Cramer pointed out that the 10-year Treasury was paying more than 5.2%, so a stock’s payout needs real cash to back it up to beat that risk-free return. These five picks come from insurance, midstream energy, retail real estate, consumer staples, and private credit. Each one’s latest results show operating cash flow or segment earnings strong enough to keep the checks coming, and four of the five have raised their payouts in 2026. We look at coverage first and yield second.
Prudential Financial: Cash Flow Covering the Dividend More Than 5 Times
Prudential Financial (NYSE:PRU | PRU Price Prediction) yields 4.53% at a recent price of $121.95, and its cash coverage is the strongest in this group. Over the last four reported quarters, operating cash flow covered common dividends about 5.4x. For full-year 2025, operating cash flow of $6.271 billion covered $1.926 billion in dividends roughly 3.3x, and the company reported capital spending of $0. Insurer cash flows swing a lot from quarter to quarter, so the multiyear trend tells you more than any single quarter.
Track record: The quarterly dividend has gone up every year this decade, from $1.10 in 2020 to $1.40 in 2026, a 27% increase. Long-term holders should know that payouts fell during the 2008 financial crisis, when the annual dividend dropped from $1.15 in 2007 to $0.58 in 2008.
Bull case: Second-quarter adjusted EPS came in at $4.08 against a $3.52 consensus. Pre-tax adjusted operating income at the PGIM asset manager rose 28% to $294 million, and Prudential returned $743 million to shareholders in the quarter. The stock trades at about 11 times trailing earnings, which is cheap for a business that posted 16.4% operating ROE.
Risk: Prudential of Japan’s voluntary sales suspension has dragged on international sales, which fell 33% in constant dollars in the second quarter, and there’s no set end date for the fix. Analysts remain cool on the stock. The ratings count stands at 14 holds, 3 sells and 1 strong sell, and the consensus target of $111.67 sits below where shares now trade.
Energy Transfer: 20 Straight Raises at an Ultra-High 7.16% Yield
Energy Transfer (NYSE:ET) is the only ultra-high-yield name here besides Ares. It yields 7.16%, and it pays partnership distributions on a K-1 rather than ordinary dividends. In the third quarter, adjusted distributable cash flow attributable to partners was about $2.5 billion, up from $1.9 billion a year earlier. Against the new quarterly rate of $0.3425 per unit on 3,444,252,000 units outstanding, that works out to coverage of roughly 2.1x.
Free cash flow looks lower because Energy Transfer is in the middle of a heavy building cycle. In 2025, operating cash flow of $10.149 billion covered distributions about 2.1x. After $6.303 billion of capital spending, though, only $3.846 billion was left, less than the $4.725 billion paid out.
Track record: The October increase was the 20th consecutive quarterly raise, up 3% from a year ago. Investors who remember 2020 will note that the distribution was cut from $0.305 to $0.1525 at the end of that year. Subsequent raises have restored and surpassed that level.
Bull case: Management raised full-year adjusted EBITDA guidance to $19.7 billion to $19.9 billion. Since the start of 2025, the company has signed more than 9.5 million MMBtu per day of agreements with hyperscalers, data centers, and power plants. Phase I of the Hugh Brinson pipeline is running at 1.5 Bcf per day, and the pending Vaquero deal is expected to be immediately accretive to DCF per common unit. Analysts are enthusiastic, with 20 Buy or Strong Buy ratings and 3 Holds.
Risk: Part of 2026’s strength came from market volatility. The CFO put this year’s optimization gains at “something probably closer to $1.5 billion,” compared with a historical range of about $600 million to $700 million. At the same time, 2027 growth capex is expected to reach about $7 billion.
Simon Property Group: Record-Level Occupancy and a Fresh Dividend Hike
Simon Property Group (NYSE:SPG) yields 3.9%. It just declared a fourth-quarter dividend of $2.30 per share, up 4.5% from a year ago. Funds from operations (FFO) is the standard cash-earnings measure for REITs. Management raised full-year real estate FFO guidance to $13.30 to $13.40 per share, which puts the annualized dividend at about 69% of the midpoint. That’s comfortable coverage for a REIT.
The cash flow statement shows a tighter margin. In 2025, operating cash flow minus capital spending covered the dividend outflow about 0.99x. Even so, the CEO said, “we generate a significant amount of free cash flow after dividends and after capital,” and the balance sheet has room: net debt is five times EBITDA, fixed-charge coverage is 4.6 times, and liquidity is about $9 billion.
Track record: Simon cut its dividend in 2020, from $2.10 to $1.30. The new $2.30 payout is now above the pre-pandemic rate.
Bull case: Malls and Premium Outlets occupancy reached 96.5%, which ties the company’s highest since 2016. Sales productivity rose 14.8% to $852 per square foot, and the leasing pipeline is up 30%. Simon also has $1.2 billion of development underway at a blended 9% yield.
Risk: Rising interest costs. Management expects a drag of about $0.30-ish next year, and tenant bankruptcies are still a risk for any mall landlord.
PepsiCo: Decades of Raises, Thinner Coverage
PepsiCo (NASDAQ:PEP) yields 4.11%, and its dividend coverage is the tightest in the group. In 2025, free cash flow covered the dividend almost exactly at 1.00x. Through the first nine months of 2026, coverage was about 0.97x, though the fourth quarter is usually PepsiCo’s strongest for cash (it produced $6.619 billion of operating cash flow in the fourth quarter of 2025). The balance sheet can absorb a short gap, with interest coverage of 10.26x and net debt at 2.60 times EBITDA.
Track record: PepsiCo has raised its quarterly dividend every year in the available record, from $0.13 in 1999 to $1.48 today. The 2026 increase was about 4%, and the company plans $8.9 billion in shareholder returns this year.
Bull case: Organic revenue grew 3.1% in the third quarter, the fastest rate since the fourth quarter of 2023, driven by volume. International businesses now produce 45% of profit. At about 16 times forward earnings, the stock is priced for slow growth.
Risk: Core EPS growth guidance was cut to 2.5% to 3.5%, down from 5% to 7%. The CFO warned that “commodities continue to ramp up” as hedges roll off.
Ares Capital: Ultra-High 9.92% Yield Backed by $1.37 of Spillover
Ares Capital (NASDAQ:ARCC) yields 9.92%. It’s a business development company (BDC), a lender to mid-sized private companies, and for BDCs, operating cash flow says little about dividend safety. Earnings matter more. Third-quarter core EPS of $0.46 fell just short of the $0.48 dividend, and net investment income covered the quarter’s payout about 0.95x. Ares has a buffer for that: $983 million of undistributed taxable income, or $1.37 per share, along with about $7 billion of liquidity.
Track record: Ares has paid $0.48 every quarter from March 2023 through the payment scheduled for December 29, 2026. Management says the regular dividend has been stable or increasing for 69 consecutive quarters.
Bull case: About 71% of the portfolio is floating rate, and management estimates that every 100-basis-point rise in base rates adds about $0.02 per share of quarterly earnings. Non-accruals sit at 2.4% of cost, below the company’s historical average of roughly 3%. The pending MidCap Financial deal is expected to be slightly accretive to core earnings. The stock trades near book value, at a price-to-book ratio of 0.991.
Risk: NAV per share slipped to $19.31 from $19.94 at the end of 2025. If core earnings keep falling short of the payout, the spillover buffer will shrink.
Cash Coverage Separates These Five
Prudential and Energy Transfer have the largest cash coverage. Simon and Ares lean on FFO and spillover income, which are solid buffers, and PepsiCo leans on more than 25 years of annual raises and a strong balance sheet. Each one supports its payout with documented cash generation, and all five spread risk across sectors that rarely move together. Watch Ares’ core earnings and PepsiCo’s fourth-quarter cash flow in the next earnings reports, since those two have the least room for error. (A double-digit yield usually means the market suspects something, so it pays to know the warning signs before you buy; we laid out the seven that most often precede a cut in a free dividend trap guide.)
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
