High-yield stocks are generally off limits for risk-averse investors because they tend to be fundamentally unsound types of equities, bringing with them high debt loads, falling top lines, and so on. However, there are a few rare gems that may be attractive to conservative investors. 

With this theme in mind, we asked our Motley Fool investors which high-yield dividend stocks they think might be appealing for income-seeking investors who are allergic to risk. They recommended GlaxoSmithKline (NYSE:GSK)AT&T (NYSE:T), and Buckeye Partners, L.P. (NYSE:BPL). Here's why. 

A finger presses a button marked "analysis," which produces a result of low risk out of five options.

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Get paid to wait 

George Budwell (GlaxoSmithKline): Like most big pharmas, GlaxoSmithKline is dealing with the loss of exclusivity for a key member of its product portfolio -- in its case, the megablockbuster asthma medicine Advair. Complicating matters further, Glaxo has run into a deluge of other headwinds.

Over the past four years, for instance, the company has experienced a slew of costly late-stage clinical failures, a bribery scandal that resulted in some hefty fines, and a handful of payers who initially refused to cover the drugmaker's newer respiratory medicines, including Breo Ellipta, on favorable terms. Advair's falling sales, combined with these other factors, have caused the drugmaker's shares to plummet over this period.

On the bright side, Glaxo's management has so far refused to cut back on its rich dividend program, resulting in a yield of nearly 5%. The drugmaker's new managerial team has also instituted a host of cost-saving measures to improve free cash flows and operating margins heading into 2020. These steps, along with the company's projected mid-single-digit revenue growth in the coming years, should be enough to keep its top flight dividend intact.

The litmus test, though, should be the early commercial performance of Glaxo's shingles vaccine, Shingrix, that appears almost certain to get a green light from the FDA following a unanimous vote by an outside panel of experts this month. Put simply, Shingrix is expected to quickly become the drugmaker's next blockbuster product, meaning a lot is riding on its commercial launch.  

In all, the worst appears to be over for Glaxo -- making this high-yield dividend stock far less risky than it has been in quite some time.  

A leader in the wireless world

Keith Noonan (AT&T): If you're looking for stocks that fit a conservative investment approach, AT&T should have a place near the top of your list. The company trades at less than 13 times forward earnings estimates, has a stellar track record of returning value to shareholders, and has a sturdy business with some significant growth opportunities ahead. 

Despite challenges from lower-priced competitors including Sprint and T-Mobile, premium wireless phone service is a proven draw, and AT&T's advantage over budget-priced offerings will probably become more pronounced with the launch of 5G. The company is also in position to be a leading service provider for connected cars and other Internet of Things applications, and its pending acquisition of Time Warner will also turn it into a content powerhouse -- opening up a range of bundling opportunities that rivals will probably struggle to match.

Turning to the dividend, you won't find many companies with a better returned income profile than AT&T. The company's payout yields roughly 5.3%, and with the current cost of distributing its dividend representing roughly 76% of the company's $15.8 billion in trailing free cash flow, AT&T is still in good shape to deliver payout growth. Even if cash flows were to dip and drive up its payout ratio, there's a good chance AT&T would still raise its payout, as it's built an impeccable 33-year history of annual payout increases that it's surely keen to maintain

With a great dividend, a low earnings multiple, and a leadership position in the wireless world, AT&T stands out as a great choice for conservative investors.

A central player in oil and gas

Sean O'Reilly (Buckeye Partners, L.P.): For anyone desiring income and safety, master limited partnership Buckeye Partners, L.P. fits the bill in a multitude of ways.

Buckeye is a pipeline and energy-infrastructure owner that helps its customers move oil, refined petroleum products, gasoline, jet fuel, and other commodities over vast distances. It owns over 6,000 miles of pipelines and 120 liquid petroleum terminals. These terminals are vital to the world markets, and the company's hub in the Bahamas is one of the world's largest.

Buckeye Partners' shares have lagged so far in 2017, down over 14%. Part of the problem is probably a decreased utilization rate of its hub storage, from 99% in Q2 2016 to 91% in Q2 2017. This part of the business had been a cash cow that benefited from extremely high oil inventories in recent years. Client losses at its Carribean hub haven't helped, either. But within this short-term difficulty lies an opportunity for conservative investors. Buckeye still owns what are essentially legal monopolies, and its $782 million in cash from operations over the past 12 months more than covers its dividend payout.

With units experiencing what will probably prove to be a short-term sell-off, and with an enticing 9.2% dividend yield to tide investors over, Buckeye Partners is worth considering for any conservative investor willing to deal with the tax implications of owning an MLP. 

 

George Budwell has no position in any of the stocks mentioned. Keith Noonan has no position in any of the stocks mentioned. Sean O'Reilly has no position in any of the stocks mentioned. The Motley Fool recommends Time Warner and T-Mobile US. The Motley Fool has a disclosure policy.