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3 Stocks to Buy With Dividends Yielding More Than 6%

By Dan Caplinger - Oct 2, 2017 at 7:47PM

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High-yielding stocks can be rewarding, but you have to be careful about risk.

High-yield dividend stocks are always tempting, but you have to be more careful with them than with the average stock. Many high-yield giants turn out to be dividend traps that eventually led to a reduction or elimination of their payouts. It's rare to find a stock yielding 6% right now, and just about all of them have risk factors you need to consider. Nevertheless, if you can take on some risk, you'll find a few stocks worth a closer look. Among them are Royal Dutch Shell (RDS.A) (RDS.B), Blackstone Group (BX), and Seagate Technology (STX).


Dividend Yield

Royal Dutch Shell


Blackstone Group


Seagate Technology


Data source: Yahoo! Finance. * Variable dividend; yield is based on last 12 months' distributions.

This stock is keeping up its energy

Royal Dutch Shell has seen many of the same challenges that peers throughout the oil and gas industry have faced in recent years. Plunging prices for crude oil have posed threats for even major players in energy. Like many of its peers, Shell has had to be aggressive in cutting its debt by selling down assets, and some dividend investors have worried about the company's ability to keep paying down its obligations while still making such large cash distributions.

In response, Shell is moving even more strongly toward embracing a longer-term approach with its assets and capital investment strategy. Having successfully integrated British multinational energy company BG Group into its corporate structure, Shell is looking at often overlooked parts of its business that are delivering superior returns on capital, such as the downstream and chemicals divisions. The energy giant won't stop looking for ways to boost its overall production, but investors can expect Shell not to make new discoveries or asset acquisitions the sole source of growth supporting the dividend in the years to come. That's good news for shareholders looking for dividends to continue well into the future.

Oil barrels arranged in a grid pattern.

Image source: Getty Images.

Blackstone profits from smart investments

The private equity industry has benefited greatly from the recovery since the 2008 recession, and as the largest alternative asset manager in the world, Blackstone has captured at least its fair share of gains from the bull market. The company counts private equity, hedge funds, real estate, and credit-oriented funds among its core offerings to investors, and in return for its management, Blackstone receives an annual management fee along with a share of any profits that the funds generate. The company makes variable dividend payments based on its success during the period, and that requires dividend investors to accept the unpredictable nature of payouts. For instance, in 2016, distributions were almost 45% less than they had been in 2015 due to a lower-than-usual number of initial public offerings.

When times are good, Blackstone has plenty of growth potential. For instance, the sale of logistics and real estate venture Logicor to a Chinese investment firm for nearly $14 billion created a huge payday not just for Blackstone fund investors but also for the company itself because of its stake in the deal. Similar opportunities exist in many industries, and if Blackstone can continue to identify good investments early on, it will be able to deliver rising distributions in the years ahead.

Seagate looks to store more profits

The data storage industry has been a big driver of success over the long run, but evolution in the technology behind storing data has required Seagate and its peers to pivot adeptly. Old-style hard-disk drives still have their role to play in data centers and other applications, but solid-state memory drives and other high-end options have become increasingly important. Seagate's share price has been volatile lately, reflecting questions about the sustainability of the business and the company's ability to keep up with the pace of change.

Investors have been nervous about Seagate's dividend for a long time, especially when the company faces major financial shortfalls. For instance, in its most recent quarter, Seagate's revenue came in more than 6% below what investors had wanted to see, and adjusted earnings missed expectations by about a third. Many were also nervous about Steve Luczo's decision to give up the CEO role, but bullish investors see the promotion of new CEO Dave Mosley as a potential catalyst to get the company moving forward again.

Seagate, Blackstone, and Shell are far from risk-free, and dividend investors need to understand that any stock with a 6% yield isn't a sure thing. Nevertheless, these three stocks are worth a closer look for those willing to take on some risk, and they'll do their best to sustain their dividends well into the future.

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Stocks Mentioned

Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
The Blackstone Group L.P. Stock Quote
The Blackstone Group L.P.
Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
Seagate Technology plc Stock Quote
Seagate Technology plc

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