As enticing as high-yield dividend stocks can be, not all are safe or worth your money. High yields can sometimes indicate value traps to avoid at all costs.

The key is to focus on dividend yield stocks that are well-placed to protect and even grow their dividend payout -- like these three incredible stocks that sustainably yield more than 4%. 

5.3% yield with solid dividend growth

Despite gaining ground in recent months, STORE Capital (STOR) stock is still down about 27% for the year, offering contrarian investors an opportunity to scoop up some shares of this 5.3%-yielder.

The coronavirus pandemic hit real estate investment trusts (REIT) like STORE Capital hard. STORE Capital is heavily invested in service-oriented properties like restaurants, health clubs, and movie theaters that bore the brunt of COVID-19 lockdowns.

However, the real test for an REIT during such times lies in its rent collection. STORE Capital is faring pretty well on that front -- its rent collection inched higher from 85% in July to 88% in September. Moreover, 92% of the company's 2,554 properties were open for business by August, compared with only 65% in April. 

A rising arrow over a stack of coins and plant shoots in soil.

Image source: Getty Images.

The uptick in business even encouraged management to increase its dividend in September. STORE Capital has increased its dividend every year since going public in 2014. Management also reinstated its investment guidance, now expecting to close acquisitions worth $300 million to $450 million in the second half of 2020. Along with built-in annual rent escalators in STORE Capital's long-term lease agreements, these acquisitions have ensured steady cash flow growth. 

Between 2015 and 2019, STORE Capital clocked compound annual growth rates of 16% in net income, 7.5% in adjusted funds from operations, and 6.9% in dividends. STORE Capital could post similarly impressive growth numbers as economic activity picks up.

5.7% yield that looks safe for now

Dow Inc. (DOW), the specialty chemicals giant, yields a strong 5.7% today. Management is keen to protect dividends -- Dow hasn't missed a dividend payment in more than 100 years.

Ever since Dow was spun off from DowDuPont in April 2019, it has focused intently on churning its portfolio to drive higher cash flows and returns on invested capital. Dow now plans to:

  • Reduce workforce costs by 6%.
  • Shut down some amine and solvents facilities and coatings reactors.
  • Sell rail infrastructure assets in North America for cash worth $310 million.
  • Divest marine operations for cash worth $620 million this year.
  • Save $500 million in operating expenses by the end of 2020.
  • Spend $1.25 billion in capital expenditures in 2020, compared with $2 billion in 2019.

Dow's third-quarter earnings report should be out soon, and its bottom line may have taken a hit because of restructuring charges. However, it's a temporary blip. Dow's moves to cut costs, divest noncore assets, and streamline its portfolio to focus on higher-margin products should benefit shareholders in the long run.

In fact, consider it an opportunity if Dow's stock drops after its Q3 earnings. Dow is a well-established, diversified company with a huge addressable market. For example, its packaging and specialty plastics business alone has nearly $200 billion addressable applications. Dow's two other segments -- industrial intermediates and infrastructure, plus performance materials and coatings -- have addressable markets that are at least half as large. These revenue opportunities, combined with management's focus on deleveraging and growth, make Dow's high yield alluring. 

4.2% yield with a lot of promise

Duke Energy (DUK -0.39%) recently made headlines for a surprising reason: NextEra Energy (NEE -1.08%) offered to take it over. While Duke rejected the offer, the proposal was significant given NextEra's sheer size and hold in the utility sector, particularly in renewable energy (it's the world's largest producer of wind and solar power).

While this event must've piqued investor attention in Duke Energy, it isn't the only reason why I'm bullish about this dividend stock.

Duke Energy is among the largest utilities in the U.S., providing electricity to nearly 7.8 million customers in six states and natural gas to roughly 1.6 million customers in five states. Duke just unveiled ambitious plans to scale up its clean energy efforts: By 2025, it aims to retire coal units aggressively and double its renewables portfolio to 16 gigawatts. In line with its plans, Duke has bumped up its five-year capital spending target by $2 billion to $58 billion. Between 2025 and 2029, it expects to spend $65 billion to $75 billion, focusing on renewable energy. With this renewed clean energy program in place, Duke now expects to hit the upper end of its targeted adjusted earnings-per-share growth of 4% to 6% through 2024.

DUK Chart

DUK data by YCharts

That earnings growth should mean larger dividends year after year. Duke Energy has paid a dividend every year for 94 years, and has increased it annually for 14 consecutive years now. The impact is visible on the stock's total return price. With Duke also yielding 4.2% today versus NextEra's 1.8%, it's a compelling bet.