Interest rates may be just a tad above record lows, and while that dynamic is somewhat reflected in bond yields at the moment, it isn't so much in dividend yields. Indeed, a handful of stocks are still dishing out surprisingly high dividend payouts despite the somewhat adverse overall economic environment. Investors looking for high-yield dividends just have to look in the more obscure corners of the market to find them.
Here's a rundown of five high-yield dividend stocks to watch and perhaps even go ahead and add to a diversified investment portfolio.
Image source: Getty Images.
1. AT&T
Dividend yield: 7.1%
There's no denying AT&T (T 0.05%) is dealing with a major debt headache.
It was already deeply indebted, and the 2015 acquisition of DirecTV ultimately cost the company $67 billion. It's now got $154 billion in debt on its balance sheet, with the DirecTV property accounting for the biggest piece of that debt load doing the least to help service it. After years of trying to fix what's broken with the satellite cable TV brand, the company is now just looking to sell it at what will certainly be a significant loss.
What's largely gotten lost in the noise, however, is that AT&T's television woes and its subsequent debt burden aren't actually threatening the telecom giant's payout. While the company opted to not increase its dividend when it normally would have in December -- for the first time since 2006 -- the current annualized payout of $2.08 is still less than last year's suppressed adjusted earnings of $3.18 per share. Moreover, the analyst community is calling for decent earnings growth next year after another slight lull this year. The eventual sale of DirecTV shouldn't adversely affect the ability to keep funding this level of payout.
2. New York Community Bancorp
Dividend yield: 5.9%
Sinking interest rates haven't just worked against bond and dividend yields. They've also made the lending business less profitable, as the margins on loans are directly linked to rates. Generally speaking, the higher the rate, the more profitable the loan.
To this end, New York Community Bancorp's (NYCB +0.15%) net interest slumped in 2017, 2018, and again in 2019, in step with falling rates. Ditto for last year, with or without the headaches caused by the contagion. This may be why New York Community Bancorp shares have been falling since 2016.
We could be nearer a cyclical bottom than many people might realize, however.
At the same time interest rates have leveled off from a multi-year decline that carried rates to what may be absolute floors, analysts are calling for a 15% rebound in sales this year driving per-share earnings up from $1.02 in 2020 to $1.12 this time around. Both are more than enough to cover the current quarterly payout of $0.17 per share, but given the outlook, there may be room for New York Community Bancorp to finally start increasing a common stock dividend that's been stagnant since 2016.
3. AbbVie
Dividend yield: 5%
Any investor who knows AbbVie (ABBV 1.19%) well knows it's almost synonymous with its flagship product Humira. This drug meant to treat arthritis and intestinal problems accounted for nearly half of last year's revenue. That's becoming a big problem fast, as Humira's patent protection starts to expire in a big way beginning next year. Sales could deteriorate quickly beginning the following year.
But AbbVie may not be in the sort of trouble the market suggests it is. It's also the name behind cancer therapy drug Imbruvica, which added $5.3 billion to the company's top line in 2020. Imbruvica could drive between $7 billion and $10 billion in annual sales at its peak. Newer drugs Rinvoq and Skyrizi are only producing around $2.3 billion in annual revenue now, but CEO Richard Gonzalez has suggested those two franchises could jointly produce $20 billion worth of yearly sales at their peaks.
At the very least, it's a transition worth watching.
4. STAG Industrial
Dividend yield: 4.5%
Not all real estate investment trusts -- or REITs -- are built the same. While this category of holdings seems to focus on mortgages, residential dwellings, and hotels, a wide swath of REITs are dedicated to far more consistent customers.
Take STAG Industrial (STAG 0.27%) as an example. This landlord owns 98.2 million square feet worth of industrial space, boasting a tenant list of companies and organizations that aren't about to abandon their rented spaces. The company's three biggest tenants are (in order) Amazon, the U.S. federal government, and XPO Logistics. In the same resiliency vein, around 40% of its property portfolio is an e-commerce player.
The staying power of its customer base is evidenced in how much rent it's continued to collect despite the economic fallout from the coronavirus. As of the end of December, 96.9% of its portfolio remains occupied, and as of Feb. 10, STAG Industrial had collected 99.6% of the rent it was due as of the end of 2020.
5. Enbridge
Dividend yield: 7.6%
Finally, add Enbridge (ENB 0.46%) to your list of high-yield dividend stocks to put on your radar.
It's not exactly a household name. Not only does the gas and oil pipeline operator remain in the background of the energy sector, it's also a Canadian company. Don't let its obscurity fool you, though. Enbridge handles around a fourth of North America's crude oil, and about a fifth of the United States' natural gas.
Yes, this stock tanked early last year when the COVID-19 pandemic torpedoed the price of oil and gas. Shares are well up from last March's lows but have yet to reclaim their pre-pandemic highs. Investors remain concerned about the effect a slowing global economy may have on the energy industry's profitability.
That weakness may be rooted in a misunderstanding of Enbridge's role within the business, however. This company gets paid for every barrel of oil and every cubic foot of natural gas it pushes through its pipelines, regardless of the price agreed upon by the buyers and sellers. Its 2020 adjusted EBITDA and distributable cash flow were both up, and full-year earnings per share of CA$2.42 and distributable cash flow of CA$4.67 easily cover the company's dividend payments -- a dividend that's grown for 26 straight years.
