Exceptionally high dividend yields don't always mean exceptionally good stocks. Sometimes, high yields are a symptom of underlying problems.
However, that's not always the case. You can find great stocks with juicy dividends. Here are my five top ultrahigh-yield dividend stocks to buy in April (listed alphabetically).
1. Ares Capital
Ares Capital (ARCC 0.27%) might be the best dividend stock many investors have never heard of. It's the largest publicly traded business development company (BDC). With a market cap of less than $13 billion, though, some could overlook Ares Capital. I think that's a mistake.
As a BDC, Ares Capital must return at least 90% of its income to shareholders as dividends to be exempt from federal taxes. The company continues to generate plenty of income to return as evidenced by its dividend yield of nearly 9.4%.
The market for direct lending to middle-market companies is growing. Ares Capital is especially well positioned to meet the demand with its industry expertise, scale, and track record.
2. Energy Transfer
Energy Transfer's (ET 0.03%) name aptly reflects its business. The company operates around 125,000 miles of pipeline transporting crude oil, natural gas, and natural gas liquids (NGLs) across the U.S. In addition, Energy Transfer owns other assets, including storage facilities and terminals.
The midstream energy leader also transfers significant money to unitholders via distributions. Energy Transfer's distribution yield is a hair under 7.9%. The company expects to increase its distribution by 3% to 5% annually.
I like that roughly 90% of Energy Transfer's earnings come from fee-based contracts. This gives the company a steady cash flow -- something that income investors prize.
3. Enterprise Products Partners
Enterprise Products Partners (EPD -0.47%) is a peer of Energy Transfer in the U.S. midstream energy industry. It operates over 50,000 miles of pipeline, 42 natural gas processing trains, 26 fractionators, facilities that can store over 300 million barrels of liquids, and 20 deepwater docks.
This limited partnership offers a distribution yield of nearly 6.9%. Its distribution is likely to grow. Enterprise Products Partners has increased its distribution for 25 consecutive years by a compound annual growth rate (CAGR) of around 7%.
Enterprise's growth prospects look good, too. The demand for NGLs, in particular, should remain strong for a long time to come. The U.S. is a leading exporter of NGLs, which should keep Enterprise's pipelines and other midstream assets busy.
4. Pfizer
Pfizer (PFE 0.85%) has been a favorite for income investors for decades. The company still ranks among the largest drugmakers in the world despite its market cap falling over 50% since late 2021.
This steep decline has driven Pfizer's dividend yield to record highs. The yield currently stands at close to 6.2%. CFO Dave Denton said in Pfizer's fourth-quarter conference call that growing the dividend is the company's top capital-allocation priority.
Pfizer's COVID-19 sales have plunged. It faces a patent cliff with multiple top-selling products losing patent exclusivity over the next few years. However, the company should still be able to deliver solid growth thanks to new products and business development deals.
5. Verizon Communications
Like Pfizer, Verizon Communications (VZ 1.16%) is a household name for many Americans. The company provides wireless and broadband services to businesses and consumers across the world.
Verizon's dividend is a big draw for investors. The company has increased its dividend payout for 17 consecutive years. Its dividend yield currently tops 6.2%.
What I like even more about Verizon is that its business appears to be gaining momentum. The company generated free cash flow of $18.7 billion in 2023, up from $14.1 billion in 2022. Verizon's consumer postpaid phone gross additions jumped nearly 17% year over year in Q4, the best quarterly growth in four years.
