With thousands of publicly traded companies and over 4,000 exchange-traded funds (ETFs) to choose from, there are countless ways to make money on Wall Street. But among this laundry list of strategies, few have been as successful over the long term as buying and holding high-quality dividend stocks.
Public companies that pay a regular dividend to their shareholders are almost always profitable and, in many cases, have proven their ability to navigate a challenging economic climate. Best of all, income stocks tend to outperform.
In "The Power of Dividends: Past, Present, and Future," analysts at Hartford Funds, in collaboration with Ned Davis Research, analyzed over 50 years of return data from dividend payers and non-payers. Researchers found that dividend stocks more than doubled the annualized return of non-payers (9.2% vs. 4.31%, from 1973-2024) and did so while being notably less volatile.
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In a perfect world, income seekers would be able to buy ultra-high-yielding stocks -- those with yields four or more times greater than the 1.15% average yield of the S&P 500 -- with minimal risk. However, studies have shown that stocks with ultra-high yields often come with outsize operating risks.
Thankfully, with careful vetting, high-octane income gems can be unearthed. The following three well-known, historically cheap, ultra-high-yield dividend stocks -- sporting an average yield of 5.68% -- are ripe for the picking by opportunistic income seekers.
Sirius XM Holdings: 4.92% yield
The first supercharged dividend stock that can perk up the pocketbooks of income seekers is satellite-radio operator Sirius XM Holdings (SIRI 0.04%). Though Sirius XM doesn't increase its payout on an annual basis, its current yield of 4.92% is within a stone's throw of an all-time high.
One of the top selling points of Sirius XM's operating model is that it's one of America's few legal monopolies (outside of the utility sector). While it still competes with terrestrial and online radio companies for listeners, it's the only licensed satellite-radio operator. This monopoly status affords Sirius XM premium subscription pricing power.
NASDAQ: SIRI
Key Data Points
Speaking of subscriptions, Sirius XM Holdings' revenue mix is another core differentiator. Traditional radio operators generate nearly all of their revenue from advertising. Though ad-driven businesses often perform well during periods of economic growth, advertising is highly cyclical, and spending can dry up quickly during recessions.
In comparison, Sirius XM brought in just 21% of its net sales from advertising (via Pandora) last year, with the bulk (approximately 76% of net sales) tracing back to subscriptions. Streaming subscribers are far less likely to cancel during periods of economic weakness than businesses are to meaningfully reduce their marketing budgets. In other words, Sirius XM appears better positioned to navigate economic ebbs and flows than traditional radio operators.
There's also a clear value proposition that can't be ignored. Shares can be purchased right now for less than 7 times forecast earnings in 2027, representing a 44% discount to its average forward price-to-earnings (P/E) multiple over the last five years.
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HP Inc.: 6.32% yield
A second high-octane dividend stock that can pad income investors' wallets is personal computing and printing titan HP Inc. (HPQ +2.14%). Although stalwart tech stocks have been left in the dust by the artificial intelligence (AI) revolution, HP now offers a price dislocation and 6.3% yield that may be too enticing to pass up.
Shares of HP have tumbled by nearly 50% since November 2024 on fears of rising personal computer (PC) production costs. Specifically, the insatiable demand for memory, courtesy of the rise of AI, has sent DRAM and NAND prices soaring. These higher costs are compressing HP's PC margins and worrying investors.
The counter to the above is that HP doesn't have a demand issue. While higher memory prices are adversely affecting its bottom line, consumer PC sales surged 16% in the fiscal first quarter, with total units (including commercial systems) up 12%. Furthermore, AI PCs are strongly contributing to this growth, accounting for over a third of total PC shipments during the quarter. A demand problem would be worrisome -- but that's not an issue for HP.
Key Data Points
At the same time, investors have soured on HP's legacy printer operations. While there's no immediate panacea for shrinking sales in this segment, it's important to note that operating margins remain meaningful at more than 18%. Printing is a potential cash cow that enables HP to invest in higher-growth initiatives.
Lastly, there's its historically inexpensive valuation. Investors are paying a forward P/E of just over 6 to own shares of HP, representing a 24% discount to its average forward earnings multiple over the last half-decade.
The Campbell's Co.: 5.79% yield
The third jaw-droppingly cheap ultra-high-yield dividend stock that's ripe for the picking by income investors is none other than food and beverage behemoth, The Campbell's Co. (CPB 4.38%). Mirroring the other companies on this list, Campbell's 5.79% yield is a stone's throw from an all-time high.
Campbell's shares are nearing a 17-year low due to generalized weakness in snack sales (i.e., nothing specific to Campbell's products) and the adverse effect of tariffs. President Trump's steel tariffs are an added cost for a company that prominently packages its food in steel-alloy cans.
NASDAQ: CPB
Key Data Points
Although Campbell's share price clearly reflects these challenges, it also opens the door for opportunistic long-term investors to snag a potential bargain.
For instance, the company has been pulling levers to make its operations more cost-efficient. This includes cost synergies tied to the $2.7 billion Sovos Brands acquisition in 2024 and from production optimization, including plant closures. Campbell's is targeting $375 million in annual cost savings by fiscal 2028 (its fiscal year ends on the Sunday closest to July 31).
Though management has been actively tightening the company's belt, it's been freely spending in other areas in an effort to sustainably boost the company's organic growth potential. Campbell's sees its snacks segment as a path to generate sustained annual organic growth in the 2% to 3% range.
The final piece of the puzzle is Campbell's valuation. A forward P/E of 10.4 marks a 27% discount to its average forward P/E over the previous five years.
