3 High-Yield Dividend Stocks Paying up to 14.4%
September 14, 2020
Get Reliable Income from These High-Yield Dividend Stocks
It’s time to refocus on high-yield dividend stocks.
So, you’re worried about the COVID-19 pandemic?
Or maybe you’re thinking the economy will implode?
Or perhaps you’re worried about the government deficit?
I hear ya!
For many investors, fear of the unknown holds us back. At any time, a million possible things could go wrong and knock the stock market down. All of which means bad news for the value of our investment portfolios and retirement funds.
But there’s one group of investments that are actually quite predictable: high-yield dividend stocks.
Even through the COVID-19 recession, most high-dividend stocks continued to mail out checks to their shareholders. For investors watching that money roll into their brokerage accounts, these payments made it a lot easier to stomach the market’s recent ups and downs.
But it gets better. As I have written about before, numerous studies have shown that high-yield dividend stocks outperform their non-dividend-paying peers by a substantial margin. And many of these companies deliver those gains with a lot less risk.
With that in mind, I’ve put together a list of some of my favorite high-yield dividend stocks.
To be clear, the names below don’t constitute a list of buy recommendations. They do, however, represent a great starting point for further research.
Let’s get started.
Truist Financial Corp
For years, regional banks have struggled to compete against their larger peers. The biggest players in the industry, like Bank of America Corp, Wells Fargo & Co, and JPMorgan Chase & Co., can spread their overhead costs across a wider base of sales. This has allowed these giants to undercut competitors while still earning higher returns for shareholders.
So, what’s the solution for mid-sized banks?
Get bigger themselves.
In 2019, BB&T and SunTrust Banks announced they would merge their operations into a new banking company called Truist Financial Corp (NYSE:TFC).
Overnight, the maneuver created the sixth-largest financial institution in the United States. In total, the company was to oversee over $370.8 billion in deposits. (Source: “Truist Reports Second Quarter 2020 Results,” Truist Financial Corp, July 16, 2020.)
The merger, in theory, was expected to allow Truist to generate the same revenue with dramatically lower costs.
Management has already started closing down redundant bank branches and laying off staff. Analysts see the potential to trim billions of dollars in annual overhead expenses, which should get passed on to shareholders in the form of dividends and stock buybacks.
In the meantime, investors will get well compensated while they wait. Truist pays a quarterly dividend of $0.45 per share. Based on the current stock price, this comes out to an upfront yield of almost five percent.
Marine Petroleum Trust
Marine Petroleum Trust (NASDAQ:MARPS) represents the ultimate cash cow business.
The partnership, which was created in 1953, owns a collection of offshore oil and gas wells in the Gulf of Mexico. But rather than plowing profits back into new drilling operations, management is content to pay out all of the company’s income to unitholders. (Source: “Marine Petroleum Trust — About Us,” Marine Petroleum Trust, last accessed September 7, 2020.)
This makes the business a lucrative high-dividend stock. Over the past year, Marine has paid out a total of distribution of $0.26 a share. That comes out to a trailing yield, based on the share price at the time of this writing, of 14.3%.
To be clear, this above-average payout comes with above-average risk.
Marine’s distributions swing wildly in lockstep with energy prices. Furthermore, management will eventually close the partnership down when the oil wells run dry. But for investors who understand the risks up front, a royalty trust like Marine can make for a lucrative high-dividend stock.
Starbucks Corporation
From the late 1990s through the early 2010s, Starbucks Corporation (NASDAQ:SBUX) ranked as one of the fastest-growing businesses in the world.
CEO Howard Schultz took the company’s brand of high-end coffee around the world, making investors a fortune in the process. Today, you can spot the now-iconic double-tailed mermaid logo on storefronts across North America, Europe, and Asia.
However, these days, analysts don’t see the coffee giant growing anywhere near as quickly as it used to. With the coffee market saturated, at least in Norther America anyway, Starbucks has fewer opportunities to expand its business profitably.
So, instead, Starbucks management has contented itself to milk existing stores for lucrative cash flow, seeking out opportunities to squeeze even more money out of operations.
This has turned the business into a cash machine.
Since 2012, Starbucks has boosted its dividend to shareholders fourfold, while buying back tens of billions of dollars in stock. Shareholders can expect those payouts to grow further in the coming year as the business rebounds from the COVID-19 pandemic and management further dials back growth spending.
