The dividend yield on the S&P 500 has been hovering near its lowest level in roughly two decades for some time now, and while it's starting to move higher, it's still at a paltry 1.7%. So what are yield-hungry investors left to do?
Thankfully, there is no shortage of high-paying dividend stocks on Wall Street. And in a time of market volatility, like we've seen throughout 2022, quality income-paying names can be used as a defensive play in portfolios.
"We have continued to highlight the importance of dividends in the current backdrop, where we have seen wide performance spreads between dividend payers versus non-payers," says Jill Carey Hall, equity and quant strategist at BofA Securities. Looking specifically at small-cap stocks, Carey notes that "dividend yield has been the best-performing long factor" for the year-to-date.
However, not all dividend stocks are created equal, and it can be a dangerous practice for investors to simply chase yield. Many times, a company's high yield can be a sign of trouble in its underlying business.
With that in mind, we've selected 10 high-paying dividend stocks with yields of 5% or more. However, we didn't just randomly pick names, though. To put together a list of quality firms, we looked for companies with solid fundamentals, generous yields and backing from the analyst community. Investing in sturdy dividend stocks remains a favorite strategy on Wall Street and these ones are worth a closer look.
Data is as of Sept. 19. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Stocks are listed in order of yield, lowest to highest.
- Market value: $4.3 billion
- Dividend yield: 5.3%
Douglas Emmett (DEI, $20.97) is a real estate investment trust (REIT) that owns 18.1 million square feet of Class A office space and 4,577 apartment units in Los Angeles and Honolulu. DEI stock has had a rough go of it on the charts, down more than 37% for the year-to-date. However, this could just create an opportunity to get one of Wall Street's favorite high-paying dividend stocks at a discount.
Raymond James analyst William Crow has an Outperform (Buy) rating on DEI stock with a $28 target price, more than 38% above its current share price. Crow believes that the REIT's office markets have bottomed and are in a slow climb out of a large hole caused by COVID-19 and work-from-home.
"[W]e continue to have a positive view of most of Douglas Emmett's submarkets, its portfolio, sound balance sheet, and experienced management team, which has a strong track record of value creation for shareholders," Crow says. "It's not often, and shouldn't be, that one could buy DEI's portfolio at an implied 8.0% cap rate."
Piper Sandler analyst Alexander Goldfarb is also upbeat toward DEI, with an Overweight (Buy) rating and a $30 price target. In a recent note to clients, Goldfarb said that apartment rents are strong, while net operating income for DEI's office space continues to grow despite an occupancy rate in the mid-80s.
This fundamental strength was seen in Douglas Emmett's second-quarter earnings report. Its revenues increased 9.8% year-over-year to $247 million, while its adjusted funds from operations (AFFO) jumped 15% to $89.6 million. Its AFFO payout ratio was 64.9% during the quarter. For all of 2022, DEI expects net income of 56 cents a share at the midpoint of its guidance, while its funds from operations should be $2.05 a share.
With strong residential submarkets and strengthening office submarkets, DEI hasn't traded this low since early 2012.
Philip Morris International
- Market value: $148.7 billion
- Dividend yield: 5.3%
Philip Morris International (PM, $95.92) stock is doing relatively well in 2022. Shares are flat for the year-to-date, compared to a nearly 19% slide for the S&P 500 Index. And analysts think there's more upside to come. Per S&P Global Market Intelligence, the consensus price target for PM is $109.16, about 14% higher than the stock's current price.
CFRA Research analyst Garrett Nelson has an even higher target price of $120. Nelson also has a Buy rating on PM stock, saying he continues "to like PM's defensive qualities and total return potential after accounting for the highly lucrative dividend of $5.00/sh annualized in the current market backdrop." Indeed, if you include the payout from one of Wall Street's high-paying dividend stocks, PM's year-to-date total return is 3.3%.
Meanwhile, the company is looking to expand its global presence. Philip Morris announced in May that it would pay $16 billion to acquire Swedish Match, whose smoke-free brands include ZYN (nicotine pouches), America's Best Chew (chewing tobacco), General (snus) and Longhorn (moist snuff).
One potential hurdle in the proposed acquisition, which is currently expected to expire in October, is Elliott Management. The activist investor took a position in Swedish Match after the two companies announced the merger. If history is any guide, the hedge fund could possibly pressure Philip Morris and Swedish Match to get a higher sale price, according to The Wall Street Journal. Elliot would need to acquire $1.6 billion of Swedish Match's stock to prevent Philip Morris from obtaining more than 90% of the Stockholm-based company, a sale requirement.
Given ZYN commands 64% of the nicotine pouch business, the successful acquisition of Swedish Match would boost PM's global market share for smoke-free products. It would also bring Philip Morris into direct competition with Altria Group (MO), its former owner until it was spun off in 2008.
- Market value: $39.1 billion
- Dividend yield: 5.3%
Williams Companies (WMB, $32.06) owns and operates more than 30,000 miles of pipeline in 25 states. It moves approximately 30% of the U.S. natural gas produced each year. WMB's four operating segments generated roughly $2.4 billion in revenue in the second quarter, 9.1% higher than a year earlier.
On the bottom line, its adjusted net income in the quarter was $484 million, a 48% year-over-year improvement. On an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) basis, Williams Companies earned $1.5 billion, up 14% from Q2 2021.
As a result of its strong showing in the second quarter, WMB raised its full-year adjusted EBITDA outlook to $6.25 billion at the midpoint, 11% higher than in 2021 and 8% above its original 2022 guidance of $5.8 billion set at the beginning of the year.
As for WMB's spot on this list of high-paying dividend stocks, the company paid out $1.04 billion in dividends in the first half of the year. Its coverage ratio [available funds from operations divided by common dividends paid] was 2.24. For all of 2022, it expects to pay out $2.08 billion with a 2.29 coverage ratio. That's very healthy.
The consensus estimate of the 28 analysts covering the energy stock is Buy, according to S&P Global Market Intelligence. They also have an average target price of $37.85, nearly 20% higher than where the stock is at now.
In August, Argus Research analyst Bill Selesky reaffirmed his Buy rating on Williams with a $40 price target.
"We expect Williams to continue to benefit from its diversified asset base and growing demand for natural gas, and believe that the stock is favorably valued at current levels," Selesky wrote in his Aug. 10 note to clients.
- Market value: $25.5 billion
- Dividend yield: 6.1%
LyondellBasell Industries (LYB, $78.03) is a global chemical company with six operating segments worldwide. Its products include olefins and co-products, polyolefins, polyethylene and polypropylene products, and propylene oxide. It also refines crude oil into gasoline and distillates.
The company hired Peter Vanacker as its new CEO in December 2021. However, he didn't officially take the reins until May. The executive replaced Kenneth Lane, who left after seven years to become CEO of W.R. Grace. Vanacker has held CEO and other executive positions with several chemical businesses, and he has a strong track record of sustainable growth and value creation.
LyondellBasell reported second-quarter earnings at the end of July. Sales grew 28.3% year-over-year to $14.8 billion, and were up 12.8% quarter-over-quarter due to higher volumes and prices during the quarter. On the bottom line, it generated EBITDA, excluding some items, of $2.5 billion, 21.3% higher than in the first quarter.
The company's cash flow was $3.1 billion during the second quarter, 25.4% higher than a year earlier. As a result, it paid out $2.1 billion in dividends during the quarter and bought back $45 million of its own stock. Through the first six months of 2022, WMB repurchased $262 million of its shares.
LyondellBasell plans to close its Houston crude oil refinery at the end of 2023. Possible suitors have been interested in the roughly 265,000 barrel-per-day (bpd) refinery. However, the refinery could be mothballed without an eventual buyer. In addition, it would cost the company more than $1 billion annually to keep it open beyond 2023.
Cogent Communications Holdings
- Market value: $2.6 billion
- Dividend yield: 6.8%
Cogent Communications Holdings (CCOI, $53.63) has created one of the largest IP data networks in the world over its 23-year history. Its goal is to provide its customers with the highest-quality internet for the lowest possible cost. It now provides internet service in more than 217 major markets on six continents worldwide.
CEO Dave Schaeffer founded the company in 1999. He's been chairman and CEO since the company's founding. He owns 10.5% of the company, making him the third-largest shareholder behind BlackRock (BLK) and Vanguard.
Highlights of the company's second-quarter results include a 4.3% year-over-year increase in total customer connections to 95,777. Its on-net customer connections account for 86% of its total customer connections. The number of on-net buildings were up 120 year-over-year and 30 quarter-over-quarter to 3,095. On-net refers to network facilities owned by Cogent that are already connected at a specific location.
Another highlight from the second quarter was Cogent's 2.8% increase in its quarterly dividend to 90.5 cents per share. It's up 12.4% from Q1 2021. The increase was the company's 40th consecutive quarterly bump in its dividend payment, and the current annual payout of $3.62 per share yields a healthy 6.8%.
Also, during the quarter, the company repaid its 2024 350 million Euro Notes at an exchange rate of $1.06, down from $1.13 when issued. CCOI finished the second quarter with total net debt of $854.4 million and a net leverage ratio of 3.7.
The stock is attractively valued, too, trading at 4.3 times sales and 15.2 times cash flow – well below its five-year averages. What's more, Oppenheimer analysts Timothy Horan and Edward Yang (Outperform) see solid upside for one of Wall Street's highest-paying dividend stocks. They have a target price of $78, considerably higher than CCOI's current share price.
- Market value: $3.0 billion
- Dividend yield: 7.0%
Hanesbrands (HBI, $8.54) announced its second-quarter results in August. Included was an admission by the company that a ransomware attack against HBI cost it $100 million in revenue during the second quarter. That lowered its earnings per share by 8 cents.
However, despite the temporary shutdown, its sales, excluding personal protective equipment (PPE), were up 75% compared to Q2 2019, to $1.5 billion. Its Champion brand revenues increased 96% over Q2 2019.
As part of its focus on growing the Champion brand, Hanesbrands bought the North American Champion trademarks from Wolverine World Wide (WWW) subsidiary Keds for $102.5 million. The purchase gives Hanesbrands greater control of the global Champion brand.
For all of 2022, the company expects full-year revenue of $6.5 billion, with an adjusted operating profit of $655 million and adjusted EPS of $1.17.
But there's even more growth on the horizon. The company announced its three-year Full Potential Plan in May 2021. The plan is designed to grow Hanesbrands' annual revenue by $1.2 billion, the bulk of it from Champion. Overall revenue will grow to $7.4 billion by 2024, a compound annual growth rate of 6%. Currently, it's right on target, investing an additional $160 million in the business to meet its 2024 goals.
In addition to growing its Champion brand, HBI wants to reignite global sales growth for its innerwear segment by an additional $200 million by 2024. Innerwear consists of several iconic brands, including Hanes t-shirts and boxers and Bali underwear. It accounts for 45% of overall sales, but has been falling in recent years.
Hanesbrands stock is down nearly 50% year-to-date. It trades at 0.45x sales, its lowest level in the past decade. In other words, investors have the opportunity to pick up one of Wall Street's high-paying dividend stocks at a big discount.
New York Community Bancorp
- Market value: $4.4 billion
- Dividend yield: 7.1%
New York Community Bancorp (NYCB, $9.54) is the holding company of New York Community Bank, which operates 237 branches under a handful of subsidiaries in several states, including New York, New Jersey, Ohio, Florida and Arizona. It has $63.1 billion in total assets, $41.2 billion in deposits, and $6.8 billion in stockholders equity.
NYCB provides two major services. One is multi-family loans in the New York City area for non-luxury, rent-regulated properties with below-market rents. The other is offering financial products and services for individuals and businesses.
The bank reported record second-quarter results at the end of July that included a 6% increase in non-GAAP earnings per share to 35 cents, and pre-provision net revenue, excluding merger-related expenses, of $243 million, 11% higher than a year earlier. Other good news in the report was a 15% increase in NYCB's annualized total loans portfolio to $48.5 billion. In addition, its net interest margin (NIM) increased by nine basis points to 2.52%. A basis point is one-one hundredth of a percentage point.
The merger expenses mentioned in the previous paragraph are for the bank's pending merger with Flagstar Bancorp (FBC). New York Community Bank originally announced the $2.6 billion all-stock acquisition in April 2021. As a result, Flagstar shareholders will get 4.02 NYCB shares for each Flagstar share held. The combined entity will have $87 billion in assets from more than 400 branches. NYCB shareholders will own 68% of the merged firm.
According to Wedbush Securities, Flagstar should benefit from a larger balance sheet, while both companies should benefit from their diversified revenue streams. Wedbush believes the merger must be completed for all shareholders to benefit over the long haul. The merger agreement was recently extended until Oct. 31, 2022, to allow the banks to obtain a national rather than a state bank charter.
Pioneer Natural Resources
- Market value: $56.1 billion
- Dividend yield: 8.7%
Pioneer Natural Resources (PXD, $234.85) is an independent oil and gas company focused on the Permian Basin in Texas. In early August, it reported second-quarter results that included free cash flow of $2.7 billion. This was significantly higher than its Q2 2021 free cash flow of $616 million.
Thanks to the strong free cash flow, PXD returned more than 95% to shareholders in the form of base and variable dividends along with share repurchases. For the third quarter, its base dividend will be $1.10 a share, while its variable dividend is $7.47 for a total payout of $8.57. On an annualized basis, that's a 14.1% yield, making it the highest-paying dividend stock in the energy sector.
"Pioneer's strong balance sheet provides the financial flexibility to return significant free cash flow to investors, while still growing annual oil volumes," Scott Sheffield, CEO of Pioneer Natural Resources, said in the company's second-quarter press release.
In 2022, Pioneer expects to produce between 623 and 648 million barrels of oil equivalent per day (MBOEPD), generating more than $9.0 billion in free cash flow.
CFRA analyst Stewart Glickman has a Buy rating on PXD stock with a $283 target price, 18% higher than where it's currently trading.
"If Q3 dividends are sustained in Q4, we estimate a 2022 yield of 13%, which we view as extremely strong," Glickman writes in a note to clients. "We would caution investors that in this scenario, though, almost 90% of the payouts are derived from variable dividends, which are contingent on crude oil prices that have fallen recently."
However, if you're an aggressive investor that likes high dividend yields, you can't get much better than what Pioneer's doling out right now.
- Market value: $23.3 billion
- Dividend yield: 9.1%
Diamondback Energy (FANG, $130.93) is another member of the energy sector featured on this list of high-paying dividend stocks. FANG focuses on oil exploration and production in the Permian Basin. Just as with Pioneer Natural Resources, Diamondback Energy generates so much free cash flow it's able to pay base and variable dividends while also buying back its shares.
In early August, FANG reported its second-quarter results, which showed it generated $1.3 billion in free cash flow during the quarter and $2.3 billion in the first six months of fiscal 2022. The company also paid a base dividend of 75 cents per share and a variable dividend of $2.30 per share for the three-month period. The annualized yield of the total base-plus-variable dividend is 9.3%. Not quite as high as Pioneer, but still very healthy.
In addition, it bought back $303 million of its stock in the second quarter and $78 million in the first quarter. It also repurchased $200 million in July. Plus, Diamondback's board on July 28 voted to double the company's share repurchase program, from $2 billion to $4 billion. It currently has approximately $3.1 billion left on its program.
FANG is a favorite among Wall Street pros, too. At the end of July, Goldman Sachs announced its five favorite energy stocks. Diamondback made the cut due to its capital allocation decisions around dividends and share repurchases, which should help differentiate FANG from its exploration and production competitors. Goldman has a Buy rating and a $155 target price on the stock.
Based on Diamondback's trailing 12-month free cash flow of $2.82 billion, it has a free cash flow yield of 12.4%. This is great news for investors seeking out the best high-paying dividend stocks, as anything over 8% is considered value territory.
- Market value: $572.3 million
- Dividend yield: 31.6%
Dorian LPG (LPG, $14.26) owns a fleet of 22 very large gas carriers (VLGCs) that ship liquified petroleum gas (LPG) to destinations around the world. The average age of its fleet is 7.5 years, about three years younger than the global fleet of VLGCs.
UBS analyst Brian Reynolds has a Buy rating on LPG stock with a $19 price target, more than 61% higher than its current share price. Reynolds likes the company's steady return of capital (ROC) to shareholders.
"We expect the market to continue to positively receive Dorian's commitment to ROC over the past few quarters which has included $2.50/$1.00/$1.00 share 'irregular dividends' in addition to share buybacks," Reynolds writes in an Aug. 3 note to clients.
Although the company reported lower than expected fiscal first-quarter adjusted EBITDA, Reynolds believes that the LPG market is strengthening, which should lead to a continued cash return to shareholders.
Consensus estimates are for Dorian to bring in earnings per share of $1.85 in fiscal 2023, $2.26 in fiscal 2024, and $3.11 in fiscal 2025. That has it trading at less than five times its 2025 projected earnings. If these projections come to pass, Dorian's current valuation will be lower than it's been in several years.
As Reynolds made note of, the company has paid three irregular per-share dividends to date in 2022 – $1.00 in January, $2.50 in June, and another $1.00 in September. The $4.50 per share in 2022 dividends yields nearly 32% based on its current share price.
You shouldn't expect this going forward, but if the LPG market continues to improve in China and elsewhere, there's no reason why LPG won't remain one of Wall Street's highest-paying dividend stocks.
Will has written professionally for investment and finance publications in both the U.S. and Canada since 2004. A native of Toronto, Canada, his sole objective is to help people become better and more informed investors. Fascinated by how companies make money, he's a keen student of business history. Married and now living in Halifax, Nova Scotia, he's also got an interest in equity and debt crowdfunding.
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