5 Dividend Stocks With High Yields That Are Safer Than You Might Think
A high yield is a sign that investors are worried about a business, but sometimes that concern is overwrought.
Pfizer, Bristol Myers Squibb, Realty Income, W.P. Carey, and Hormel Foods are all high-yield dividend stocks that may appear riskier due to their elevated yields. However, the risk may not be as significant as it seems. Pfizer's 5.9% yield is due to concerns over its dividend sustainability, but its cash dividend payout ratio is 85%, which is high and indicates the dividend is supportable.
Bristol Myers Squibb's 4% yield is tied to a payout ratio of 55%, which is more reasonable. Both companies are working on new drugs to offset patent expirations, which are a normal part of pharmaceutical business. Realty Income and W.P. Carey are high-yield net lease REITs with yields of 5.5% and 5.8%, respectively. While rising interest rates have squeezed the spread between financing costs and rents, property markets typically adjust and ensure REITs can continue to make profitable investments.
Hormel Foods has a 5.3% yield, but its debt-to-equity ratio is low, and it has covered its interest costs 11 times over. The company has a long history of increasing dividends, and The Hormel Foundation controls a large portion of its stock and uses dividends to support its giving. Despite the high yields, the dividends of these stocks appear to be safer than their elevated yields suggest, given their strong financial positions and commitment to long-term dividend growth.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
