5 Best High-Yield Dividend Stocks to Buy Now

Core Insights - The article highlights five dividend stocks with yields ranging from 3.5% to 7.1%, emphasizing their strong cash flows and business models that can sustain payouts during economic downturns [1][12]. Group 1: High-Yield Dividend Stocks - High-yield dividend stocks offer payouts significantly higher than the S&P 500's average yield of 1.4%, but high yields can indicate underlying issues such as sluggish growth or high payout ratios [2]. - Successful dividend stocks are characterized by strong free cash flow, durable business models, and an economic moat that protects earnings [2]. Group 2: Individual Stock Analysis - Altria Group (MO): Offers a yield of approximately 6.5% with a payout ratio of 78%, supported by the recession-resistant nature of tobacco consumption. The company has increased dividends for 55 consecutive years despite declining cigarette volumes [5][6]. - Pfizer (PFE): Yields 7.1% after a decline from COVID-19 vaccine peaks, with a 90% payout ratio. The company has 28 ongoing phase 3 trials that could reignite growth by 2026, trading at 7.6 times forward earnings [7][8]. - ExxonMobil (XOM): Provides a conservative yield of 3.5% with a sustainable payout ratio of 56%. The company has maintained capital discipline and increased dividends for 42 consecutive years, trading at 15 times forward earnings [9]. - British American Tobacco (BTI): Offers a 5.5% yield with a high payout ratio, but strong cash-flow coverage due to non-cash charges. The company operates in over 180 markets, trading at 11.4 times forward earnings [10]. - Takeda Pharmaceutical (TAK): Yields 4.5% and is often overlooked by U.S. investors. The company is reducing leverage through asset sales and debt reduction, trading at 15 times forward earnings [11]. Group 3: Investment Strategy - Reliable income is becoming scarce in a market dominated by growth stocks, making these five companies attractive for dependable payouts despite their lack of explosive growth potential [12]. - The right mix of these stocks depends on investor risk tolerance, with Exxon for conservative coverage, Pfizer and British American Tobacco for higher risk-reward, and Takeda or Altria for balance [13].