The investment landscape has changed dramatically in the last year or so. The unprecedented era of near-zero interest rates is now over: Between May 2022 and May 2023, the Federal Reserve raised the federal funds rate from a target range of 0.75% to 1% to a range of 5% to 5.25%, which it chose to maintain in its June meeting. With inflation high and the nearly risk-free 10-year U.S. Treasury bond now paying about 3.37%, investors are demanding more income from their stock holdings. There are plenty of dividend stocks to choose from, but far fewer boasting yields that compete with Treasurys.
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Unlike government bonds, equities offer both dividend income and the potential for capital gains. While not all of these stocks have made big gains in this year’s turbulent market, they offer relative stability combined with healthy yields.
Here are seven of the best high-yield dividend stocks to buy:
| Stock | Trailing dividend yield (as of June 23) |
| OneMain Holdings Inc. (ticker: OMF) | 9.4% |
| Blackstone Inc. (BX) | 4.4% |
| Volkswagen AG (VWAPY) | 5.8% |
| Ambev SA (ABEV) | 4.5% |
| Lloyds Banking Group PLC (LYG) | 5.6% |
| BASF SE (BASFY) | 8.1% |
| Verizon Communications Inc. (VZ) | 7.4% |
OneMain Holdings Inc. (OMF)
While perhaps a bit off the beaten path, OneMain Holdings is a $5.1 billion mid-cap financial company based out of Evansville, Indiana. OneMain underwrites personal loans and insurance, with a strong presence in auto loans, credit cards and life insurance. Rising rates are often good for businesses like OMF, which enjoys higher margins as a result. The stock looks cheap at about seven times earnings, and its dividend rewards investors with a great income stream for holding the stock. OMF pays a 9.4% yield.
Blackstone Inc. (BX)
Blackstone is “the preeminent alternative asset manager,” according to Morningstar sector strategist Greggory Warren. Unlike traditional asset managers who tend to predominantly invest in publicly traded stocks and bonds, Blackstone is a major player in real estate, private equity, hedge funds and other fields that should theoretically have a low correlation to the wider market. While high interest rates are expected to slightly hit revenue and earnings this year, analysts expect operations to bounce back in a major way in 2024, with revenue and earnings per share both expected to jump by nearly 36%. The stock pays a 4.4% yield.
Volkswagen AG ADR (VWAGY)
As one of the world’s largest automakers, Volkswagen benefits from economies of scale thanks to the variety of models it offers, which should set it up for success in the transition to electric vehicles. In addition to the eponymous VW, the company also owns Audi, Porsche, Bentley and Lamborghini. Morningstar senior equity analyst Richard Hilgert speaks highly of Volkswagen’s “common architecture manufacturing strategy,” which should help keep costs low. That said, there is the risk that consumer demand for battery electric vehicles won’t materialize, putting revenues at risk. Analysts still predict modest earnings growth in 2024 and 2025. The stock pays a 5.8% yield.
[READ: Types of Fixed-Income Investments.]
Ambev SA (ABEV)
High dividends are great, but large yields are only as meaningful as the stability of the businesses backing them up. Thankfully for ABEV shareholders, few products have more robust long-term demand than alcohol. Ambev is a subsidiary of Anheuser-Busch InBev SA (BUD), which counts brands such as Budweiser, Corona and Stella Artois among its impressive collection of industry names. With a solid 4.5% yield, ABEV is a solid pick for dividend investors. Analysts expect earnings to rise 12.5% in 2023.
Lloyds Banking Group PLC ADR (LYG)
Lloyds is a United Kingdom-based retail and commercial banking firm. With the recent turmoil in U.S. banks, American investors may appreciate Lloyds’ lower risk allocation. It shed hundreds of billions of dollars in runoff and risk-weighted assets during its 2011 restructuring, which “significantly reduced its dependence on wholesale funding,” writes Morningstar equity analyst Niklas Kammer. “Today, Lloyds operates one of the strongest retail franchises in the United Kingdom.” While mortgages represent about two-thirds of Lloyd’s loans to customers, the firm has shifted its focus to other markets, including financial planning, credit card loans and loans to small and medium-sized businesses, as competition heated up in mortgages.
“This should allow Lloyds to offer a stronger value proposition to its clients as open banking initiatives take hold,” Kammer writes. The stock pays a 5.6% yield.
BASF SE (BASFY)
BASF is a chemical producer striving to promote a more sustainable future with environmental protections and social responsibility. And yet the firm “is subject to a range of environmental, social and governance, or ESG, issues that could pose challenges moving forward,” writes Morningstar analyst Katherine Olexa. Morningstar’s sustainability research arm finds BASF manufactures at least 44 substances that pose significant human health hazards.
“Improper management of its products and services could leave the firm liable for associated damages in the event of an incident which, at times, may involve hefty fines,” Olexa writes, while an outright ban could force the company to reformulate its existing products or chemicals. Despite these concerns, Olexa is bullish on BASFY’s long-term prospects, noting the company maintains a top-three market position in more than two-thirds of its businesses. It plans to diversify geographically, adding a site in Zhanjiang, China, that Olexa believes will “drive profitable growth for the firm, while further regional diversification will mitigate profit volatility over time.” The stock pays an 8.1% dividend.
Verizon Communications Inc. (VZ)
The largest of the high-dividend stocks to buy on this list, the nearly $151 billion Verizon is a telecom giant in the oligopolistic telecom sector. With only two true competitors and high barriers to entry, Verizon enjoys all the benefits of a utility, as mobile data and voice connection is essential for modern-day life and commerce. Conservative income investors are most likely to find VZ stock suitable for their needs — the business is unlikely to be disrupted, and it generates predictable cash flows. Make no mistake, VZ is unlikely to be the biggest gainer in your portfolio, and analysts expect more or less flat revenue growth this year and next, but its dividend yield will help make up for what VZ lacks in capital appreciation potential. Don’t let the negative year-to-date total return scare you, though; the stock pays a 7.4% yield.
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7 High-Yield Dividend Stocks to Buy originally appeared on usnews.com
Update 06/26/23: This story was previously published at an earlier date and has been updated with new information.
