The 6 Best Dividend Stocks That Yield More Than 5%-October 2018

Dividend yield  is just one criterion that investors use to evaluate potential equities in the eternal search for best dividend stocks.

However, while some investors seek high dividend income, others prefer high capital growth stocks, while some investors are willing to forego some of the share price growth and accept reduced dividend payouts in return for balanced total returns from both sources. Therefore, a definition of the best dividend stocks will vary depending on the specific portfolio goals, investors’ preferences, analysis methodology and other considerations.

Let us consider a dividend yield of 5% as the main criterion for identifying best dividend stocks. Using the Dividend Screener available at DividendInvestor.com – I found that nearly 1,100 individual equities offer yields above the 5% mark.

To whittle down this list to a manageable size, we must introduce additional constraints to the analysis. Therefore, the six best dividend stocks listed below include equities that – in addition to yielding 5% or more – also have positive total returns over the past 12 months, dividend payout ratios between 40% and 65% with just one exception, distribute dividends at least four times per year and have boosted their annual dividend payouts for at least the past three years.

Based on the above criteria and sorted in ascending order by dividend yield, the six best dividend stocks yielding 5% or more are:

Altria Group, Inc.(NYSE:MO)

Market Capitalization:             $117.14B

Dividend Yield:                        5.15%

Dividend Payout Ratio:           52%

First Dividend:                         1928

Consecutive Annual Hikes:    9 years

Headquartered in Richmond, Virginia, and founded in 1919, Altria Group, Inc., manufactures and sells cigarettes, smokeless products and wine in the United States. In its ninth year of a consecutive annual dividend hikes streak, the company boosted its quarterly dividend 14.3% in September, which is the second dividend hike in 2018. The company already offered a 6.1% quarterly dividend boost six months earlier. During the current streak of consecutive annual dividend hikes, MO enhanced its total annual dividend amount nearly 150%, corresponding to an average annual growth rate of nearly 12%. After a decline in early 2018, the share price gained 13.4% since its 52-week low in early May 2018. Having just gone ex-dividend in mid-September, the next ex-dividend date will occur in mid-December with the pay date to follow in early January 2019.

Aircastle Ltd. (NYSE:AYR)

Market Capitalization:             $1.64B

Dividend Yield:                        5.34%

Dividend Payout Ratio:           40%

First Dividend:                         2006

Consecutive Annual Hikes:    8 years

Based in Stamford, Connecticut, and founded in 2004, Aircastle Limited leases, finances, sells and manages commercial flight equipment to airlines worldwide. Over the past eight years, the company has advanced its annual dividend distribution amount more than three-fold, which is equivalent to an average growth rate of 15.6% per year. The company’s current 2.34% yield is 11% higher than its own 4.8% average yield over the past five years. The current 40% dividend payout ratio is in a sustainable range and significantly lower than the 103% five-year average payout ratio, which indicates that the company’s earnings are currently in much better position to support future dividend distributions and annual hikes. After a 20% drop in early 2018, the share price has regained 40% of those losses and currently trades nearly 10% above its 52-week low from early March.

Braemar Hotels & Resorts, Inc. (NYSE:BHR)

Market Capitalization:             $366.30M

Dividend Yield:                        5.60%

Dividend Payout Ratio:           62%

First Dividend:                         2014

Consecutive Annual Hikes:    4 years

Headquartered in Dallas Texas, and established in 2014, Braemar Hotels & Resorts is a real estate investment trust (REIT) that invests primarily in full-service luxury hotels and resorts. The company anticipates its luxury properties to generate revenue per available room (RevPAR) at least twice the current U.S. average RevPAR for all hotels. The company boosted its annual dividend over the past four consecutive years at an average growth rate of 33.7% per year, which resulted in an overall annual dividend amount enhancement of 220%. The REIT’s current 5.6% yield is nearly 65% above the fund’s own 3.4% five-year average. The share price gained more than 18% and combined with the robust dividend payouts for a total return of 22.54% over the past 12 months.

B&G Foods, Inc. (NYSE:BGS)

Market Capitalization:             $2.00B

Dividend Yield:                        6.29%

Dividend Payout Ratio:           65%

First Dividend:                         2007

Consecutive Annual Hikes:    8 years

Headquartered in Parsippany, New Jersey, and founded in 1996, B&G Foods manufactures, sells and distributes a portfolio of shelf-stable, frozen food and household products in the United States, Canada and Puerto Rico. The company’s current 6.29 yield is almost 34% above the company’s own 4.7% average yield over the past five years and more than triple the 2.01% average yield of the entire Consumer Goods sector. The current yield is also more than triple the 1.89% simple average yield of all the companies in the Processed & Packaged Goods industry segment. After declining in the first five months of 2018, the share price recovered all those losses and gained 36.3% since its 52-week low in May 2018. Even with the early share price decline, the company delivered a 3% total return over the past 12 months, which is a sign of a positive trend when compared to its 2% total loss over the past three years.

Energy Transfer Equity LP (NYSE:ETE)

Market Capitalization:             $20.15B

Dividend Yield:                        7.01%

Dividend Payout Ratio:           114%

First Dividend:                         2006

Consecutive Annual Hikes:    12 years

Based in Dallas, Texas, and founded in 2002, ETE sells and transports natural gas to electric utilities, independent power plants, local distribution companies and other end-users. The current $0.305 quarterly distribution corresponds to a $1.22 annualized payout and currently yields 7.03%, which outperformed the 4.8% average yield of the company’s peers in the Oil & Gas Pipelines segment by more than 46%. ETE maintained an average annual growth rate of more than 18% over the past 11 consecutive years and advanced its total annual distribution 635% over that period. While flat for 2018 and over the trailing 12 months, the unit price rose almost 24% since its 52-week low in early April 2018. While the combined total return of 5.5% over the past 12 months is not as high as expected due to the flat share price, it indicated a positive trend reversal against a total loss of more than 18% over the three-year period.

New Residential Investment Corporation (NYSE:NRZ)

Market Capitalization:             $6.17B

Dividend Yield:                        11.06%

Dividend Payout Ratio:           50%

First Dividend:                         2013

Consecutive Annual Hikes:    4 years

Based in New York, New York, and founded in 2011, the New Residential Investment Corporation is a real estate investment trust (REIT) that focuses on investing in and managing residential mortgage-related assets in the United States. Over the past four years, the total annual dividend amount advanced 20%, which corresponds to an average annual growth rate of 4.6%. The current 11.06% yield is 260% above the 3.06% average yield of the entire Financials sector, as well as 150% higher than the 4.44% average yield of all the companies in the Residential REITs industry segment. Additionally, as the third-highest yielding REIT in the segment, NRZ’s current 11.06% yield outperformed the 6% average yield of the sector’s only dividend-paying companies by 85%. The share price advanced nearly 8% over the past year and is 12.4% above the 52-week low from early February 2018. Unlike some of the other entries on this list that showed total returns only in the past 12 months, NRZ rewarded its shareholders with total returns of 21%, 65% and 98% over the past one, three and five years, respectively.

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