5 High Yield Stocks With Sustainable Payout Ratios to Buy Today

Описание: You can download a comprehensive Excel spreadsheet of high dividend stocks with 5%+ yields here: https://www.suredividend.com/high-div...

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Many investors look to high yield dividend stocks with the hope of generating more income from their investment portfolios.

The problem with this approach is that many stocks with high yields have unsustainable dividend payments. Their dividends exceed their earnings or cash flows, which inevitably results in a dividend cut.

You can avoid this problem by investing in high yield stocks with low payout ratios. In this video, I’m going to introduce 5 high yield dividend stocks with sustainable payout ratios that you could buy today.

High Yield Stock #1: AT&T (T)

AT&T is the largest telecommunications company in the United States by market capitalization. Its only competitor of similar size is fellow telecommunications giant Verizon Communications.

AT&T has a current dividend yield of 6.3% and is perhaps the single safest stock with a dividend yield above 5%. Using 2018 earnings guidance, the company is on pace for a dividend payout ratio of approximately 58%.

AT&T is also absurdly cheap right now. We expect the company to generate earnings-per-share of about $3.45 in fiscal 2018, which implies a price-to-earnings ratio of 9.3. AT&T’s 10-year average price-to-earnings ratio has been 13.4. We believe that valuation expansion will me a meaningful contributor to this stock’s total returns moving forward.

High Yield Stock #2: Owens & Minor (OMI)

Owens & Minor is a healthcare distribution, transportation, and logistics company. It is likely that you haven’t heard of Owens & Minor. It is a small cap stock with a market capitalization of $1.1 billion.

Still, there’s a lot to like about Owens & Minor. The company trades with a dividend yield of 6%. Moreover, this high dividend yield is well-supported by the underlying cash flows. Owens & Minor is on pace for a dividend payout ratio of just 52% in fiscal 2018.

Like AT&T, Owens & Minor is currently undervalued. Our 2018 earnings estimate for Owens & Minor is $2.00 per share, which implies a current price-to-earnings ratio of 8.6. We believe that Owens & Minor deserves a price-to-earnings ratio of between 14 and 15. Valuation expansion has the potential to deliver excellent returns to today’s buyers of Owens & Minor.

High Yield Stock #3: Altria Group (MO)

Altria is the largest cigarette company in the United States. The company sells the Marlboro brand in the U.S. along with several non-smokeable brands and the Ste. Michelle brand of wine. Altria also has a 10% ownership stake in alcoholic beverage company Anheuser Busch.

Altria is well-known for having an above-average dividend yield. The company’s yield is currently 4.9%. Altria’s management team targets a dividend payout ratio of 80% and is on pace for a payout ratio of 73% in 2018.

The company’s valuation is also attractive. We believe the company should earn about $3.96 in fiscal 2018, which means it is trading at a current price-to-earnings ratio of 14.3. Altria’s 10-year average price-to-earnings ratio is 16. This is the rare case where investors can buy a very high-quality business at an extremely attractive price.

High Yield Stock #4: Omega Healthcare Investors (OHI)

Omega Healthcare Investors is a healthcare real estate investment trust – or REIT, for short – that generates 85% of its revenue from skilled nursing facilities and 15% of its revenue from senior housing developments.

This REIT currently trades with a remarkably high distribution yield of 8.4%. Omega Healthcare Investors appears likely to deliver funds from operations of $3.01 in fiscal 2018. Using the company’s current distribution payment, this implies a dividend payout ratio of 88%.

Omega is trading at a price-to-FFO ratio of 10.4 while its 10-year average price-to-FFO ratio is 12.4. Today looks like an excellent opportunity for dividend investors to accumulate shares in this high-yielding REIT and bolster the passive income generated from their investment portfolios.

High Yield Stock #5: Enterprise Products Partners (EPD)

Enterprise Products Partners is a master limited partnership (MLP) that operates as an oil and gas storage and transportation company. Enterprise Products Partners’ asset base includes nearly 50,000 miles of pipelines and 250 million barrels of storage capacity.

Enterprise Products Partners has a yield of 6.1%. Using cash flow, Enterprise Products Partners is on pace for a dividend payout ratio of just 65% in fiscal 2018.

The company also appears slightly undervalued. Enterprise Products Partners is trading at a price-to-cash-flow ratio of 10.6, while its 10-year average price-to-cash-flow ratio is 11.6. The company holds appeal for income-oriented investors that want to accumulate shares in an undervalued midstream energy company.