In the current market environment where the S&P 500 index yields less than 2% on average, high-dividend stocks continue to attract income investors seeking attractive returns. Despite rising interest rates, there are still stocks available with superior yields and sustainable dividend payouts.
Let's explore four ultra-high dividend stocks that offer yields above 8% and have a track record of sustainable dividends.
4 high-dividend stocks
Ultra-high dividend stocks are somewhat rare, but these four offer yields over 8%.
| Symbol | Company Name | Dividend Yield |
|---|---|---|
| MO | Altria Group | 8.40% |
| TDS | Telephone & Data Systems | 10.85% |
| LNC | Lincoln Financial | 8.58% |
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1. Altria Group (MO)
Altria Group (NYSE: MO) is a leading consumer staples giant known for its popular Marlboro cigarette brand in the United States. It also offers a range of non-smokable brands, including Skoal and Copenhagen. With over 40% retail market share in the U.S., Marlboro remains the company's flagship brand.
Altria has an impressive dividend track record, having increased its dividend for more than 50 consecutive years. This achievement has earned the company a place on the exclusive Dividend Kings list, as well as the title of Dividend Champion.
In its fourth-quarter report, Altria surpassed analyst expectations, reporting a non-GAAP EPS of $1.18, beating estimates by 2 cents. Although its revenue of $5.08 billion showed a slight year-over-year decline, the company's management outlined plans for 2023 that focus on balancing earnings growth, strategic investments, and shareholder returns.
For the full year of 2023, Altria expects adjusted diluted EPS in the range of $4.98 to $5.13, representing a growth rate of 3% to 6% from the previous year. The company aims to maintain a target dividend payout ratio of 80% of its annual adjusted EPS.
Considering an estimated EPS of approximately $5.01 in 2023, Altria's stock currently trades at a price-to-earnings (P/E) ratio of 9.4, which indicates undervaluation. A fair value estimate for Altria suggests a P/E ratio of 11, which is reasonable for a highly profitable company with a strong market position and a successful history. Moreover, the stock's current yield of 8% is exceptionally attractive, both in absolute terms and relative to its historical yields.
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2. Telephone & Data Systems (TDS)
Telephone & Data Systems (NYSE: TDS) is a well-established telecommunications company offering cellular and landline services, wireless products, cable, broadband, and voice services across the United States. Its Cellular division generates over 75% of the company's total operating revenue.
Beginning as a collection of 10 rural telephone companies in 1969, TDS has grown into a market leader with a market capitalization of $1.1 billion and annual revenues surpassing $5.4 billion.
TDS recently declared its 49th consecutive annual dividend increase, raising the quarterly dividend by 2.8% to 18.5 cents. However, the company's first-quarter financial results for 2023 failed to impress investors, leading to a 17% decline in TDS shares following the report. Total operating revenues for the quarter were $1.3 billion, down 1% compared to the same period the previous year and $30 million short of analyst estimates.
Despite this setback, TDS did show some positive indicators in its performance. Postpaid average revenue per user (ARPU) increased by 1.9% year over year, reaching $50.66. The company also experienced a 4% growth in total broadband connections, amounting to 515,400 connections, and a 4% increase in residential revenue per connection, reaching $60.24.
During the quarter, TDS repurchased nearly 291,000 of its common shares for $3 million. Management reaffirmed its 2023 guidance, expecting service revenues at U.S. Cellular to be approximately $3.1 billion, with total expected operating revenues for TDS reaching around $1.045 billion.
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3. Lincoln National (NYSE:LNC)
Lincoln National (NYSE:LNC) offers life insurance, annuities, retirement plan services and group protection. The corporation was founded in 1905 as The Lincoln National Life Insurance Company. Former President Abraham Lincoln’s son granted the company permission to use the name. The corporation has grown into a market capitalization of $6 billion.
Lincoln National reported fourth-quarter and full-year 2022 results on Feb. 8. The company had net income of 1 cent per share in the fourth quarter, which compared unfavorably to $1.20 in the fourth quarter of 2021. Adjusted net income equaled 97 cents per share compared to $1.56 in the same prior-year period. Additionally, annuities average account values shrunk by 16% to $144 billion and group protection insurance premiums grew 9% to $1.2 billion.
For the full year, Lincoln suffered an adjusted loss of $5.22 per share compared to adjusted net income of $8.20 in 2021. However, these results included $12.21 of net unfavorable items due in large part to the company’s annual review of DAC and reserve assumptions.
The company repurchased 8.7 million shares of stock for $550 million in the trailing twelve months, reducing the share count by 7%.
For 2023, we expect the company’s adjusted earnings to normalize once again. LNC had grown net income by 7% on average over the nine-year period between 2012 and 2021.
The dividend has grown since it was slashed in 2008 and 2009 to 4 cents annually. The corporation’s 2020 dividend of $1.60 was the first year the dividend returned to this level since 2007. The share count has been reduced meaningfully over the last decade. Continued strong share repurchase would be a tailwind to per-share earnings.
We estimate that LNC can grow net income by around 3% per annum off 2023’s forecast for $8.25 per share. The company has a three-pronged product strategy it is currently enacting. The “reprice, shift & add new product” strategy focuses on achieving strong returns while providing consumer value.
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