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When searching for high-yield dividend stocks, it’s essential to consider various factors to ensure the sustainability and growth potential of the dividends. Below, we’ll discuss three high-yield dividend stocks that have been selected based on a thorough methodology, which includes analyzing dividend consistency, assessing financial health, considering payout ratios, and evaluating analyst recommendations.
However, it’s important to note that what may be a great dividend stock for one investor, may not fit with another investor’s long-term goals or risk tolerance. You should always conduct your own research and consult with a financial advisor before making any investment decisions. With that said, here’s the methodology used to choose these three high-yield dividend stocks to consider buying this month.
Methodology
To identify the top high-yield dividend stocks for May, we applied the following criteria:
1. Minimum dividend yield of 5%: We focused on stocks that offer a substantial dividend yield to provide investors with significant income potential.
2. Dividend consistency: We looked for companies with a history of consistently paying and increasing their dividends over time, demonstrating a commitment to rewarding shareholders.
3. Financial health: We evaluated each company’s financial stability by examining metrics such as debt-to-equity ratio, interest coverage ratio, and cash flow to ensure they have the financial strength to maintain their dividend payouts.
4. Payout ratios: We analyzed the dividend payout ratio to ensure that the company’s dividends are sustainable and not consuming too much of its earnings or cash flow.
5. Analyst recommendations: We reviewed analyst ratings and price targets to gauge market sentiment and potential upside for each dividend stock.
Now, here are the three companies that stood out when looking at the above criteria:
Pfizer Inc. (NYSE:PFE)
Pfizer Inc. is a global biopharmaceutical company that develops, manufactures, and markets a wide range of medicines and vaccines. With a forward dividend yield of 6.04% and a market cap of $157.48 billion, Pfizer is an attractive option for income-seeking investors.
The company has a strong track record of paying dividends, with a forward annual dividend rate of $1.68 per share. Pfizer’s payout ratio of 71.79% indicates that its dividends are sustainable and well-covered by its earnings. The company’s interest coverage ratio of 17.41 and debt-to-equity ratio of 0.42 demonstrate its financial stability and ability to maintain its dividend payouts.
Analysts have a consensus price target of $40.28 for Pfizer, with recent ratings from Morgan Stanley, BMO Capital, and Cantor Fitzgerald. The average price target of $36.67 from these three analysts implies a 30.32% upside potential for the stock.
VICI Properties Inc. (NYSE:VICI)
VICI Properties Inc. is an experiential real estate investment trust (REIT) that owns a portfolio of gaming, hospitality, and entertainment properties across the United States and Canada. With a forward dividend yield of 5.76% and a market cap of $30.04 billion, VICI Properties offers investors an attractive income opportunity.
The company has a forward annual dividend rate of $1.66 per share and a payout ratio of 64.59%, indicating a sustainable dividend payout. VICI Properties’ interest coverage ratio of 4.48 and debt-to-equity ratio of 0.71 demonstrate its financial stability and ability to maintain its dividend payments.
Analysts have a consensus price target of $34.05 for VICI Properties, with recent ratings from Morgan Stanley, Mizuho, and Wells Fargo. The average price target of $32 from these three analysts implies a 10.96% upside potential for the stock.
Ares Capital Corporation (NASDAQ:ARCC)
Ares Capital Corporation is a business development company that specializes in providing financing solutions to middle-market companies across various industries. With a forward dividend yield of 9.32% and a market cap of $12.53 billion, Ares Capital offers investors a high-yield income opportunity.
The company has a forward annual dividend rate of $1.92 per share and a payout ratio of 81.36%, indicating a sustainable dividend payout. Ares Capital’s interest coverage ratio of 5.22 and debt-to-equity ratio of 1.13 demonstrate its financial stability and ability to maintain its dividend payments.
Analysts have a consensus price target of $19.58 for Ares Capital, with recent ratings from JP Morgan, Truist Securities, and Oppenheimer. The average price target of $22.33 from these three analysts implies a 6.81% upside potential for the stock.
Looking for Income Outside of Dividend Stocks? Check Out These Alternative Options
While high-yield dividend stocks can provide a steady income stream, investors may also want to consider alternative income-generating options. Two attractive alternatives are the Cityfunds Yield Fund and Arrived’s Single Family Residential Fund.
Cityfunds Yield Fund
The Cityfunds Yield Fund targets an 8% APY and provides investors with stable cash flow backed by real estate assets. The fund invests in a diversified pool of collateralized real estate loans, including home equity-backed notes and short-term mortgage notes, aiming to generate consistent interest income for its investors.
Investors in the Cityfunds Yield Fund receive quarterly distributions, which can be reinvested to compound returns or paid out directly to their bank accounts. With a five-year term and options for liquidity after 12 months, this fund offers a balance between liquidity and long-term growth potential.
Click here to see how much you could be earning with Cityfunds Yield.
Single Family Residential Fund
Arrived’s Single Family Residential Fund allows investors to gain exposure to a portfolio of single-family rental properties in dynamic markets nationwide. Launched in Q4 2023, the fund aims to provide a steady income stream and pursue long-term capital appreciation by acquiring properties in markets with strong job and income growth, affordability, and increasing housing demand.
As of Q1 2024, the fund has accumulated a portfolio of 33 properties and paid out an annualized dividend of 4.0%. With plans for continued acquisitions in attractive markets and operational efficiency improvements, Arrived’s Single Family Residential Fund offers investors a compelling opportunity to diversify their income streams through real estate investment.
Click here to learn more about the Single Family Residential Fund or browse individual rental properties you can invest in with as little as $100.
The Bottom Line on These High-Yield Investments
When considering high-yield dividend stocks, it’s crucial to analyze various factors to ensure the sustainability and growth potential of the dividends. Pfizer Inc., VICI Properties Inc., and Ares Capital Corporation stand out as attractive options based on their dividend yields, consistency, financial health, and analyst recommendations.
However, investors should also consider alternative income-generating options, such as the Cityfunds Yield Fund and Arrived’s Single Family Residential Fund, to diversify their portfolios and potentially enhance their income streams. As always, investors should conduct thorough research and consider their individual financial goals and risk tolerance before making any investment decisions.
This article 3 Best High-Yield Dividend Stocks To Consider Buying In May originally appeared on Benzinga.com
