High-yield dividend stocks can be a valuable part of an investment portfolio, offering both higher income and the potential for growth. These are stocks of companies that offer higher-than-average dividend yields compared to peers.
While income is the main focus, many of these stocks also offer the potential for capital appreciation, as companies that consistently pay high dividends often have strong fundamentals and a stable business model. High-yield stocks can also help protect against inflation, allowing investors to maintain purchasing power.
Energy Transfer (ET), Ares Capital Corporation (ARCC), and CTO Realty Growth (CTO) are three stocks trading under $30 that stand out for their high yields of over 7% and the reliability of their payouts. These companies have consistently grown their dividends and have sustainable payouts, making them excellent high-yield dividend stocks to consider.
Let’s take a closer look.
#1. Energy Transfer
Energy Transfer (ET) is a leading energy infrastructure company in the U.S. The company’s core operations include the transportation and storage of natural gas (NGQ24), crude oil (CLU24), NGLs (natural gas liquids), and refined products.
What stands out is that Energy Transfer’s extensive assets are strategically located across every major supply basin in the U.S., with access to key demand markets domestically and for exports. This expansive network positions the company to capitalize on rising energy demand efficiently.
The company also benefits from a robust customer base with solid credit profiles, which enhances its ability to deliver consistent earnings that support its payouts. Additionally, Energy Transfer maintains a strong distribution coverage ratio, ensuring the sustainability of its dividend.
Energy Transfer generates most of its earnings (about 90%) from fee-based contracts. The higher mix of fee-based earnings helps in mitigating the impact of commodity price volatility and provides stability. Moreover, it ensures a reliable and high-quality earnings stream that supports its payouts.
The company has consistently increased its dividends, and currently pays a quarterly dividend of $0.3175 per share, translating into a yield of 7.8%. Further, Energy Transfer targets a 3-5% annual increase in dividends in the coming years, reinforcing its commitment to returning value to shareholders.
In summary, Energy Transfer is a dependable income stock, and this is reflected in analysts’ bullish stance. Of the 15 analysts covering ET stock, 13 recommend a “strong buy.” One analyst has a “moderate buy,” and one suggests a “hold.” Overall, ET has a “strong buy” consensus rating.
Analysts’ average price target of $18.92 implies about 15.5% upside potential from current levels.
#2. Ares Capital Corporation
Ares Capital Corporation (ARCC) is a compelling investment for investors focused on high-yield stocks. This business development company, which specializes in direct loans and investments targeting private middle-market enterprises, has paid and increased its dividends over the past decade. The company's payout history shows its dividends' reliability and commitment to enhance shareholders’ value.
ARCC’s dividend has grown at a faster pace than its peers over the past decade. Moreover, the company offers an attractive yield of approximately 9.2% near the current market price, making it a compelling choice for income-focused investors.
Ares Capital’s diverse portfolio - which places emphasis on less cyclical sectors - and its defensive business model enable it to consistently generate solid core earnings, which in turn support its dividend payouts. Further, solid demand for alternative funding solutions in middle-market companies bodes well for future growth and dividend payments.
Wall Street is optimistic about ARCC. Among the 13 analysts covering the stock, eight rate it as a “strong buy,” three have a “moderate buy,” and two suggest a “hold.” This reflects a consensus rating of “strong buy.”
Analysts’ average price target of $21.81 implies about 4% upside potential from current levels.
#3. CTO Realty Growth
CTO Realty Growth (CTO) is a retail-focused Real Estate Investment Trust (REIT) that emphasizes owning, operating, and investing in high-quality properties, aiming for long-term cash flow growth. The company specializes in acquiring multi-tenant retail assets in fast-growing markets, capitalizing on population growth and increased tenant demand.
CTO targets high-growth areas with strong existing yields and potential for higher returns through vacancy lease-up, redevelopment, or adjusting in-place leases to higher market rental rates. Its portfolio of high-quality assets generates substantial income and cash flow, allowing the company to pay and increase its dividends.
Notably, CTO has paid dividends for 48 years. Additionally, it has consistently increased its dividends for the past 12 years. It currently offers an impressive yield of nearly 8%.
The company’s high-quality assets, investments in multi-tenant retail properties, high occupancy rate (around 92%), and ability to grow same-property net operating income (NOI) support its growth and dividend payments. Furthermore, CTO has no immediate debt maturities, a solid balance sheet, and strong liquidity, which will reduce pressure on its cash flows and drive growth.
Analyst sentiment is positive, with four out of six analysts rating CTO Realty Growth stock as a “strong buy.” One analyst has a “moderate buy,” and one has a “hold” rating.
The average analyst price target of $19.33 is roughly flat with its current market price, while the Street-high target of $20 implies an expected premium of about 5%.
On the date of publication, Sneha Nahata did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
