Dividend stocks can be a safer way of earning regular income amid the market volatility. High-yield dividend stocks, in particular, are attractive to many investors because they provide a mix of income, stability, and long-term growth.
Aside from yield, other factors to consider when selecting a dividend stock include consistency in dividend payments and a sustainable payout ratio. Here are three high-yield dividend stocks that may appeal to investors right now.
Rio Tinto: Dividend Yield of 5.7%
Rio Tinto (RIO) is a leading mining and metals company. Its core business is to extract and refine essential raw materials that support global industrial development.
While iron ore remains its primary focus, the company has expanded its portfolio by investing in copper (HGH25), gold (GCG25), lithium, aluminum (ALG25), and other critical minerals. Rio pays a forward dividend yield of 5.7%, which is higher than the materials sector average of 2.8%, making it an attractive option for income-seeking investors.
Rio’s stock has fallen 18.5% year-to-date, underperforming the S&P 500 Index's ($SPX) 26.8% gain.
Iron ore remains the backbone of Rio Tinto’s business, with the Pilbara region in Western Australia serving as a world-class production hub. The continued demand from China and other emerging markets ensures a consistent revenue stream.
For the six months ended June 30, Rio Tinto reported segmental revenue of $15.2 billion, supported by strong iron ore prices and increased demand for industrial metals.
Rio's sustainable dividend payout ratio of 51% is supported by strong free cash flow, which remains stable even during periods of commodity price volatility. It generated $5.03 billion in FCF during the first half of the year and paid out an interim ordinary dividend of $2.9 billion.
Management stated, “Our strong balance sheet enables us to continue to maintain our practice of a 50% interim payout with a $2.9 billion ordinary dividend, as we continue to invest with discipline to shape Rio Tinto into an even stronger company."
Overall, on Wall Street, RIO stock is a “Moderate Buy.” Of the 11 analysts covering the stock, seven rate it a “Strong Buy,” and four rate it a “Hold.” The average price target of $81.58 implies a potential upside of 34% from current levels.
Altria Group: Dividend Yield of 7.5%
Valued at $91.7 billion, tobacco giant Altria Group (MO) has long been a dividend investor favorite. Its ultra-high yield and consistent dividend hikes have made it a top choice for those looking for a steady income. Altria's forward dividend yield of 7.54% exceeds the consumer sector average of 1.89%.
Altria's core business is the sale of cigarettes, tobacco products, and related accessories. However, due to tobacco industry challenges, the company has been diversifying into e-cigarettes, alcohol, and cannabis to stay in business.
MO stock has gained 34.1% YTD, outperforming the broader market gain.
In the third quarter, net revenues fell 0.6% year-over-year to $5.5 billion, owing to lower shipment volume. Adjusted earnings per share increased 7.8% to $1.38 from the previous year quarter. Altria paid out $1.7 billion in dividends in the quarter.
Tobacco is the company's primary business. As a result, industry challenges have raised concerns among investors about Altria's ability to maintain its high dividend payout ratio of 76.1%. However, Altria has earned the title of a Dividend King, which are companies that have increased dividends consistently for at least 50 consecutive years. Altria raised its dividend by 4.1% in the second quarter, marking its 59th dividend increase. The company also emphasized its previous goal of increasing dividends by mid-single digits per year until 2028.
While management anticipates earnings growth of 2.5% to 4% in 2024, analysts predict a 3.7% increase, followed by another 4.2% in 2025.
Overall, on Wall Street, MO stock is a “Hold.” Of the 10 analysts covering the stock, four rate it a “Strong Buy,” four rate it a “Hold,” and two suggest a “Strong Sell.” The stock is trading close to its average price target of $54.38, but its high price estimate of $65 implies a potential upside of 20.2% from current levels.
Granite Ridge Resources: Dividend Yield of 7.4%
Granite Ridge Resources (GRNT) is an upstream energy company focused on the exploration and production of oil (CLF25) and gas (NGF25) across various basins in North America. Granite stock is up 2.5% year-to-date, compared to the broader market's gain.
While oil production increased by 3% in the third quarter, natural gas production fell by 12%, resulting in a total decline in production volumes. Net revenue totaled $94 million, compared to $108.4 million in Q3 2023. Adjusted earnings were $0.14 per share, down from $0.21 per share during the same period last year.
The company's operating cash flow (OCF) before working capital changes stood at $70.7 million. Granite Ridge regards OCF as an accepted measure of an oil and gas company's ability to generate cash to pay dividends, reduce debt, and fund growth projects.
The company declared a quarterly dividend of $0.11 per share in the third quarter. Granite Ridge has a forward dividend yield of 7.4%, which is higher than the energy sector average. With a payout ratio of 70.4%, Granite Ridge has plenty of room to maintain or even hike dividends while reinvesting in growth opportunities. Analysts expect earnings to fall 35% in 2024 before rising 20.5% in 2025.
In 2024, the company acquired 23 gross future drilling locations in the Delaware, Bakken, and Appalachian basins combined. Its ambitious plans to increase its production base through strategic drilling programs and acquisitions may result in higher earnings. Furthermore, its high yield and consistent dividend policy make it a good choice for both value and income investors.
Overall, on Wall Street, GRNT stock is a “Moderate Buy.” Of the five analysts covering the stock, three rate it a “Strong Buy,” and two rate it a “Hold.” Its average price target of $7.56 per share implies a potential upside of 25.8% from current levels.
