5 Best High-Yield Dividend Stocks to Buy Now

Key Points

• High yields often signal trouble, but these five companies combine above-average payouts with sustainable business models.

• From tobacco to pharmaceuticals to energy, each stock offers defensive characteristics that protect dividends during recessions.

• Payout ratios range from conservative (56%) to stretched (227%), requiring careful position sizing based on risk tolerance.

• 10 stocks we like better than Altria Group ›

High-yield dividend stocks entice investors with payouts two to four times higher than the S&P 500's 1.4% average yield. But high yield often signals trouble -- sluggish growth, stretched payout ratios, or sector headwinds. The winners are companies with strong free cash flow, durable business models, and an economic moat to protect earnings. That's the formula for dividends that survive downturns and compound wealth over time.

The trick is separating yield traps from genuine opportunities. For income investors willing to balance risk and reward, the following five blue chip stocks stand out as compelling candidates for above-average passive income.

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The contrarian income play

Altria Group (NYSE: MO) yields approximately 6.5% with a 78% payout ratio supported by the recession-resistant nature of tobacco consumption. Despite declining cigarette volumes, pricing power offsets the decline while cost discipline generates consistent free cash flow that has funded dividend increases for 55 consecutive years.

Altria stock trades at just 11.8 times forward earnings, reflecting pessimism that may be overdone given Altria's pivot toward reduced-risk products. For investors who can stomach the ethical considerations, Altria offers one of the most reliable high yields in the market.

The pandemic hangover opportunity

Pfizer (NYSE: PFE) has become the contrarian income play of the pharmaceutical space, yielding 7.1% after its stock cratered from COVID-19 vaccine peaks. The 90% payout ratio looks stretched, but Pfizer has 28 ongoing phase 3 trials that could reignite growth by 2026. With Pfizer trading at just 7.6 times forward earnings, the market has priced in a permanent decline rather than a temporary transition. Patient investors get paid handsomely to wait for the turnaround.

The disciplined driller

ExxonMobil (NYSE: XOM) offers a more conservative 3.5% yield backed by a sustainable 56% payout ratio and one of the strongest balance sheets in energy. Unlike during previous cycles, Exxon has maintained capital discipline even as oil prices recovered, prioritizing shareholder returns over aggressive expansion. The company has increased its dividend for 42 consecutive years, proving its ability to navigate commodity volatility. At 15 times forward earnings, investors get exposure to the global energy complex without the leverage that destroyed other oil majors.

The global nicotine play

British American Tobacco (NYSE: BTI) offers a 5.5% yield, one of the richest in consumer staples. Its payout ratio looks unsustainably high on generally accepted accounting principles (GAAP) earnings, but cash-flow coverage is stronger thanks to non-cash charges from deleveraging after the 2017 Reynolds acquisition. With operations spanning over 180 markets, British American Tobacco offsets U.S. regulatory risk with emerging-market growth. At 11.4 times forward earnings, investors comfortable with the tobacco backdrop are paid handsomely to wait for deleveraging and reduced regulatory uncertainty.

The overlooked pharma giant

Takeda Pharmaceutical (NYSE: TAK) rounds out the list with a 4.5% yield that most U.S. investors overlook. Japan's largest pharmaceutical company trades on U.S. exchanges as an American depositary receipt (ADR), offering geographic diversification and exposure to both developed and emerging markets. Takeda's payout ratio of 227% looks alarming, but asset sales and debt reduction are bringing leverage down to sustainable levels, anchored by blockbusters like Entyvio in gastroenterology. At 15 times forward earnings, Takeda offers defensive characteristics and a stable dividend policy that rewards patient investors.

The case for boring dividends

Reliable income is becoming a scarce commodity in markets dominated by growth stories. These five companies -- spanning tobacco, pharma, and energy -- may never deliver explosive upside, but they offer dependable payouts in exchange for measured risk.

The right mix depends on your tolerance: Exxon for conservative coverage, Pfizer and British American Tobacco for higher risk-reward, and Takeda or Altria for balance. In markets where growth stocks swing wildly, dividends backed by real cash flow provide the kind of stability that keeps portfolios compounding. Whatever the blend, boring dividends may be the smartest offense in uncertain markets.

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George Budwell has positions in Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends British American Tobacco P.l.c. and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.