Want Safe Dividend Income in 2025 and Beyond? Invest in the Following 3 Ultra-High-Yield Stocks.

Many high-yield stocks lost their luster in 2022 and 2023 as rising rates drove investors toward risk-free CDs and Treasury bills for higher yields. But in 2024, the Federal Reserve cut its rates three times as inflation cooled off. It executed its first rate cut of 2025 this September, and forecasts call for at least two more rate cuts by the end of the year.

As interest rates decline, more investors will likely pivot back toward safe dividend stocks, which pay more generous yields than the 10-year Treasury's current yield of 4.1%. Investors can buy these three high-yield stocks to capitalize on that rotation: Verizon Communications (NYSE: VZ), Energy Transfer (NYSE: ET), and Realty Income (NYSE: O).

Verizon Communications

Verizon, one of the top telecom companies in America, served 146.1 million wireless customers and 12.9 million broadband customers at the end of its latest quarter. But over the past five years, its stock declined more than 30% as its wireless business struggled to gain new customers and its aging business wireline segment shrank.

However, Verizon now trades at just 6 times next year's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and pays a high forward yield of 6.7%. That low valuation and high yield should limit its downside potential. It's raised its dividend annually for 19 consecutive years, and its low payout ratio of 63% gives it plenty of room for future hikes.

Verizon has been struggling to keep pace with AT&T's and T-Mobile's aggressive promotions, but it expects to bundle more of its wireless and broadband plans together to offset that pressure. It also expects its planned acquisition of Frontier Communications to add another 2.2 million fiber subscribers to its higher-growth broadband business when it closes next year. From 2024 to 2027, analysts expect Verizon's adjusted EBITDA to grow at a compound annual growth rate (CAGR) of 3% as those stabilizing tailwinds kick in. So while the telco leader faces some near-term challenges, it should attract more income investors as interest rates decline.

Energy Transfer

Energy Transfer, one of the largest midstream companies in the U.S., operates more than 140,000 miles of pipeline across 44 states. It provides pipeline, storage, and terminalizing services for natural gas, liquefied natural gas (LNG), natural gas liquids (NGLs), crude oil, and other refined products. It also exports those resources to over 80 other countries and territories.

As a midstream company, it generates most of its revenue by charging upstream extraction companies and downstream refining companies "tolls" to use its infrastructure. That toll road model insulates it from volatile commodity prices, since it merely needs those resources to keep flowing through its pipes to generate steady revenue.

As a master limited partnership (MLP), it pays out distributions (which include a return of capital to its investors) instead of regular dividends (which don't include a return of capital). Last year, it generated a distributable cash flow (DCF) of $8.36 billion to cover its $4.39 billion in total distributions. It currently pays a high forward yield of 7.9%.

From 2024 to 2027, analysts expect Energy Transfer's adjusted EBITDA to rise at a steady CAGR of 4% as it expands its domestic facilities and exports more LNG overseas. At 7 times next year's adjusted EBITDA, it still looks like a safe and undervalued income play.

Realty Income

Realty Income is a leading real estate investment trust (REIT) that owns more than 15,600 commercial properties across the U.S. and Europe. It mainly rents out those properties to recession-resistant retailers like convenience stores, drugstores, and discount stores, and it splits its rental income with its investors. As a REIT, it needs to pay out at least 90% of its pre-tax income as dividends to maintain a lower tax rate.

Realty Income is one of the few REITs that pays its dividends monthly. It's raised its payout 132 times since its IPO in 1994, and it currently pays a forward yield of 5.4%. Its occupancy rate has never dipped below 96% since its public debut, even as the U.S. economy was rattled by three major recessions.

Like many other REITs, Realty Income's growth was throttled by higher interest rates, which made it pricier to purchase new properties and generated tougher macro headwinds for its tenants. But as interest rates decline, those headwinds will subside. It expects its adjusted funds from operations (AFFO) per share (which REITs use to gauge their profits) to rise from $4.19 in 2024 to $4.24 to $4.28 in 2025 -- which will easily cover its forward dividend of $3.21 per share. At $59, it still looks like a bargain at 14 times that estimate.

Leo Sun has positions in Energy Transfer, Realty Income, and Verizon Communications. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.