Income lovers are no doubt on the hunt for the highest-paying dividend stocks. Of course, investors must be aware of the risks that comes with the highest-paying dividend stocks. While dividend stocks are generally thought of as safer than non-dividend-paying stocks, this is not necessarily the case, especially when playing in the very-high-yield sandbox.
For starters, a dividend that is too high may not be sustainable and could be in danger of being cut. So, it’s important to keep an eye on a company’s payout ratio, or the percentage of profits being paid out to shareholders in the form of dividends. Additionally, since a stock’s dividend yield goes up as its share price goes down, a high yield could signal trouble is afoot with regard to the underlying company.
With that said, it can still be fun to go in search of the highest-paying dividend stocks. And there are some out there that combine acceptable levels of risk with more-than-acceptable levels of income. You’ll notice that the list below is heavily weighted toward a few sectors, namely energy and shipping. However, it also includes tech and mining companies.
Without further ado, here are some of the highest-paying dividend stocks for income investors to consider.
LUMN Lumen Technologies $5.15 BHP BHP Group $69.38 EC Ecopetrol $12.05 ZIM ZIM Integrated Shipping Services $18.79 SBLK Star Bulk Carriers $21.86 NFE New Fortress Energy $36.33 PBR Petrobras $11.73
Lumen Technologies (LUMN)
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The first of today’s high-paying dividend stocks is fiber optics firm Lumen Technologies (NYSE:LUMN), which operates in the wired telecommunications business. It has 400,000 route miles of fiber across 60 different countries, which is impressive, but perhaps not as eye-catching as the stock’s 18.1% yield.
Lumen currently pays out 25 cents a share quarterly. It reduced its payout to 25 cents from 54 cents a share at the start of 2019. And while it hasn’t raised its dividend since then, it hasn’t cut it again either. Its payout ratio of 50% is within the “healthy range,” according to Dividend.com. So, investors shouldn’t be particularly worried that the company will reduce or stop paying its dividend.
However, investing in Lumen Technologies carries other risks. The company has missed earnings estimates in three of the past four quarters. Meanwhile, full-year revenue and earnings are expected to contract for 2022 and 2023.
Finally, shares are down 57% over the past year, which has contributed to the rise in the stock’s dividend yield. But analysts’ average price target of $6.73 implies upside of more than 30% from the current level. That in addition to the high dividend yield would make for a nice return indeed.
BHP Group (BHP)
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Australia’s BHP Group (NYSE:BHP) is a multinational mining, metals, natural gas and petroleum company. The stock has significantly outperformed the broader market over the past year, rising nearly 20% compared with a 9% drop for the S&P 500. This outperformance could continue in 2023.
In Goldman Sachs’ (NYSE:GS) 2023 Commodity Outlook, the investment bank notes that commodities were the best-performing asset class in 2020 and 2021. It also says this year could prove even better.
“From a fundamental perspective, the setup for most commodities next year is more bullish than it has been at any point since we first highlighted the supercycle in October 2020,” the report said.
BHP Group has capitalized on strength in the commodities sector. The company’s most recent fiscal year ended on June 30. For fiscal 2022, BHP reported a 34% surge in profit from operations to $34.1 billion, along with record underlying EBITDA of $40.6 billion.
Turning to the dividend, BHP Group has 13 consecutive years of dividend payments under its belt, along with two consecutive years of dividend increases. The company pays shareholders semiannually in addition to the occasional special dividend. Its current yield of 9.4%, along with the bullish outlook for the commodities sector, certainly qualifies BHP as one of the high-paying dividend stocks investors should consider.
Ecopetrol (NYSE:EC) is an integrated energy company based in Columbia that engages in the exploration, development and production of crude oil and natural gas. While most energy stocks performed well in 2022, EC topped out in April. However, shares have rebounded 40% since hitting a 52-week low of $8.59 on Sept. 26, so the tide may be turning in its favor.
The company delivered record-breaking results for the first nine months of 2022. Revenue nearly doubled year over year while net income rose 150%. While energy prices are off their highs, they are expected to remain elevated, which bodes well for Ecopetrol’s financials in the coming year.
As for income, the stock yields 12.3% based on the $1.49 annual dividend Ecopetrol paid in 2022. This marked a nearly 1,500% increase over its 2021 annual dividend of 9.3 cents. In 2020, though, the annual dividend was 88 cents. So, consistency in its dividend would not be one of Ecopetrol’s attributes.
The stock generally goes ex-dividend in April, so investors have some time to purchase shares if they want to capture the next annual payout.
ZIM Integrated Shipping Services (ZIM)
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ZIM Integrated Shipping Services (NYSE:ZIM) is a cargo shipping and logistics services firm with a ridiculously high dividend yield. How high? Try nearly 150%.
2022 was a good year for the firm as snarled supply chains created opportunities. ZIM capitalized on them, generating a record $4.2 billion in net income during the first nine months of the year.
“Given our significant cash generation, and consistent with our prioritization of returning capital to shareholders, we have declared this year over $1.26 billion, or $10.55 per share, in dividends on account of 2022 results, including a Q3 dividend of approximately $354 million, or $2.95 per share,” said ZIM President and CEO Eli Glickman.
Over the past four quarters, ZIM has paid out $27.55 in dividends, more than its current share price of $18.79. Given that ZIM went public in 2021, it doesn’t have a long history upon which to base the consistency of its payout, but its payout ratio of just over 50% isn’t too concerning.
This is definitely one of the highest-paying dividend stocks investors will want on their watch list in 2023.
Star Bulk Carriers (SBLK)
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Star Bulk Carriers (NASDAQ:SBLK) is another high-yield shipper with 128 vessels and a yield of 29%.
Like ZIM Integrated Shipping Services, Star Bulk Carriers was able to capitalize on global trends to deliver strong financial results. For the first nine months of 2022, the company recorded a 23% year-over-year jump in revenue to $1.14 billion. Net income for the same period of $480 million represented a 26% increase.
In a recent company presentation, Star Bulk President Hamish Norton noted that after accumulating a minimum of $2.1 million cash per vessel on the balance sheet for a quarter, any excess cash is distributed to shareholders as a dividend. During the past 12 months, the company distributed $669 million in dividends, or $6.50 per share.
New Fortress Energy (NFE)
Source: shutterstock.com/Wojciech Wrzesien
Liquefied natural gas supplier New Fortress Energy (NASDAQ:NFE) made headlines last month when it raised its dividend a whopping 3,000% from 10 cents a share to $3.
In December, the company’s board of directors adopted a new framework for rewarding shareholders, targeting an annual cash dividend equivalent to approximately 40% of its annual adjusted EBITDA.
“Our business is now generating significant, stable, and growing cash, which we believe affords us the ability to both retain capital necessary to grow and return excess capital to shareholders in the form of meaningful dividends,” said New Fortress Energy Chairman and CEO Wes Edens. “We are fortunate to have a strong balance sheet and the liquidity we believe is necessary to execute our strategy and achieve our goals, matching long-term LNG supply with long-term power demand around the world.”
In addition to its focus on income, investors should consider buying NEF for capital appreciation. The stock is up 77% over the past year, while analysts’ consensus target of $71.29 is 96% above the current share price.
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Brazilian oil and gas company Petrobras (NYSE:PBR) should appeal to the income investor with a penchant for risk and a stomach for volatility.
The company recorded $94.3 billion in revenue through the first nine months of 2022, a 57% increase over the same period in 2021. Adjusted EBITDA of $52.3 billion was up 62% over the same period, although it declined sequentially between Q2 and Q3 amid falling Brent crude oil prices.
Yet, the company still had enough to pay down $1.3 billion of its long-term debt in the third quarter while also rewarding investors with a dividend of $1.29 a share in November. The payout has been inconsistent from quarter to quarter. In total, though, Petrobras has paid $7.59 a share over the past 12 months for a yield of 66.9%.
Like its dividends, Petrobras’ share price has bounced around quite a bit. But for income investors who aren’t afraid of some volatility, PBR is an intriguing choice.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks.Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
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