Dividend-paying companies offering high yields often attract investors seeking steady, predictable cash flows over capital appreciation. These companies are typically mature, established businesses with predictable earnings.

Furthermore, high-yield dividend stocks often belong to various sectors like utilities, real estate, telecommunications, and consumer staples, offering diversification to a growth-heavy portfolio. Here are three such high-yield dividend stocks that passive income investors may like.

Dividend Stock #1: Verizon Communications

Dividend Yield: 6.8%

Verizon Communications (VZ), a telecommunications industry leader, has long been a popular choice among dividend investors. It provides a wide range of services, including wireless communications, broadband, and fiber-optic networks, to both individual consumers and businesses.

Verizon is popular among passive income investors for its high dividend yield of 6.8%, which is higher than the communications industry average of 2.6%. VZ stock has gained 1.8% in the year to date, lagging the S&P 500 Index’s ($SPX) 24.5% gain. 

In the most recent third quarter, adjusted earnings declined to $1.19 per share from $1.22 in the year-ago quarter. However, the company generated $14.5 billion in free cash flow for the nine months of 2024, allowing it to pay out $8.4 billion in dividends. In September, it also announced a quarterly dividend increase to 67.75 cents per share, which marked its 18th consecutive dividend increase. 

Total operating revenue of $33.3 billion was flat year-over-year. Verizon’s wireless service revenue grew by 2.7%, driven by an increase in postpaid subscribers. Total broadband connections also increased 16% year-over-year. 

Verizon’s strong free cash flow supports its dividend payout ratio of 57.3% and could also help the company pay down its debt levels. Its debt-to-equity ratio is quite high at 1.54x, but management assured that the company is on track to pay down its debt. Analysts predict Verizon’s earnings to fall by 2.3% in 2024, consistent with the company’s guidance, before increasing by 2.8% in 2025. 

Overall on Wall Street, Verizon stock is rated a “Moderate Buy.” Out of the 24 analysts who cover Verizon stock, seven rate it a "Strong Buy," two suggest it’s a “Moderate Buy,” 14 rate it a "Hold,” and one says it’s a “Strong Sell." Its average price target of $46.45 suggests that the stock can increase by 17.3% over current levels. However, its high target price of $55 implies upside potential of 38.8% over the next 12 months.

Verizon stock offers a mix of income and growth potential. Its leadership in the telecom industry, commitment to 5G expansion, and consistent high-yield dividend payments make it an attractive choice for conservative passive income investors.

Dividend Stock #2: Enterprise Products Partners

Dividend Yield: 6.7%

Enterprise Products Partners (EPD) operates a vast network of pipelines and storage facilities that transport and store natural gas (NGG25), crude oil (CBH25), natural gas liquids, and refined products. Its high and consistent distribution yield has made it a popular dividend stock in the energy sector.

EPD shares have gained 19% year-to-date. 

With over 50,000 miles of pipelines and extensive processing and export facilities, EPD is an important link in the energy supply chain. The company’s business model is primarily fee-based, which helps to reduce commodity price volatility. This enables steady increases in earnings and distributable cash flow (DCF), allowing for consistent dividend payments. 

In the third quarter, DCF of $2 billion increased 5% from the year-ago quarter. Net income in the quarter also increased by 8% to $0.65 per share. Prior to the third quarter, EPD also increased its quarterly dividend by 5.3% to $0.525 per share. It marks the company’s 25th dividend increase in a row.

Adjusted free cash flow balance of $943 million generated in the third quarter could help the company pay down its debt, as its debt-to-equity ratio is at 1.09x. Enterprise Product Partner pays an attractive dividend yield of 6.7%, higher than the energy sector average of 4.2%. EPD’s forward dividend payout ratio of 73.5% is high. But the company has been paying and increasing dividends for the past 25 years, meaning the company is able to sustain dividend payments. Analysts expect EPD’s earnings could increase by 6.09% in 2024, followed by another 7.12% increase in 2025. 

Overall, Wall Street rates EPD stock a "Strong Buy." Out of the 15 analysts who cover EPD, 11 recommend a "Strong Buy," one rates it a “Moderate Buy,” and three recommend a "Hold." The average analyst price target of $34.69 represents a potential 11.2% increase from current levels. Its high target price of $39 suggests the stock could climb by another 25% over the next 12 months. 

Dividend Stock #3: Rio Tinto

Dividend Yield: 6.04%

Rio Tinto Group (RIO) is one of the world’s largest mining companies, with a diverse portfolio of operations that include iron ore (IPUF25), aluminum (ALF25), copper (HGF25), gold (GCF25), and other key commodities. 

Rio Tinto’s diverse portfolio provides a hedge against market volatility in specific commodities. Rio has a forward dividend yield of 6.04%, which exceeds the materials sector average of 2.8%. The stock provides an intriguing mix of income and growth potential. Rio’s stock has fallen 21.1% year-to-date. 

Iron ore continues to be Rio’s largest revenue contributor. China accounts for a significant portion of Rio Tinto’s iron ore exports. While iron ore remains its primary focus, investments in copper and lithium (LMF25) position the company well for future growth in renewable energy and electric vehicles.

For the first half of 2024, Rio Tinto generated $5.8 billion in earnings. It also generated free cash flow of $2.8 billion that allowed the company to pay dividends of $2.9 billion and maintain its 50% payout ratio.

Management believes the company’s strong balance sheet will allow it to maintain dividend payments while molding Rio Tinto into “an even stronger company.” With a low debt-to-equity ratio of 0.23x and significant cash reserves, Rio Tinto has the financial flexibility to invest in growth opportunities and continue to return capital to shareholders through dividends and buybacks.

Overall, Wall Street rates RIO stock 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 $83.58 implies a potential upside of 42.6% from current levels.

On the date of publication, Sushree Mohanty 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.