Wall Street’s top credit rating agencies don’t give out “A” ratings to anyone. A company’s financial profile must pass rigorous tests to earn that designation. This group of five dividend stocks has fortress-like financial profiles that support their high-yielding dividends (all over 5%). That should give income-focused investors the confidence to buy and hold them for passive income.
Enterprise Products Partners
Enterprise Products Partners (EPD -1.40%) currently yields 6%. The master limited partnership (MLP) sets the standard for balance sheet strength in the energy midstream sector with the highest credit rating at A-/A3. It backs that high rating with a low-leverage balance sheet (3.0x) and durable cash flows (80% fee-based). The MLP, which sends a Schedule K-1 Federal tax form each year, currently covers its high-yielding distribution with cash flow by 1.9 times, enabling it to retain over $1 billion to reinvest in the partnership each quarter.
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The company’s strong, growing cash flows have enabled it to increase its distribution for 28 straight years. That growth should continue. Enterprise Products Partners currently has $6.5 billion in major growth capital projects under construction that should enter commercial service through early 2029, giving it strong near-term growth visibility.
Mid-America Apartment Communities
Mid-America Apartment Communities (MAA +0.93%) currently yields 5.2%. The real estate investment trust (REIT) backs that payout with a fortress-like financial profile, including A-/A3 credit ratings. It’s one of only a dozen publicly traded REITs with a rating at or above that level.
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The apartment landlord further supports its high-yielding payout with stable, growing cash flows and a conservative dividend payout ratio (around 70% of its core funds from operations). It has ample financial flexibility to expand its portfolio, having already committed nearly $600 million to develop six new communities that it should complete through 2028. Rising rental income should support continued dividend growth. Mid-America has increased its dividend for 16 straight years, growing it at a 6.4% compound annual rate over the past decade, significantly exceeding peers.
Realty Income
Realty Income‘s (O +0.23%) monthly dividend currently yields 5.8%. The REIT backs that payout up with an A/A-/A3 balance sheet. It also has a diversified portfolio (retail, industrial, gaming, data center, and other properties) secured by long-term net leases with many of the world’s leading companies. Those leases provide it with very stable, steadily rising rental income.
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The REIT also has a conservative financial profile (around 75% of its adjusted funds from operations), enabling it to retain nearly $1 billion in cash flow each year to fund new income-generating real estate investments. New investments should support continued dividend growth. Realty Income has increased its dividend 136 times since its public market listing in 1994, including the past 116 consecutive quarters.
Pfizer
Pfizer (PFE +0.92%) currently has a 6.1% dividend yield. The pharmaceutical giant boasts a strong A/A2 balance sheet. The company has paid 351 consecutive quarterly dividends and has raised its payout for 17 straight years.
The company has had to navigate several headwinds in recent years, including tariffs, patent expirations, and declining sales related to its coronavirus products. It’s addressing those issues by cutting costs and investing in growth (R&D and acquisitions). It’s striving to deliver high-single-digit compound annual revenue growth over the five years after 2028, while maintaining and growing its dividend. While the near-term headwinds make Pfizer riskier than other stocks on this list, its fortress balance sheet gives it the flexibility to weather the storms it’s currently facing without sacrificing the dividend.
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Verizon
Verizon‘s (VZ -0.51%) dividend currently yields 6%. The mobile and broadband giant has a rock-solid financial profile, with A-/Baa1/BBB+ credit ratings. While the company’s debt levels have risen over the past year due to its recent acquisition of Frontier Communications (pushing its leverage ratio from 2.3x to 2.5x), it generates robust free cash flow, which will steadily de-leverage its balance sheet. The company generated $10.2 billion in free cash flow after capital expenditures during the first half of this year, easily covering its dividend ($5.9 billion), while allowing it to return an additional $3.5 billion to investors through share repurchases. Verizon currently expects to produce over $21.5 billion in free cash flow this year, up 9%-10% from last year.
The company’s strong, growing cash flows should support continued dividend increases. Verizon has raised its payout for 20 straight years.
Rock-solid, high-yielding dividend stocks
Lots of companies currently offer dividend yields of 5% or more. However, this group stands out because they back their high-yielding payouts with fortress-like financial profiles, evidenced by their A-rated balance sheets. As a result, they offer bond-like risk profiles and income streams, with equity-like returns, a great combination for investors seeking to grow their income and their wealth.
