As the market waits for the Federal Reserve’s next move regarding interest rates, you may wonder whether now is the time to load up on dividend stocks.
After all, these types of stocks are highly sensitive to interest rate changes, rising as rates come down, but falling as rates go up. Then again, even in today’s high interest rate environment, plenty of dividend-focused names have held up well. While not for certain, these high-quality, high-yield names may remain strong candidates for your portfolio.
There have been some other top high-yielders that have performed poorly in recent months because of rising uncertainty over the future direction of the U.S. economy. While they may be vulnerable to further near-term volatility, they could prove shrewd buys in hindsight.
So, as the summer turns to fall, what are the top dividend stocks to buy? Take a look at these seven. Each one has a high (5% or more) and sustainable yield and trades at a favorable price.
British American Tobacco (BTI)
British American Tobacco (NYSE:BTI) currently pays out $2.76 per share annually in dividends.
This gives BTI stock a yield of 8.2%. Sure, given this high payout, you may be concerned that the market has priced BTI like this for a reason, such as because of the increased risk of a dividend cut. However, this payout is more than covered by BTI’s earnings, which are expected to come in at $4.85 per share this year.
While cigarette smoking rates are declining, the company is having success in its transition towards becoming primarily a producer of noncombustible tobacco/nicotine products.
After pulling back earlier this year, low-priced, high-yield BTI is a dividend stock to consider this fall.
CTO Realty Growth (CTO)
Like other real estate investment trusts, macro concerns have weighed on CTO Realty Growth (NYSE:CTO) thus far in 2023. Shares in this REIT, which focuses on retail properties in faster-growing metro areas, are down by more than 10% since January.
However, if you’re on the prowl for high-yield dividend stocks with big upside, CTO stock is worth a closer look. At current prices, shares sport a forward yield of 9.18%.
This payout has also grown dramatically in recent years, rising from just 8.33 cents per share quarterly at the start of 2020, to 38 cents per share quarterly today.
Future dividend growth may not arrive as rapidly, but even with the macro concerns, analysts expect CTO’s funds from operations, a metric used to measure REIT cash flow, to keep rising in 2024. This suggests more room for a further increase to its payout.
Golub Capital BDC (GBDC)
Golub Capital BDC (NASDAQ:GBDC) is a business development company, or BDC. BDCs are closed-end funds that lend to small and mid-sized companies, paying out most of their earnings as dividends.
BDCs offer high-yields, and GBDC stock is no exception, with a forward dividend yield of 10.24%. Rising rates and recession worries weighed on Golub Capital BDC during 2022 and 2023, but in more recent months, shares have trended higher.
Even as uncertainty remains, further upside may be in the cards, if the Fed begins lowering rates in 2024.
Yes, GBDC has lowered its payout in the past, but this reduction (implemented at the onset of the pandemic) wasn’t permanent, and this BDC in fact has just recently raised its rate of payout.
Although a severe, extended downturn could affect the ability to sustain this current payout, the stock’s double-digit yield more than accounts for the risk.
Main Street Capital (MAIN)
Main Street Capital (NYSE:MAIN) has a dividend (6.92%) that may not be as high as that of GBDC, but there are also aspects to this BDC stock that may make it more appealing to dividend investors.
For starters, MAIN stock pays out its dividends monthly rather than quarterly. If you are looking to generate income for day-to-day expenses from your portfolio, this may be appealing. Main Street Capital also has a lower payout ratio than GBDC.
Although Golub Capital has made loans to a larger number of individual companies, Main Street Capital’s investments are spread across a wider swath of industries.
New York Community Bancorp (NYCB)
Earlier this month, I argued why New York Community Bancorp (NYSE:NYCB) is one of the most undervalued bank stocks.
Shares in this financial institution, which despite the name is geographically diversified following its merger last year with Flagstar Bancorp, trade for only 8.4 times earnings, and at a more than 20% discount to book value.
However, that’s not all. NYCB stock also has a high forward dividend yield of 5.87%. The stock earlier this year experienced a big run-up in price. NYCB’s purchase of assets formerly owned by now-defunct Signature Bank (OTCMKTS:SBNY) played a big role in this.
According to analysts from Wedbush, these assets were acquired at a $2.4 billion discount. While largely now baked into its valuation, further upside from this deal, plus the benefit of cost synergies from the Flagstar deal, could help drive shares even higher.
Realty Income (O)
Like MAIN, Realty Income (NYSE:O) is another of the monthly dividend stocks. In fact, this REIT and dividend aristocrat literally trademarked the phrase “the monthly dividend company.”
But despite having this blue-chip status, O stock has actually performed quite poorly this year, dropping over 15% year-to-date.
However, this may work to your advantage if you’ve yet to add Realty Income to your portfolio. At current prices, shares sport a forward dividend yield of 5.69%. Macro concerns are of course a big factor behind the shift in sentiment about O from bullish to bearish.
Still, as a Seeking Alpha commentator recently argued, investors have irrationally bid down O shares to a bargain basement price.
In the commentator’s view, even with interest rates and recession worries in mind, Realty Income’s diverse property portfolio and strong balance stand to keep it resilient if economic challenges worsen rather than improve in 2024.
VICI Properties (VICI)
Following a 2022 merger with MGM Growth Properties, REIT VICI Properties (NYSE:VICI) is the landlord to many of the large casinos operated by Caesars Entertainment (NASDAQ:CZR) and MGM Resorts (NYSE:MGM).
This high-quality portfolio produces steady income for VICI stock, enabling the REIT to pay out $1.66 per share in dividends annually (5.36% forward yield).
In recent months, the stock has been rangebound, stuck in the low-$30s per share as investors assess the macro picture.
Still, analysts expect steady, mid single-digit earnings growth in the coming years. This will likely lead to similar levels of both dividend growth and stock price appreciation.
For investors looking for solid total returns over a long time frame, this makes VICI one of the top dividend stocks to buy.
On the date of publication, Thomas Niel did not hold (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.