It’s still a difficult time for income investors. Interest rates are predicted to rise in 2017, and Treasury yields are creeping up. But a 10-year Treasury bond pays less than 2.6% interest annually; guaranteed investments such as CDs and checking accounts offer returns of barely 1% a year. In that environment, high-yield dividend stocks look attractive … and that’s where the danger sets in.
With broad market indices at all-time highs, worldwide growth still muted and domestic political unrest possible, income-focused investors rightly feel a bit squeezed at the moment. And that raises the risk of “chasing yield” — taking on too much risk for near-term return.
Many high-yielding dividend stocks aren’t even good plays. In many cases, a high yield means the dividend is unsustainable, or that investors see significant risk of losing capital at the same time.
There are reasonably safe places to find yield, however, even in this market. That doesn’t mean they’re perfectly safe — there’s no such thing as a free lunch — but for investors looking to drive income with the modest addition of risk, we have a few candidate.
These high-yield dividend stocks all yield more than 5%. All of them are U.S.-based companies (if only to avoid the tax complications that can come from overseas dividends). And all are worth a long look for income investors hunting strong dividends without taking on a significant amount of risk.
Here’s a look at these seven high-yield dividend stocks, starting with the smallest yielder.