Dividend stocks are an investor’s best friend on several fronts. Some look at dividends as a way of measuring a company’s financial stability. Some love dividends because they provide a stable source of income, which can be reinvested or simply used throughout retirement. And some investors gun after the highest-yielding dividend stocks they can find — even if their payouts aren’t so steady — in hopes of maximizing their returns.
Well, how about the top — the flat-out biggest dividends?
The problem is that, like everything in life, you have to look at dividend stocks one case at a time. A dividend typically means a company has cash to share, sure, but a company isn’t necessarily healthier the more it yields. Sometimes, a high yield can just be a result of a stock crashing before it ultimately cuts its dividend, and some classes like master limited partnerships (MLPs) and real estate investment trusts (REITs) have payouts directly tied to their profits, which means that income can slide if earnings do.
So if you’re looking to add some serious income to your portfolio, you might start your research with this list of the 25 highest-yielding large-cap dividends stocks in the U.S. They tend to be more stable, and their dividends more secure:
#25: Crown Castle International Corp. (CCI), 4.27% Dividend Yield: Crown Castle is the first of many REITs, on our list. REITs own real estate and often control the operations on that land, and must pay out at least 90% of their income to shareholders in the form of dividend. In Crown Castle’s case, it owns and rents out wireless infrastructure, including cellular towers and antenna systems. CCI only gained status as a REIT this year, so the dividend is very new — but the most recently declared payment of 82 cents per share translates into a 4%-plus dividend yield.
#24: Enterprise Products Partners L.P. (EPD), 4.3% Distribution Yield: EPD is another popular type of high-dividend stock — the MLP. MLPs are a type of organization that typically deals in natural resources, such as pipelines delivering oil, that receive favorable tax treatment, but in exchange pay out a significant portion of its cash. This is done through distributions, which are similar to dividends but are taxed differently. EPD is the natural gas liquids business side of Enterprise Products Company and operates more than 50,000 miles of pipelines for natural gas, NGL crude oil and other products.
#23: Southern Co. (SO), 4.34% Dividend Yield: No surprise to see a utility — among the most stable and stereotypical of dividend stocks — on this list. Southern Company has ridden a rising tide of both its own growing earnings and general love for yield-bearing utilities this year. Also, a potentially brutal winter could keep lifting Southern and other utes going forward.
#22: Spectra Energy Partners, LP (SEP), 4.38% Distribution Yield: Spectra Energy is another MLP – in this case, related to Spectra Energy Corp. (SE) — that deals primarily in natural gas pipelines and storage. Spectra Energy Partners has treated unit-holders to a great year, up 16% year-to-date. And each of SEP’s distributions in 2014 has been bigger than the last, with the most recent payout of 57.62% representing a roughly 4.4% yield.
#21: Kinder Morgan Inc (KMI), 4.41% Dividend Yield: Kinder Morgan is America’s king of energy infrastructure, boasting about 80,000 miles of pipelines and 180 terminals that either transport or stores everything from crude oil and natural gas to coal and steel. Just last month, Kinder Morgan merged itself with several of its other partners, including Kinder Morgan Energy Partners LP, El Paso Pipeline Partners, L.P. and Kinder Morgan Management LLC. On the upside, Kinder estimates that the move will create $20 billion in cost savings, and hey, there are a lot fewer tickers to keep track of. On the downside, the move creates something of a tax headache.
#20: Access Midstream Partners LP (ACMP), 4.52% Distribution Yield: ACMP is another natural gas-focused MLP, operating nearly 6,800 miles’ worth of pipeline. Access Midstream has been hit hard of late, down some 12% in the past month to send shares in the red for the year. ACMP has provided rapidly growing distributions for the past couple of years, growing its payout from 42 cents quarterly to 62 cents most recently — helping to provide at least some cushion against a lackluster 2014.
#19: ConocoPhillips (COP), 4.6% Dividend Yield: The country’s third-largest integrated energy giant is diversified across both crude oil and natural gas — and unfortunately, COP has dropped as the fortunes of both commodities have dropped. On the plus side, Conoco increased its dividend by roughly 6% to 73 cents per share — nearly 50% higher than five years ago. That and lower prices have helped bump COP’s yield to more than 4%.
#18: Philip Morris International Inc. (PM), 4.65% Dividend Yield: Big Tobacco — among the most notorious dividend stocks out there — has been on the regulatory ropes for years, but you wouldn’t know it by looking at American giants like Altria Group Inc (MO) or Reynolds American, Inc. (RAI), which are each up 30% this year. Philip Morris, however, hasn’t been as lucky. While many thought PM had better growth prospects than its American counterparts because of heavy regulatory pressure in the states, the global tide is turning against tobacco, too – take China, which is considering a public smoking ban. In turn, sentiment has soured on Philip Morris. Still, PM remains shareholder-friendly, insisting that it will try to return 100% of free cash flow to shareholders in the form of dividends or share repurchases — and that should help maintain and grow its thick dividend.
#17: Realty Income Corp (O), 4.73% Dividend Yield: Realty Income doesn’t do subtlety. Go to its website, and it’s proud to tell everyone who will listen that it’s “The Monthly Dividend Company.” And that’s what it does — it pays out dividends monthly, which is a great feature for retirees looking for a steady source of income to plan around. Realty Income’s portfolio includes reliable tenants such as Walgreen Company (WAG) and FedEx Corporation (FDX), helping to power a bulletproof dividend that has been paid out since 1970.
#16: Verizon Communications Inc. (VZ), 4.75% Dividend Yield: Verizon is one half of what’s often referred to as U.S. telecom’s “virtual duopoly,” with it and AT&T Inc. (T) controlling some 70% of the nation’s market share in the space. And because wireless and Internet service are practically utilities at this point – everyone needs them, and everyone pays for them on a monthly basis – Verizon and AT&T both enjoy a steady stream of cash, which is then converted into generous dividends. Verizon suffered a considerable drop in the past month after it announced it was taking a beating from customers gobbling up its promotions, though that has only served to plump up the dividend to 4.75% currently.
#15: HCP, Inc. (HCP), 4.81% Dividend Yield: HCP is a REIT that’s standing smack-dab in the middle of an important megatrend: the growth of healthcare amid the aging of the baby boomers. HCP deals in businesses such as senior living developments and medical offices — extremely stable sources of income that offer a great deal of growth potential as more baby boomers reach retirement age.
#14: Mattel, Inc. (MAT), 4.88% Dividend Yield: Dividend yield is calculated by dividing a dividend payout by share price — so like any fraction, you can either make your yield larger by growing the numerator (the dividend) or shrinking the denominator (share prices). In Mattel’s case, the Barbie-maker’s big dividend yield is a product of the latter. MAT grew its dividend a paltry 5.5% earlier this year, but what has really done wonders for the yield is a 35% year-to-date haircut thanks to four consecutive quarters of revenue misses.
#13: Williams Companies Inc (WMB), 5.17% Dividend Yield: The Williams Companies is another energy infrastructure company like Kinder, though WMB focuses primarily on natural gas, NGLs and olefins. Williams has had an up-and-down year that saw shares improve by as much as 55% at their peak, but the recent selloff has trimmed much of those gains. Still, WMB is beating the market’s 10% gains by about 4 percentage points right now, and it has rapidly grown its quarterly dividend payout by 42% this year alone.
#12: The Blackstone Group L.P. (BX), 5.2% Dividend Yield: Blackstone is one of the world’s premier global investment firms, investing in everything from private and public businesses to real estate, and offering products such as hedge funds and closed-end funds. BX has some $70 billion in assets under management, including large investments in companies such as Cheniere Energy, Inc. (LNG) and SeaWorld Entertainment Inc (SEAS).
#11: Freeport-McMoRan Inc (FCX), 5.44% Dividend Yield: Freeport-McMoRan, like Mattel, is another company whose large yield is a byproduct of a shoddy year. FCX primarily produces copper and gold, but also produces molybdenum and silver, and thanks to some acquisitions, also has operations in oil and gas production. FCX’s weakness has primarily come on concerns about copper demand out of China, and oil’s recent plunge has only exacerbated the issues. But if you’d like to be optimistic, FCX is expected to see significantly improved production in copper, gold, and oil and gas by 2016. Meanwhile, new investors will be treated to a yield well north of 5%.
#10: Plains All American Pipeline, L.P. (PAA), 5.46% Dividend Yield: This MLP based in Houston handles nearly 4 million barrels of crude oil and NGL every day. Last month, Plains finished its acquisition of a 50% stake in BridgeTex Pipeline Company LCC from Occidental Petroleum Corporation (OXY), and recently raised $1.15 billion in senior notes to help pay for the deal. PAA shares have tumbled this past winter and dipped into the red for the year, helping to make its generous yield even more attractive.
#9: CenturyLink, Inc. (CTL), 5.57% Dividend Yield: While the name isn’t as ubiquitous as AT&T or Verizon, CenturyLink is the third-largest U.S. telecom by lines served. CTL operates in mostly rural areas to offer home phone and Internet service, but recently made a deal to acquire DataGardens in an effort to build up its cloud services. CenturyLink actually cut its dividend from 73 cents quarterly to 54 cents in early 2013, which was followed by a disastrous performance that year; however, CTL shares have rebounded in 2014, tacking on some 20%-plus to make up just about all of the ground lost last year.
#8: AT&T Inc. (T), 5.63% Dividend Yield: Like Verizon, AT&T has dropped of late, and among the biggest worries are issues of subscriber churn, as well as lowered full-year revenue guidance (from 5% growth to 3%-4% growth). While AT&T is a serial dividend improver, that dividend growth has been and likely will continue to be slow, as AT&T already spends most of its cash flow on shareholders and has piled on debt in recent years. Still, AT&T yields roughly 5.6% and should announce its next payout increase soon.
#7: Enbridge Energy Partners, L.P. (EEP), 5.66% Distribution Yield: Enbridge Energy Partners, an MLP tied to Enbridge Inc (USA) (ENB), deals with natural gas and liquids deliveries, including 13% of America’s daily crude oil imports. While oil and natural gas prices have suffered in 2014, EEP’s business comes from fees on volume — and business has been good. Growing earnings have resulted in a blowout year for Enbridge Energy Partners, with 30% year-to-date gains bringing units to all-time highs around $40.
#6: Markwest Energy Partners LP (MWE), 5.77% Distribution Yield: Markwest Partners also is a player in natural gas, NGLs and crude oil in areas like the Northeast’s Marcellus shale, the Southwest’s Woodford Shale and Granite Wash, and Appalchia’s Huron/Berea Shale. Markwest has been expanding its operations, including acquisitions of natural gas processing facilities in the Utica region earlier this year. It’s also switching to more fee-based income like Enbridge Energy Partners, though it’s still exposed to some commodity risk and has fallen recently with much of the energy sector.
#5: Icahn Enterprises LP (IEP), 6.26% Distribution Yield: Icahn Enterprises LP is the holding company belonging to activist investor Carl Icahn, famous for his battles to increase shareholder value at companies such as Apple Inc (AAPL) and eBay Inc (EBAY). IEP is invested in several industries, including energy via CVR Energy, Inc. (CVI) and CVR Refining LP (CVRR), as well as railways via American Railcar Industries, Inc. (ARII).
#4: Energy Transfer Partners LP (ETP), 6.32% Distribution Yield: Energy Transfer Partners is a sprawling MLP that represents some 71,000 miles of natural gas, NGL, crude oil and refined products pipelines. Among its most recent activity includes the announcement that it and Regency Energy Partners LP (RGP) plan to build a 533-mile NGL pipeline from the Permian Basin to Mont Belvieu, Texas. It also plans to convert its West Tegas NGL pipeline to crude/condensate service. It also has increased its stake in a Bakken pipeline project via a swap with another partner, Energy Transfer Equity LP (ETE). ETP broke through to new all-time highs at the end of November before following the rest of the market down at the beginning of this month.
#3: KKR & Co. L.P. (KKR), 8.08% Distribution Yield: KKR is a major private equity firm that has made its coin on leveraged buyouts, boasting some $400 billion in PE deals over its lifetime. Its portfolio includes companies such as Alliant Insurance Services, GoDaddy Inc. and Toys “R” Us., but it also manages real estate holdings and offers hedge funds as well.
#2: Williams Partners L.P. (WPZ), 8.25% Distribution Yield: Williams Partners is yet another natural gas-focused MLP that has dropped heavily of late. Across its whole system, Williams boasts delivery of 14% of all natural gas consumed in the U.S. Williams Partners will be merging with the aforementioned Access Midstream Partners by early 2015 in a deal valued at $50 billion. Williams boasts net profit margins that are above its industry average, as well as steadily increasing distributions for years. Meanwhile, December’s 13% drop has driven WPZ’s yield above the 8% mark.
#1: Annaly Capital Management, Inc. (NLY), 10.42% Dividend Yield: Annaly Capital is a mortgage REIT, which, unlike equity REITs that actually own and usually operate real estate, simply provide financing for real estate, making their money via mortgages or mortgage-backed securities. Annaly specializes in commercial real estate, with the vast majority of its portfolio invested in agency-backed securities. That makes it — like other mREITs — sensitive to interest rates, with rising rates (or even the threat of rising rates) often putting pressure on NLY and similar stocks. NLY’s yields have dropped precipitously in the past five years, falling some 60% at the same time shares have shed nearly 40%. Still, at today’s payout of 30 cents quarterly, NLY delivers enough income to be this list’s highest-yielding dividend stock at more than 10%.
Kyle Woodley is the Managing Editor of InvestorPlace. As of this writing, he was long COP and T.