Is It Possible to Find Dividend Stocks with 5%+ Yields AND 10%+ Total Returns

Key Takeaways

• Identifying dividend stocks that consistently deliver both a 5%+ yield and 10%+ total returns requires a deep dive beyond headline numbers, focusing on financial resilience and strategic growth.
• Companies in sectors like midstream energy, utilities, and specialized REITs often possess the stable cash flows and contractual revenues necessary to support robust, growing dividends.
• While tempting, high yields can be "fool's gold" if not backed by sustainable payout ratios, strong free cash flow, and a manageable debt load, necessitating careful due diligence.

Is It Possible to Find Dividend Stocks with 5%+ Yields AND 10%+ Total Returns?

Yes, it is entirely possible, but it’s a quest that demands rigorous analysis and a keen eye for underlying financial health. Many investors chase high dividend yields only to find them unsustainable, leading to dividend cuts and capital losses. The market average dividend yield for the S&P 500 hovers around 1.2%, making a 5%+ yield seem like a dream, let alone coupling it with a 10%+ total return. This combination is often seen as contradictory: growth companies typically reinvest profits, while dividend payers are perceived as mature, slower-growth entities.

However, a select group of companies defies this conventional wisdom. These are businesses with robust economic moats, predictable cash flows, and management teams committed to both shareholder returns and strategic expansion. They operate in sectors where long-term contracts, essential services, or regulated assets provide a stable revenue base, allowing them to distribute significant portions of their earnings while still funding future growth initiatives. The trick lies in distinguishing these resilient income generators from those merely flashing a high yield due to a falling stock price or an unsustainable payout.

The allure of such "dual-threat" stocks is undeniable, offering a powerful compounding effect through consistent income and capital appreciation. This strategy can significantly enhance long-term wealth creation, especially in volatile markets where stable income acts as a cushion. Investors must look beyond the immediate yield and scrutinize the company's ability to maintain and grow that payout, ensuring it's not a value trap but a genuine opportunity for durable returns.

Which Companies Consistently Deliver Both High Yields and Strong Total Returns?

Several companies, primarily in the energy midstream, utility, and specialized REIT sectors, stand out for their ability to offer compelling dividend yields alongside a track record of capital appreciation. These businesses are often characterized by stable, predictable cash flows derived from long-term contracts or regulated assets, providing the foundation for sustainable payouts and growth. Identifying them involves looking for strong operational performance, strategic capital allocation, and a commitment to shareholder returns.

Consider Enterprise Products Partners (EPD), a midstream energy giant. It currently boasts a 6.4% dividend yield and has an impressive streak of 27 consecutive years of dividend increases. Their business model, centered on a vast network of pipelines spanning 50,000 miles, generates highly predictable income. After significant organic growth investments of $4.5 billion in 2025, EPD projects capital spending to drop to $2.5 billion in 2026, freeing up substantial cash flow for shareholders. This is further underscored by an expanded share repurchase program, now totaling $5 billion, signaling confidence in future cash generation and a commitment to total returns.

Another compelling example is MPLX (MPLX), yielding an even higher 7.7%. As one of the highest-yielding large-cap energy stocks, MPLX benefits from Marathon Petroleum's backing, ensuring predictable revenues from long-term contracts. The company saw net earnings grow by 15% in the first nine months of 2025 and raised its dividend by 12.5%. Acquisitions and expansions in key basins like Delaware, Marcellus, and Permian are setting the stage for strong performance in 2026, demonstrating a clear path to both high income and growth. These companies exemplify how essential infrastructure assets can provide both stability for dividends and avenues for expansion, driving total shareholder returns.

How Can Investors Assess Dividend Sustainability and Financial Health?

Assessing dividend sustainability goes far beyond simply looking at the current yield; it requires a deep dive into a company's financial health, particularly its cash flow generation and balance sheet strength. A high yield can be a red flag if the underlying business can't support it, leading to potential dividend cuts that wipe out any income advantage and erode capital. Key metrics like payout ratio, free cash flow, and debt levels are crucial indicators.

The payout ratio is a primary gauge, indicating what percentage of earnings or cash flow a company distributes as dividends. For REITs, this is often based on Funds From Operations (FFO). A payout ratio consistently above 80-90% can signal trouble, as it leaves little room for reinvestment or unexpected downturns. For instance, Realty Income (O), a monthly dividend payer with a 5.3% yield, is a REIT, legally required to distribute at least 90% of its taxable income. Its track record of 113 consecutive quarterly increases demonstrates that its diversified portfolio of over 15,500 commercial properties across 92 industries generates the stable cash flow needed to sustain this high payout.

Beyond the payout ratio, free cash flow (FCF) is paramount. FCF represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. A growing FCF stream is the lifeblood of sustainable dividend growth. Companies like Medtronic (MDT), a dividend aristocrat with 49 consecutive years of increases, saw its fiscal 2024 FCF increase by 14% to $5.2 billion, enabling it to return $5.5 billion to shareholders. Finally, a manageable debt-to-equity ratio and ample liquidity are critical. Excessive debt can strain a company's ability to pay dividends, especially in a rising interest rate environment. Investors should scrutinize debt maturity schedules and interest coverage ratios to ensure long-term financial stability.

What Are the Key Growth Drivers for High-Yield Dividend Stocks?

For high-yield dividend stocks to deliver strong total returns, they must possess identifiable growth drivers beyond merely maintaining their payout. These drivers often stem from strategic investments, market expansion, operational efficiencies, or secular trends that bolster their underlying business and, consequently, their ability to increase both earnings and dividends. Without growth, even a high yield can be outpaced by inflation or market appreciation elsewhere.

Consider Brookfield Infrastructure Partners (BIP), which yields 4.49% but targets 5% to 9% annual growth in funds from operations and dividend per share. Their strategy involves "capital recycling," raising $3 billion in 2025 by selling mature assets and redeploying that capital into high-growth areas like artificial intelligence (AI) data centers. This dynamic approach allows them to continuously optimize their portfolio for higher returns, leveraging predictable income from utilities, transport, and midstream energy assets to fund future-proof growth. This isn't just about maintaining the dividend; it's about growing the pie.

Similarly, Oneok (OKE), with a 5.3% yield, is a compelling turnaround play. Despite a 25% stock drop in 2025 due to debt from mega-acquisitions like Magellan Midstream, Medallion Midstream, and EnLink Midstream, these deals have significantly expanded its pipeline capacity. Management expects nearly $500 million in near-term synergies and is confident in raising the annual dividend by 3% to 4% long-term. This demonstrates that strategic, albeit sometimes debt-fueled, expansion can be a powerful growth driver, ultimately leading to enhanced shareholder value as synergies materialize and cash flows improve. These examples highlight that growth in high-yield stocks often comes from disciplined capital allocation and strategic business development, not just organic market expansion.

What Are the Risks of Chasing High-Yield Investments and How Can They Be Mitigated?

Chasing the highest dividend yields can be a perilous endeavor, often leading investors into "value traps" where a seemingly attractive yield masks underlying business deterioration. Morningstar strategist Dan Lefkovitz rightly warns that "tempting as they might be, the stock market’s juiciest yields are often illusory," frequently found in risky sectors or companies with unsustainable payouts. The most significant risk is a dividend cut, which not only eliminates the income stream but almost invariably leads to a sharp decline in the stock price, eroding capital.

A prime example of this risk is Walgreens Boots Alliance. Once a Dividend Aristocrat, it was forced to cut its dividend in early 2024 to conserve cash, subsequently being dropped from the Dow and the Aristocrats index. Its tempting 8.7% yield on January 29, 2025, quickly evaporated when the dividend was suspended the very next day. This illustrates that a high yield can be a lagging indicator of distress, with the market pricing in future cuts before they are officially announced. Investors must scrutinize the payout ratio, free cash flow trends, and the company's debt load to gauge sustainability.

Mitigating these risks involves a multi-faceted approach. First, prioritize dividend growth over raw yield. Companies with a long history of increasing dividends, like Dividend Aristocrats (those with 25+ consecutive years of increases), demonstrate financial resilience and a commitment to shareholders. Second, diversify across sectors and industries to avoid overexposure to any single distressed area. Third, look for companies with strong competitive advantages, or "economic moats," that protect their cash flows. Finally, understand the business model thoroughly. Is the income predictable and recurring, or cyclical and volatile? A deep understanding helps distinguish between a sustainable high-yielder and a ticking time bomb.

How Can Investors Screen for Sustainable High-Yield Opportunities?

Screening for sustainable high-yield opportunities requires a disciplined approach that filters out the "fool's gold" and identifies companies with genuine financial strength and growth prospects. Instead of simply sorting by the highest dividend yield, investors should layer multiple criteria to pinpoint resilient income generators. This involves combining yield targets with indicators of financial health, dividend history, and growth potential.

Start by setting a minimum dividend yield, perhaps 5%, to narrow the field. However, immediately pair this with a maximum payout ratio, ideally below 70-80% of earnings or free cash flow, to ensure the dividend is well-covered. For REITs, use FFO as the basis. Next, filter for companies with a proven track record of dividend consistency and growth. Look for those that have increased their dividend for at least 5-10 consecutive years, or even better, Dividend Aristocrats with 25+ years of increases. This history signals management's commitment and the business's ability to weather various economic cycles.

Further refine the screen by examining balance sheet health. Look for companies with manageable debt levels, indicated by a reasonable debt-to-equity ratio and strong interest coverage. Positive free cash flow generation is non-negotiable, as it's the ultimate source of dividend payments and reinvestment. Finally, consider qualitative factors: does the company operate in a stable or growing industry? Does it have a competitive advantage? Are there clear growth drivers, such as strategic acquisitions, market expansion, or technological innovation? By combining these quantitative and qualitative filters, investors can build a robust portfolio of high-yield stocks that offer both attractive income and long-term capital appreciation.

Investing in high-yield dividend stocks that also deliver strong total returns is a powerful strategy for long-term wealth creation, but it demands diligence. Focus on financial health, dividend sustainability, and clear growth drivers to uncover these dual-threat performers. By prioritizing quality over mere yield, investors can build a resilient portfolio capable of weathering market storms and generating consistent income.

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