Dividend stocks with substantial yields tend to outperform when the Federal Reserve begins lowering interest rates. These moves reflect portfolio managers shifting capital away from bonds and into stable, income-producing equities.

Among companies paying dividends above 4%, five stand out for their market strength and sustainable payouts. With yields ranging from 4.5% to 8.7%, these businesses have the cash flow and competitive positions to maintain their attractive dividends. Read on to find out more about these five top dividend payers.

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Image source: Getty Images.

British American Tobacco (NYSE: BTI) is a global tobacco powerhouse, operating in over 180 markets worldwide. The company rewards shareholders with an exceptional 8.71% dividend yield, prudently supported by a 59.1% payout ratio.

Despite a robust 19.1% gain year to date, British American Tobacco shares remain remarkably affordable at just 7.29 times forward earnings. The company’s strategic approach is twofold: maximizing profitability from traditional cigarettes through strong pricing power, while aggressively expanding into reduced-risk, next-generation products to ensure long-term sustainability.

With a commanding presence in emerging markets, the company is well-positioned for future growth. Its substantial investments in vapor and heated tobacco products underscore management’s commitment to innovation and sustainable business practices in an evolving industry landscape.

Altria Group (NYSE: MO) dominates the U.S. tobacco market through its iconic Marlboro brand. Offering pure-play exposure to American tobacco, the company boasts an attractive 8.32% dividend yield. Even after a meteoric 24.1% rise year to date, Altria shares remain a compelling value at just 9.48 times forward earnings.

MO Chart
MO Chart

With Marlboro commanding over a 40% market share, Altria Group wields exceptional pricing power to counter volume declines. The company’s strategic $2.75 billion acquisition of NJOY in 2023 — one of few FDA-approved e-cigarette manufacturers — demonstrates its commitment to expanding beyond traditional tobacco.

This proven business model combines premium pricing with operational efficiency to maintain robust profit margins. While U.S. cigarette volumes decline, Altria’s sophisticated pricing strategy and targeted investments in smokeless alternatives position the company for sustained profitability.

Pfizer (NYSE: PFE), a global pharmaceutical leader, produces a broad range of medicines and vaccines. The company offers investors an attractive 5.81% dividend yield, while shares trade at a modest 10.3 times forward earnings.

As a pharmaceutical powerhouse, Pfizer combines a diverse drug portfolio with a robust development pipeline, creating multiple pathways for future growth. While the current 443% payout ratio appears elevated due to post-pandemic revenue adjustments, the company’s strong cash flow and deep pipeline reinforce dividend sustainability.

Strategic acquisitions have bolstered Pfizer’s presence in high-value markets, particularly in rare diseases and oncology. Backed by substantial research and development investments, the company continues to advance promising therapies across multiple treatment areas.

AT&T (NYSE: T) is a telecommunications leader, serving millions of wireless subscribers and broadband customers across the United States. The company has demonstrated its commitment to strategic transformation through key moves like the $7.6 billion DirecTV stake sale to TPG.

AT&T shares have risen by a whopping 28.1% year to date. Still, its shares offer a healthy 5.08% dividend yield with a sustainable payout ratio of 63.7%. Trading at 9.53 times forward earnings, AT&T represents a compelling value, compared to both industry peers and the broader S&P 500.

The company’s growth strategy centers on aggressive 5G network expansion, positioning AT&T to capitalize on next-generation wireless opportunities. Additionally, its strategic fiber deployment targets high-potential markets with minimal competition, enhancing potential returns on investment.

Philip Morris International (NYSE: PM) markets Marlboro and other cigarette brands exclusively in international markets. The stock offers investors a 4.54% dividend yield and trades at a forward price-to-earnings ratio (P/E) of 17.4. The one drawback is the tobacco giant does sport an elevated payout ratio of 92%.

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^SPX Chart

The company’s broad geographic footprint provides natural diversification across markets with different consumption patterns. Since acquiring U.S. rights to iQOS in 2022, the company has expanded its presence in the U.S., the world’s largest market for smoke-free products.

The company’s strategic pivot toward smoke-free alternatives has shown strong momentum in key regions, while its established presence in emerging economies helps insulate the business from localized economic pressures.

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George Budwell has positions in AT&T, Pfizer, and Philip Morris International. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends British American Tobacco P.l.c. and Philip Morris International and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.

5 High-Yield Dividend Stocks to Buy Without Hesitation was originally published by The Motley Fool

Source: finance.yahoo.com