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3 Top Dividend Stocks With Yields Over 4%

Jeremy Bowman, Todd Campbell, and Sean Williams, The Motley Fool

Investors are always on the hunt for high-yielding stocks. Strong dividend yields not only deliver a solid income stream for investors, but they are generally a sign of steady profits as well as a company's commitment to returning cash to shareholders.

In today's market, with stocks at all-time highs, it's gotten harder to find generous dividend payers, but they're still out there if you know where to look. Keep reading to see why BP (NYSE: BP) , AT&T (NYSE: T) , and Ford (NYSE: F) all look like great bets for high-yield stocks.

A man flicking money into the air

Image source: Getty Images.

This oil major deserves a closer look

Todd Campbell (BP): Political instability in Venezuela has led to sanctions that have caused southern U.S. refiners to shift their purchases to Gulf of Mexico producers, pushing up prices and profit at BP, one of the world's biggest oil companies.

Venezuela accounted for about 10% of U.S. heavy crude imports used to make products such as jet fuel and diesel last year, so the impact of sanctions is significant. BP is the largest producer of oil in the Gulf of Mexico, so it should be a beneficiary of shifting supply, at least for now.

Further out, BP is knee-deep in a transformation that's driving down costs and positioning it for better profitability. The company's unit production costs have fallen 45% since 2013, and new projects coming online through 2021 are expected to have 20% lower development costs and 35% greater cash margins from 2015. Those new projects should help shore up overall production by adding 900,000 barrels of oil equivalent per day.

If everything goes to plan, BP expects to generate $14 billion to $15 billion in free cash flow by 2021, suggesting its dividend is on solid ground. Longer term, Brazil, Azerbaijan, and the West Africa acreage offer potential for development. Also, the company's acquisition of BHP's lower-48 shale acreage may also prove to be shareholder-friendly, making owning BP for its 5.5% dividend yield even more enticing.

The safest high-yield stock on the planet

Sean Williams (AT&T): Although it's far from the most exciting selection, the most consistent high-yield stock investors can buy is Ma Bell, AT&T, which is currently yielding 6.3%. Based on dividend alone, AT&T could double your initial investment in just over 11 years.

The reason AT&T gets passed over by Wall Street as a stock to buy is simple: It's a slow-growth model in an environment where lending rates are relatively low and GDP growth is above average. But believe it or not, business is about to pick up. AT&T is beginning a more aggressive rollout of its 5G network into new cities. Though this will be a costly, multiyear effort, the fruits of this spending should be significant , with an expected smartphone upgrade cycle leading to large increases in streaming data consumption. That's AT&T's bread and butter, and it should lead to improved margins for its wireless division.

At the same time, AT&T should begin to recognize improved profitability from its acquisition of Time Warner and its prized assets (HBO, CNN, TNT, and TBS). Aside from recognizing organic growth in all of WarnerMedia's operating segments in the fourth quarter, the addition of Time Warner should give AT&T more bargaining power with advertisers and greater pull in luring customers to its streaming services.

No matter how unexciting AT&T has been in recent years, it's pretty much impossible to argue with $43.6 billion in full-year cash from operations, a 15% increase from 2017, and $22.4 billion in free cash flow, which was up 36% from the previous year. Even though both figures were aided by the closure of the Time Warner purchase, they by no means signal a peak. For instance, free cash flow in 2019 is expected to grow 16% to around $26 billion, making AT&T's dividend incredibly safe.

It's not a fancy selection by any means, but AT&T is probably the safest dividend stock above 4% you can buy.

An unloved automaker

Jeremy Bowman (Ford): Times have been tough on legacy automakers like General Motors and Ford as the auto cycle appears to be past its peak. Auto investors have also focused their attention on growth stocks like Tesla , Lyft , and Uber, which are getting sky-high valuations, while GM and Ford trade at single-decision P/E ratios.

However, dividend investors can find a lot to like about Ford. The stock offers a generous dividend yield of 6.3%, and management has affirmed its commitment to the dividend even if a recession hits. The payout is also well funded as the company's payout ratio is less than 50% based on earnings.

While North America remains strong and Ford Credit has been generating bumper profits, the company has struggled in international markets as it lost money in every region outside of the U.S. last year. However, that presents an opportunity for the stock as the company has a plan to turn around its performance. Ford is refreshing its lineup with a new Ranger pickup and Fiesta compact in Europe, and the company is rolling out 10 new models in China, the world's biggest auto market. Elsewhere, the company is tweaking its supply chain to build vehicles closer to the markets in which they're sold, and it forged a partnership with Volkswagen in Europe. CEO Jim Hackett has promised more updates on the company's turnaround strategy, including details on its $11 billion restructuring plans.

Other issues outside of Ford's control hang in the balance, like Brexit and U.S.-China trade negotiations, but if the company can make progress on its turnaround initiatives, the resolutions of those trade issues would only be gravy for investors. Meanwhile, investors can sit back and collect the 6.3% yield while they wait for improvements to materialize.

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Jeremy Bowman owns shares of Ford and General Motors. Sean Williams owns shares of AT&T. Todd Campbell owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy .