3 High-Yielding Dividend Stocks With Payout Ratios Less Than 50%

One ratio that gets a lot of attention (and rightfully so) from investors is a stock’s payout ratio. It tells them how much of a company’s earnings are paid out in the form of dividends. Generally, the higher the ratio is, the more unsustainable the dividend is.

This isn’t always the case, however. A company may be coming off a single bad earnings report or it may have many noncash items weighing down its bottom line in a particular quarter that pushes the payout ratio abnormally high. Still, the payout ratio is a good metric to focus on when evaluating dividend stocks.

Three stocks that yield more than the S&P 500 average of 1.4% but still have low payout ratios are CVS Health (NYSE: CVS), JPMorgan Chase (NYSE: JPM), and ExxonMobil (NYSE: XOM). Let’s take a closer look at these dividend stocks and why they might be good additions to a portfolio.

1. CVS Health

Healthcare company CVS Health pays a dividend that yields 3.5%. Not only is this a high-yielding stock, but CVS is also a fairly safe income investment to hold in your portfolio. With a payout ratio of less than 40%, investors don’t need to have the same worries about CVS as they might have about rival Walgreens Boots Alliance, which slashed its dividend payment earlier this year. CVS, with a broader business that goes beyond just pharmacy retail and that expands into health insurance through Aetna, can provide investors with much greater stability and diversification over the long run.

For the last three months of 2023, CVS reported revenue of $93.8 billion, which was up 11.9% compared to the same period last year. The company’s adjusted earnings per share for the quarter totaled $2.12, which was an improvement versus the $2.04 adjusted profit it reported a year ago.

Rising costs in the healthcare industry have made investors wary about stocks like CVS Health. But with the stock trading at just 9 times its estimated future profits and a price/earnings-to-growth (PEG) ratio of just over 1, CVS Health stock could be a steal of a deal for investors who are willing to buy and hold.

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2. JPMorgan…


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