My Top 10 High Dividend Yield Stocks To Invest In April 2023 (2023)

Investment Thesis

In a previous article on Seeking Alpha, I wrote about my top 10 dividend growth companies to invest in for March 2023. In today’s article, the focus will not be on companies that provide you with a high Dividend Growth Rate, but instead on companies that offer you an attractive Dividend Yield [FWD].

When seeking a relatively high Dividend Yield, you should carefully select the companies you choose to invest in. This is because a high Dividend Yield could be a result of the price of the stock having decreased significantly and additionally could be a signal for a future Dividend cut to the company.

For these reasons, I consider it to be important to carefully analyze companies that offer a high Dividend Yield before taking any investment decision. Among these metrics to analyze, for example, is their Payout Ratio. The Payout Ratio of a company can be interpreted as an indicator of the sustainability of the Dividend.

By investing in companies with a sustainable Dividend, you can benefit from an additional income in the form of Dividends that can increase year over year.

First step of the Selection Process: Analysis of the Financial Ratios

In order to identify companies with a relatively high Dividend Yield [FWD], I use a filter process to make a pre-selection. From this pre-selection, I will later choose my top 10 high Dividend Yield companies of the month. To be part of this pre-selection of high Dividend Yield stocks, the companies should fulfil the following requirements:

• Market Capitalization > $10B
• Dividend Yield [FWD] > 2.5%
• Payout Ratio < 80%
• P/E [FWD] Ratio < 30
• EBIT Margin [TTM] > 5% or Net Income Margin [TTM] > 5%
• Moody’s credit rating: at least B

In the following, I would like to specify why I have chosen the metrics mentioned above in order to select my top 10 high Dividend Yield stocks of the month.

A Market Capitalization of more than $10B contributes to the fact that the risks attached to your investments are lower, since companies with a higher Market Capitalization tend to have a lower volatility than companies with a low Market Capitalization.

A Payout Ratio of less than 80% contributes to the fact that the risk of a Dividend cut in the near future tends to be lower. A Payout Ratio of more than 100%, for example, would imply that the company pays a higher Dividend per Share than it has generated Earnings per Share. This would be a strong indicator that the Dividend could be cut soon and that the share price could drop significantly as a result. This would imply a strong risk factor for investors. Therefore, this filter contributes to lowering the risk level.

A P/E [FWD] Ratio of less than 30 implies that the price you pay for the company is not very high, thus filtering out those that have stock prices in which high growth expectations are priced in. High growth expectations imply strong risks for investors, since the stock price could drop significantly. Again, the filtering process helps us to reduce the risk so that we are more likely to make an excellent investment decision.

An EBIT Margin [TTM] or Net Income Margin [TTM] of more than 5% and a Moody’s credit rating of at least B are indicators of a company’s Financial Strength.

The second, third and fourth steps are the same steps I have already described in my previous article on the selection of dividend growth companies.

Readers who are already familiar with this from my previous analysis can skip steps 2, 3 and 4 of the selection process, which are written below in italics. I have included the steps again for new readers who are not yet familiar with my selection process.

Second step of the selection process: Analysis of the Competitive Advantages

In a second step, the companies’ competitive advantages (for example: brand image, innovation, technology, economies of scale, etc.) are analyzed in order to make an even narrower selection. I consider it to be particularly important for companies to have strong competitive advantages in order to stand out against the competition in the long term. Companies without strong competitive advantages have a higher probability of going bankrupt one day, thus representing a strong risk for investors to lose their invested money.

Third step of the selection process: The Valuation of the companies

In the third step of the selection process, I will dive deeper into the Valuation of the companies.

In order to conduct the Valuation process, I use different methods and criteria, for example, the companies’ current Valuation as according to my DCF Model, the expected compound annual rate of return as according to my DCF Model and/or a deeper analysis of the companies’ P/E [FWD] Ratio. These metrics should serve as an additional filter to only select companies that currently have an attractive Valuation, which helps you to identify companies that are at least fairly valued.

The Fourth and final step of the selection process: Diversification over Industries and Countries

In the fourth and final step of the selection process, I have established the following rules for choosing my top picks: in order to help you diversify your investment portfolio, a maximum of two companies should be from the same industry. In addition to that, there should be at least one pick that is from a company that is based outside of the United States, serving as an additional geographical diversification.

My Top 10 High Dividend Yield Stocks to Invest in for April 2023

In the following, you can find the 10 high Dividend Yield stocks that I have selected for you for the month of April (2023) and that I consider to be particularly attractive at this moment in time:

The 10 selected companies:

• 3M Company (NYSE:MMM)
• AbbVie Inc. (NYSE:ABBV)
• Altria (NYSE:MO)
• Johnson & Johnson (NYSE:JNJ)
• Mercedes-Benz Group AG (OTCPK:MBGYY, OTCPK:MBGAF)
• Suncor Energy Inc. (NYSE:SU)
• TotalEnergies SE (NYSE:TTE)
• The Toronto-Dominion Bank (NYSE:TD)
• U.S. Bancorp (NYSE:USB)
• Verizon Communications Inc. (NYSE:VZ)

Source: Seeking Alpha

The Average Dividend Yield [FWD] of the selected picks is 5.51%, helping investors to gain a significant amount of extra income in the form of Dividends. At the same time, the selected 10 companies have shown an Average Dividend Growth Rate of 6.89% over the past 5 years. The metrics indicate that the selected picks combine Dividend Income with Dividend Growth.

The Average Net Income Margin of 19.07% and the Average Return on Equity of 27.30%, further demonstrate that the selected companies are highly profitable. Moreover, the Average P/E [FWD] Ratio of only 8.90 demonstrates that the picks are attractive in terms of Valuation. The relatively low P/E [FWD] Ratio of 8.90 on Average shows that the stock prices are not based on high growth expectations, which can be interpreted as a further indicator that the risk of investing in these companies can be considered as relatively low.

3M Company

3M was founded in 1902 and currently has about 92,000 employees. The company operates through the segments of Safety and Industrial, Transportation and Electronics, as well as Health Care and Consumer.

3M currently pays its shareholders an attractive Dividend Yield [FWD] of 5.91%. Its Payout Ratio of 59.01% indicates that there is further room for Dividend enhancements and this strengthens my belief not to expect a Dividend cut in the near future. Its Dividend Growth Rate [CAGR] of 9.52% over the past 10 years stands at 20.19% over the Sector Median, which shows that the company can be an appealing investment for dividend income and dividend growth investors.

3M’s P/E [FWD] Ratio of 11.85 stands 34.68% below the Sector Median and 35.54% below its Average P/E [FWD] Ratio over the past 5 years (18.38), providing evidence that the company is currently undervalued.

AbbVie

AbbVie is a worldwide operating company from the Biotechnology Industry. The company was founded in 2012 and currently has a Market Capitalization of $273.97B.

AbbVie’s Dividend Yield [FWD] of 3.81%, its 5 Year Dividend Growth Rate [CAGR] of 16.92%, its relatively low Payout Ratio of 41.41% and its relatively attractive Valuation (P/E Non-GAAP [FWD] Ratio of 14.14) contribute to the company being part of my list of high Dividend Yield companies to invest in for April 2023.

In addition to the metrics mentioned above, the company has a high EBIT Margin [TTM] of 38.97%, which is proof of its excellent position within its industry.

The company’s Dividend Growth 5 Year [CAGR] of 16.92% is significantly above the one of other competitors from the Biotechnology Industry, such as Amgen (NASDAQ:AMGN) (Dividend Growth 5 Year [CAGR] of 10.76%) or Gilead Sciences (NASDAQ:GILD) (6.66%). This once again strengthens my confidence that AbbVie should be part of this list of high Dividend Yield picks for the month of April (2023).

Altria

Altria made it to my top 10 high Dividend Yield stocks to buy in April 2023 due to the company’s attractive Valuation (P/E [FWD] Ratio of 8.62), its high Profitability (EBIT Margin [TTM] of 59.46% and A3 credit rating by Moody’s) and its high Dividend Yield [FWD] of 8.62% in combination with a 5 Year Dividend Growth Rate [FWD] of 7.18%.

In terms of Dividend Growth, I see Altria as being ahead of its competitors: proof of this is the company’s Dividend Growth 5 Yr [CAGR] of 7.18%, which is significantly above the one of competitors such as British American Tobacco (OTCPK:BTAFF)(NYSE:BTI) (Dividend Growth 5 Yr [CAGR] of -5.61%) or Philip Morris International (NYSE:PM) (3.55%), thus strengthening my opinion to pick Altria over its competitors.

In addition to that, Altria has shown 53 Consecutive Years of Dividend Growth, which underlines my theory that the company is a perfect choice for investors seeking an attractive Dividend Yield, while at the same time, being able to increase this Dividend year over year.

In the graphic below you can see that Altria has managed to significantly increase its EBIT Margin [TTM] over the past decade, further demonstrating its enormous financial strength and excellent competitive position within its industry.

Johnson & Johnson

Johnson & Johnson is among my top 10 high Dividend Yield companies to buy in April 2023 for a number of reasons, which I will discuss in the following.

First, the company stands out for its enormous Profitability: its EBITDA Margin [TTM] of 34.46% is 929.60% above the Sector Median of 3.35% and its Aaa credit rating by Moody’s provides further proof of its financial strength.

Second, the company offers investors an attractive Dividend Yield [FWD] of 2.99% while it has, at the same time, a relatively low Payout Ratio of only 43.80%. This shows that there is plenty of room for future dividend enhancements.

Third, the company has shown 60 years of Dividend Growth and its Average Dividend Growth Rate over the past 5 years is 6.11%.

Fourth, Johnson & Johnson’s 24M Beta of 0.32 demonstrates that the company can contribute to reducing the risk level and volatility of your investment portfolio.

Fifth, the company has a very attractive Valuation: its P/E GAAP [FWD] Ratio of 17.28 is 33.45% below the Sector Median of 25.96, which clearly indicates that it’s currently undervalued.

Below you can find the Seeking Alpha Profitability Grade for Johnson & Johnson, which underlines the company's enormous financial strength.

Mercedes-Benz Group AG

The German car manufacturer was founded in 1886, has 168,797 employees and currently a market capitalization of $82.02B. At its current share price, the company pays shareholders a Dividend Yield [FWD] of 7.29%. Mercedes-Benz Group’s attractive Dividend Yield, combined with its relatively low Payout Ratio of 39.67% and its Average Dividend Growth Rate over the past 5 years of 11.54%, makes the company an appealing choice for dividend income investors that, at the same time, want to benefit from the dividend growth the company provides shareholders with. Its P/E [FWD] Ratio of 5.34 indicates that the company is currently undervalued, since it stands 61.96% below the Sector Median of 14.05.

The Seeking Alpha Dividend Grades confirm that Mercedes-Benz could be an excellent pick for your portfolio: the company receives an A+ rating for Profitability, and an A rating for Valuation and Revisions. For Momentum, it receives an A-. Only for Growth does the company receive a D- rating.

Suncor Energy

Suncor Energy is a Canadian based and internationally operating company from the Integrated Oil and Gas Industry. It was founded in 1917 and has a current Market Capitalization of $39.27B.

The company pays its shareholders a Dividend Yield [FWD] of 5.16% and has shown a Dividend Growth Rate [CAGR] of 8.00% over the past 5 years. Its EBIT Growth Rate [FWD] of 11.64% suggests that the company is on track in terms of Growth, which is further underlined by its Free Cash Flow Per Share Growth Rate [FWD] of 16.13%.

I consider its current Valuation to be attractive, since its P/E [FWD] Ratio of 5.47 stands 29.78% below the Sector Median of 7.79.

The Seeking Alpha Quant Ranking underlines my theory to make Suncor Energy part of my top 10 high Dividend Yield stocks to buy in April 2023: the company is ranked 2^nd out of 17 in its Industry and 37^th out of 247 within its Sector.

TotalEnergies

TotalEnergies is a French based and worldwide operating oil and gas company that was founded in 1924 and currently has 101,309 employees. The company’s current Market Capitalization stands at $142.07B.

TotalEnergies’ current Dividend Yield [FWD] is 5.17%, which is 31.23% above the Sector Median (3.94%).

The company’s Dividend Yield [FWD] is significantly above the one of other European competitors such as Shell (NYSE:SHEL) (Dividend Yield [FWD] of 4.11%) or BP (NYSE:BP) (4.35%) and higher than that of U.S. competitors such as Exxon Mobil (NYSE:XOM) (Dividend Yield [FWD] of 3.52%) or Chevron (NYSE:CVX) (3.91%), thus strengthening my decision to make the company part of this list.

Moreover, TotalEnergies’ P/E [FWD] Ratio of 5.09 lies 34.60% below the Sector Median, which shows that the company is currently undervalued, which contributes to my current buy rating for the company.

The Toronto-Dominion Bank

Canadian based Toronto-Dominion Bank was founded in 1855 and currently has 99,999 employees. The bank has a Market Capitalization of $103.10B and I consider its Valuation to be particularly attractive at this moment in time.

The bank has a P/E [FWD] Ratio of 10.15, which stands 12.92% below its Average over the past 5 years, strengthening my confidence that it's currently attractive in regard to Valuation.

Compared to other Canadian banks such as Royal Bank of Canada (NYSE:RY) and The Bank of Nova Scotia (NYSE:BNS), or U.S. competitors such as Wells Fargo & Company (NYSE:WFC) or Citigroup (NYSE:C), it shows the highest Growth Rates: while Toronto-Dominion Bank has a Revenue Growth Rate [CAGR] of 7.09% over the past 5 years, Royal Bank of Canada’s is 4.26% and The Bank of Nova Scotia’s is 3.13%. U.S. competitors Wells Fargo (Revenue Growth Rate [CAGR] of -3.42%) or Citigroup (1.57%) also show significantly lower Revenue Growth Rates.

With a Dividend Yield [FWD] of 5.01%, the Canadian bank pays a significantly higher Dividend when compared to its peer group. The bank’s Dividend Yield lies 32.97% above the Sector Median of 3.77%, contributing significantly to making the bank part of this list of my top high Dividend Yield stocks to buy in April 2023.

The graphic below shows the bank’s Price / Book Ratio over the past 10 years, further demonstrating its currently attractive Valuation.

U.S. Bancorp

U.S. Bancorp’s Dividend Yield [FWD] of 5.48% stands above the one of JPMorgan (NYSE:JPM) (Dividend Yield [FWD] of 3.15%) and Bank of America (NYSE:BAC) (3.26%) as well as Canadian competitors such as Bank of Montreal (NYSE:BMO) (4.98%).

The company’s Revenue Growth Rate [FWD] of 9.88% and its Average Revenue Growth Rate [FWD] over the past 5 years of 3.24% show that the company is on track in terms of Growth.

The Seeking Alpha Dividend Grades further confirm that the company is an excellent pick for investors seeking Dividend Income and Dividend Growth: the company is rated with an A- for Dividend Consistency, a B+ for Dividend Safety and Dividend Yield and with a C+ in terms of Dividend Growth.

However, in case you are looking for a bank with a higher Market Capitalization and even broader risk diversification, I see JPMorgan as being ahead of its competitor, which I discussed in my recent analysis on the U.S. Banking Industry.

Verizon Communications

The New York based Integrated Telecommunication Services company Verizon was founded in 1983 and has 117,100 employees at this moment in time. The company’s current Market Capitalization is $156.95B.

Not only the company’s attractive Valuation (P/E [FWD] Ratio of 8.10, which stands 56.31% below the Sector Median (18.55) and 27.82% below its 5 Year Average P/E [FWD] Ratio (11.23)), but also its high Dividend Yield [FWD] of 6.98% and its relatively low Payout Ratio of 50%, have contributed to Verizon being part of this list of high Dividend Yield stocks to buy in April 2023.

Verizon currently pays a higher Dividend Yield [FWD] than competitor AT&T (NYSE:T) (6.98% compared to 6.01%) and its Valuation is significantly lower than the one of other companies from the same industry, such as T-Mobile (NASDAQ:TMUS) (P/E [FWD] Ratio of 20.64) or BCE (NYSE:BCE) (18.03).

Conclusion

In today’s article, I have provided you with 10 companies which I currently consider to be attractive not only because of their relatively high Dividend Yield (the 10 selected picks provide you with an Average Dividend Yield [FWD] of 5.51%), but I also consider them to be attractive for investors due to their relatively high Dividend Growth Rate [FWD] of 6.89% that has been demonstrated on Average over the past 5 years.

In addition to that, they are highly profitable (which is proved by their relatively high EBIT Margin [TTM] and strong credit ratings). Moreover, the picks have a relatively low Payout Ratio, strong competitive advantages and additionally, they are currently attractive in terms of Valuation, meaning that the acquisition price you have to pay is at least fair.

For all of the reasons mentioned above, these picks are among my top 10 high Dividend Yield companies to invest in for April 2023.

Author’s Note: I would love to hear your opinion on my selection of high Dividend Yield companies to buy in April 2023. Do you already own or plan to acquire any of the picks?

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

In my analyses, I aim to identify companies that have strong competitive advantages over their competitors (for example, a strong brand image, cost advantages, special know how, strong pricing power, a strong distribution network, etc.) in order to support you to find excellent long-term investments. I aspire to help you build an investment portfolio consisting of high-quality companies that are particularly attractive in terms of risk and reward (for example, due to their wide economic moat, high financial strength, high profitability, attractive valuation, growth potential and expected return). I was born in Germany and majored in Business Administration at the University of Mannheim (Germany) and San Diego State University (United States).