The adage “sell in May and go away” hasn’t always been wise advice. It’s especially impractical for income investors who need to have their money working for them. Instead of selling stocks in May, income investors could be better off buying.
Fortunately, you have plenty of good picks from which to choose, and many of them offer especially juicy dividend yields. Here are my five favorite high-yield dividend stocks to buy in May.
1. Ares Capital
Ares Capital (NASDAQ: ARCC) might be the least well-known of my picks. Anyone familiar with middle-market financing probably knows the company well, though. It’s the largest publicly traded business development company (BDC) providing financing solutions to middle-market businesses.
Its dividend yield currently stands at nearly 9.3%. Ares Capital can pay such a high dividend because it continues to generate hefty profits. Unlike some ultra-high-yield dividend stocks, the company hasn’t been forced to cut its dividend.
I like Ares Capital’s diversified portfolio and its risk-management strategy that reduces the chances of losing money on investments. Most of all, I like the company’s track record of delivering higher total returns than the S&P 500.
2. Chevron
Warren Buffett hasn’t been buying many stocks. However, Chevron (NYSE: CVX) was among three stocks that he added to Berkshire Hathaway‘s stake in the fourth quarter of 2023.
I don’t know if Buffett is buying Chevron this month, but I think income investors should seriously consider it. The giant oil and gas producer offers a dividend yield of nearly 4% and has increased its dividend for an impressive 37 consecutive years.
Buffett understands that oil and gas demand is more likely to increase than decrease over the next decade and beyond, even with the rising adoption of renewable energy sources. He also no doubt approves of Chevron’s investments in carbon-capture technology. These factors, in addition to the attractive dividend, make this oil stock one of my favorites right now.
3. Enterprise Products Partners
While Chevron is a household name, another great energy pick — Enterprise Products Partners (NYSE: EPD) — isn’t. However, Enterprise is a major player in the North American midstream energy industry with more than 50,000 miles of pipelines, natural gas processing facilities, and other assets.
Enterprise Products Partners’ distribution yield tops 7.3%, and the partnership has increased its distribution for 25 consecutive years. I’m not talking about nominal growth, either. Enterprise’s distribution has increased by a compound annual growth rate of around 7%.
The company has a strong balance sheet with solid credit ratings. It’s also investing in building new pipelines and a natural gas liquids export facility that should fuel growth in the future.
4. Pfizer
Some might think Pfizer‘s (NYSE: PFE) dividend is the only thing going for the big drugmaker these days as its dividend yield of nearly 6.6% is great. Pfizer’s commitment to growing its dividend is also reassuring to income investors.
However, the company’s valuation is another key positive. The stock trades at a forward earnings multiple of only 11.6. This low valuation might be justified if Pfizer’s revenue and profits continue to decline as they have over the last couple of years. But I see a light at the end of Pfizer’s dark tunnel.
The company has been remarkably successful at winning regulatory approvals for new products and has made some smart acquisitions. I expect these efforts will translate to solid total returns over the rest of the decade.
5. Verizon Communications
Investors were initially disappointed with Verizon Communications‘ (NYSE: VZ) Q1 results. However, they quickly realized the telecommunications giant’s quarter wasn’t so bad. Importantly, the company’s free cash flow jumped 17% year over year to $2.7 billion.
This news should be music to the ears of income investors who love Verizon’s sky-high dividend yield of 6.7%. The company has increased its dividend for 17 consecutive years. That streak seems likely to continue as Verizon continues to generate strong free cash flow.
Do I expect Verizon to deliver jaw-dropping growth? No. However, the company’s business is chugging along. Its dividend payouts are juicy and should be safe. That’s enough to make Verizon a great high-yield dividend stock to buy in May.
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Keith Speights has positions in Ares Capital, Berkshire Hathaway, Chevron, Enterprise Products Partners, and Pfizer. The Motley Fool has positions in and recommends Berkshire Hathaway, Chevron, and Pfizer. The Motley Fool recommends Enterprise Products Partners and Verizon Communications. The Motley Fool has a disclosure policy.
My Top 5 Favorite High-Yield Dividend Stocks to Buy in May was originally published by The Motley Fool