High-yielding dividend stocks can be attractive, with several academic studies showing that stocks that yield more than 3% tend to outperform other asset classes when held for 20 years or more. However, dividend yield is not the most important metric to consider when evaluating a stock with cash or stock distributions.
A new report by Hartford Funds reveals an important insight: Dividend stocks with payout ratios below 75% often do better over the long term compared to higher ratios. The reason for this outperformance lies in the long-term sustainability of the distribution, which is important to use the combined power.
The payout ratio, calculated by dividing annual dividends per share by earnings per share (EPS) offers a window into a company’s ability to sustain dividend payments over time. A lower ratio indicates more room for sustainable dividend growth and reinvestment in the business.
With this in mind, let’s explore the three highest dividend stocks that have payout ratios below the 75% threshold and sport yields ranging from 4.42% to a high of 5.63%.
1. AT&T
AT&T (NYSE: T)a telecommunications giant with origins in the invention of the telephone, is one of the largest providers of mobile and broadband internet services in the US today.
At the top of the list, AT&T yields an impressive 5.63%, the highest among the dividend stocks featured. This generous yield, coupled with a payout ratio of 63.7%, positions the company for sustainable, long-term dividend growth.
AT&T stock also scans at an attractive valuation, with a forward 2026 price-to-earnings (P/E) ratio of just 7.86. The telecom giant’s basement valuation offers a margin of safety in today’s premium-laden market.
While not a strong growth play, Wall Street projects a top-line increase of 1.7% through 2025, AT&T’s established market position, attractive valuation, strong yield, and low payout ratio, together support its potential to generate sustainable income and stocks that remain- price appreciation.
2. Bristol Myers Squibb
Bristol Myers Squibb (NYSE: BMY)a global biopharmaceutical powerhouse, focused on developing innovative medicines in oncology, hematology, immunology, and cardiology.
With a yield of 4.99%, Bristol Myers Squibb ranks second on our list from a yield perspective. A conservative 59.8% payout ratio provides ample room to maintain and potentially grow the dividend, positioning the company for long-term dividend sustainability.
The stock also looks attractively valued, trading at just 7.6 times 2026 projected earnings. This valuation represents a deep discount relative to both large pharma peer groups and the broader market represented by the benchmark. S&P 500especially because of concerns about future patent expirations for key revenue drivers like blood thinner Eliquis and cancer immunotherapy Opdivo.
Bristol Myers Squibb’s combination of high yield, low payout ratio, and attractive valuation makes it an attractive choice for dividend investors. However, potential shareholders should closely monitor the company’s ability to bring new growth products to market quickly enough to offset the impact of these patent expirations.
3. Chevron
Chevron Company (NYSE: CVX)a leading global integrated energy company, operating across the entire spectrum of the oil and gas industry while also expanding into the renewable fuels area.
Today, Chevron offers an attractive 4.42% yield. The company’s conservative 62.2% payout ratio should give investors confidence in its ability to sustain this high yield while continuing to invest in its core operations.
Chevron shares currently trade at a forward P/E ratio of 9.4 for 2026, which represents a significant discount compared to the broader S&P 500 index. However, the company’s growth prospects are somewhat hampered by the cyclical nature of the energy sector and ongoing industry changes.
Speaking of which, analysts project a modest 2.2% in Chevron’s 2025 revenue. Despite these near-term challenges, Chevron has a proven track record of creating shareholder value and has the financial strength to navigate a rapidly changing energy landscape.
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George Budwell holds a position at AT&T. The Motley Fool has positions and recommends Bristol Myers Squibb and Chevron. The Motley Fool has a disclosure policy.
3 High-Yield Dividend Stocks With Payouts Below 75% was originally published by The Motley Fool