With potential interest rate cuts ahead, high-yield dividend stocks are gaining attention as attractive investments. Among them, Starwood Property Trust (STWD), OneMain Holdings (OMF), and British American Tobacco (BTI) stand out for their high yields of over 8%. These companies offer impressive yields and have sustainable payouts, making them reliable investments for income investors. Let’s dive into what makes them appealing choices.
#1. Starwood Property Trust (STWD)
Starwood Property Trust (STWD) focuses on financing and managing mortgage loans and other real estate investments in the U.S., Australia, and Europe. This leading diversified finance company has consistently rewarded its investors, providing a steady dividend for nearly 15 years. Since its inception, Starwood Property Trust has paid a substantial $7.7 billion in dividends, demonstrating a solid commitment to shareholder returns.
The company has strategically diversified its portfolio. It is reducing its exposure to U.S. office and construction loans and shifting more toward multifamily and industrial asset classes. Thanks to its diversification strategy, over 40% of its assets are outside the commercial lending sector, offering a well-balanced portfolio. This shift and its low leverage have allowed Starwood Property Trust to consistently perform well in all market conditions.
Starwood looks well-positioned to deliver steady growth as the global property sector begins to stabilize, particularly with potential easing cycles ahead in the U.S. and Europe. Further, its solid balance sheet and high debt capacity bode well for growth.
Currently, Wall Street analysts rate Starwood Property Trust a “Moderate Buy.” STWD offers an attractive dividend yield of 9.6%, making it an appealing investment for income investors.
#2. OneMain Holdings (OMF)
OneMain Holdings (OMF) is a leading consumer lending company focusing on nonprime customers. The company’s extensive branch network, wide product range, solid credit performance, and robust balance sheet support its financials and dividend payouts.
Over the past several years, OneMain Holdings has returned a substantial amount of cash in the form of dividends and share buybacks. Further, it has consistently increased its dividends.
The company’s core strength lies in its personal loan offerings, but its expansion into credit cards and auto finance has broadened its reach and diversified its revenue streams. These additions have transformed OneMain into a multi-product lending platform, significantly expanding its customer base and addressable market.
Further, the company’s focus on high-quality loan origination, tight credit underwriting capabilities, and investments in new products, channels, and digital capabilities strengthen its competitive positioning and bode well for future growth.
Looking ahead, OneMain’s strong balance sheet, ample funding capacity, and solid credit performance offer a stable foundation for growth. Moreover, strategic acquisitions and increased operating efficiency are expected to accelerate growth, which, in turn, will support its dividend payouts.
OneMain Holdings has a “Moderate Buy” consensus rating, and offers a notably high dividend yield of approximately 9%.
#3. British American Tobacco (BTI)
British American Tobacco Plc (BTI), or BAT, is a dependable income stock. The company’s American Depositary Receipts (ADR) offer a high and attractive yield. What stands out is the tobacco giant’s commitment to consistent dividend growth, having raised its dividend for over 25 years.
BAT’s ability to generate robust cash flows has been the key catalyst behind its shareholder returns, enabling it to return £30 billion to investors over the last six years. The company has laid out ambitious plans for the future, expecting to generate over £50 billion in free cash flow by 2030. These cash flows are expected to support further dividend increases and substantial share buybacks.
BAT’s multi-category strategy diversifies its portfolio across both traditional combustible products and fast-growing smokeless alternatives. While combustibles remain a stable, cash-generative part of the business despite an industry-wide shift toward smokeless options, BAT has seen strong growth in its non-combustible products, which now account for 18% of its group revenues.
British American Tobacco’s diversified portfolio, focus on debt reduction, solid cash flows, and focus on growing dividends make it a compelling income stock. It offers a high yield of about 8.5% and has a “Moderate Buy” consensus rating.
