Dividend stocks with high yields are an attractive investment option in a low-interest-rate environment. While the Federal Reserve may ease the pace of interest rate cuts after three consecutive reductions in 2024, high-yield dividend stocks can provide more appealing returns compared to other fixed-income investment options.
Among the high-yield dividend stocks, OneMain Holdings (OMF) and Energy Transfer (ET) appear solid investment options. These companies have resilient payouts, offer high yields of over 6%, and can grow dividends in the future. Let’s take a closer look at these top picks.
Dividend Stock #1: OneMain Holdings
OneMain Holdings (OMF) is a compelling investment opportunity for income-focused investors seeking steady cash flow through high-yield dividend stocks. The consumer finance company focuses on nonprime borrowers and has a strong record of maintaining and increasing dividends. Its diversified lending platform, growing loan origination, and expansion of sales channels position it well to deliver solid earnings and enhance shareholder value.
OneMain Holdings returned substantial cash to its shareholders. Last year, it repurchased $35 million worth of shares and raised its dividend from $1.00 to $1.04.
OneMain’s growth trajectory remains solid. In 2024, despite some challenges, particularly peak loan losses early in the year, the company generated an impressive $685 million in capital. This demonstrates the strength and resilience of its business model. Management has expressed confidence that 2024 represented a cyclical low point for earnings, and they expect future earnings and capital generation to rise significantly in 2025 and beyond. This optimistic outlook is expected to drive further dividend increases in the future.
Looking at credit performance, OneMain is seeing favorable trends that started in the third quarter and continued into the year-end. Its 30- to 89-day delinquency rate stood at 3.06% at the end of 2024, down 22 basis points year-over-year. This improvement contrasts with the same period a year earlier when delinquencies rose by 21 basis points.
Net charge-offs for the quarter were 7.9%, up slightly from the previous quarter. This increase was within expected seasonal trends and better than the patterns observed in the last two years. Similarly, consumer loan charge-offs were 7.6%, showing a slight improvement from the previous year. These positive trends in delinquencies and charge-offs suggest that the worst of the loan losses for OneMain’s consumer portfolio occurred in the first half of 2024, which bodes well for the company's future performance.
OneMain’s strategy of focusing on high-quality loan origination, maintaining diversified funding sources, and ensuring strong credit underwriting and investments in new products provides a solid foundation for future growth. Furthermore, the company’s robust balance sheet and ample funding capacity offer stability as it continues to expand. Further, OneMain’s expansion into credit cards and auto finance helps diversify its revenue streams, broaden its customer base, and expand its addressable market.
Further, its strategic acquisitions, growing customer base, and new product launches will likely accelerate its growth, supporting continued dividend payouts to investors.
With a “Moderate Buy” consensus rating from Wall Street analysts and a high dividend yield of 7.5%, OneMain Holdings stands out as a promising option for investors seeking both steady income and long-term capital appreciation.
Dividend Stock #2: Energy Transfer
Energy Transfer (ET) is a reliable, high-yield dividend stock for income investors. The energy infrastructure company operates one of the largest interstate pipeline systems in the U.S., moving oil (CLH25) and gas (NGH25) across key trading hubs and industrial regions. This vast network drives high asset utilization and distributable cash flows, supporting its dividend payouts.
The company generates about 90% of its earnings from fee-based contracts, which add stability to its financials. The remaining 10% of earnings are tied to commodity prices and spreads. This revenue model diversifies its operations and insulates the company from market fluctuations.
Thanks to its resilient business model and solid earnings base, Energy Transfer has consistently raised its dividend for years. The company recently increased its quarterly cash distribution to $0.3250 per share ($1.30 annually) and has set a target for 3%-5% annual dividend increases.
In addition to its solid financials, Energy Transfer has significant insider ownership, which signals management’s confidence in the company’s future. The company is also exploring new growth opportunities, particularly in the rapidly growing artificial intelligence (AI) and data center markets. By leveraging its extensive natural gas infrastructure, Energy Transfer has positioned itself as a key player in supplying natural gas to the growing data center industry.
Recently, the company secured its first commercial deal with CloudBurst Data Centers, a long-term natural gas supply agreement for an AI-focused data center project in central Texas. This partnership is just the beginning, with Energy Transfer in talks with other data center developers and planning more agreements to provide natural gas to data centers and electric generation facilities. This new growth avenue will significantly boost Energy Transfer’s prospects.
Wall Street analysts are bullish on Energy Transfer stock and maintain a “Strong Buy” consensus rating. Moreover, ET stock offers a high forward yield of 6.5%.
