For more than half a century, dividend stocks have averaged more than twice the annual return of non-dividend stocks.
While there are many ultra-high-yield stocks (yields four times or more than the S&P 500), only a handful pay truly safe dividends.
Five cheap, ultra-high-yield dividend stocks have the competitive advantages and catalysts they need to provide income seekers in 2026.
10 stocks we like better than Sirius XM ›
For more than a century, stocks have led the way in terms of annualized returns compared with bonds, commodities and real estate. But of the various strategies investors can employ on Wall Street, few are more consistently profitable than buying and holding high-quality dividend stocks.
Companies that pay regular dividends to shareholders are typically consistently profitable, time-tested, and can provide investors with transparent long-term growth prospects. But the bottom line is that income stocks have consistently outperformed those that don’t offer dividends.
In “The Power of Dividends: Past, Present and Future,” analysts at Hartford Funds teamed up with Ned Davis Research to compare the performance and relative volatility of dividend stocks to stocks that don’t pay dividends over a 51-year period (1973 to 2024). The Hartford Fund found that the average annual return for income stocks was more than twice the average annual return for non-payers (9.2% vs. 4.31%) and was significantly less volatile than non-payers.
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That’s despite the fact that there are quite a few dividend stocks with ultra-high yields – those that earn four or more times the yield of common stocks. S&P 500 Index (currently 1.14%) – It’s attractive right now, and here are 5 stocks that stand out as the safest ultra-high-yield dividend stocks you can buy with confidence in 2026.
The first stock to offer high dividends to income seekers in the new year is satellite radio operator SiriusXM Holdings(NASDAQ: SIRI). Sirius XM’s steady quarterly dividend and falling stock price have pushed its annual yield to nearly 5.3%.
What makes Sirius XM stock so special is that it has a legal monopoly. While it still competes with traditional radio operators for listeners, it is the only U.S. company with a satellite radio license. As a subscription-driven operator, this monopoly position gives it considerable pricing power.
In addition to its legal monopoly status, Sirius XM offers its shareholders an attractive revenue mix. While many of its peers rely almost entirely on advertising to generate revenue, Sirius XM only generates about 20% of its net sales from advertising (via Pandora). More than three-quarters of net revenue comes from subscriptions, which tend to be highly predictable in most economic environments.
Sirius XM also offers investors a very compelling value proposition in a historically expensive stock market. The stock price is trading at less than 7 times forward earnings, which is actually the lowest level in the 31-year history of public companies.
Arguably, there are no safer ultra-high-yield energy stocks on the planet than the midstream giants Enterprise product partners(NYSE:EPD). Enterprise has increased its dividend for 27 consecutive years, yielding nearly 7%.
Some investors may be wary of putting money into oil and gas stocks given heightened commodity volatility, but Enterprise Products Partners’ operating model squarely eliminates that concern. It is an energy broker that oversees more than 50,000 miles of transmission pipelines and can store more than 300 million barrels of liquids. Most of its contracts are long-term and fixed-fee in nature, eliminating the effects of inflation and commodity spot price fluctuations. In other words, its operating cash flow is high Predictable.
Cash flow predictability is particularly important given Enterprise Products Partners’ strategy of undertaking large projects and making bolt-on acquisitions. The company has more than $5 billion in major projects underway, many of which are dedicated to expanding its natural gas liquids business. At the same time, most of its bolt-on acquisitions add to its profits in the first year.
While Enterprise Products Partners’ shares haven’t historically been as cheap as Sirius XM’s, its multiple of less than 8 times forecast 2026 cash flow makes its stock cheap.
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Another ultra-high-yield dividend stock that embodies Wall Street’s safety is premier retail real estate investment trust (REIT), real estate income(NYSE: O). It is a company that pays monthly dividends and has increased payouts 133-fold since it went public in 1994.
A dark secret of Realty Income is that it primarily leases its commercial properties to reputable independent businesses that provide basic necessities and services. Realty Income focuses on leasing to grocery stores, pharmacies, dollar stores, convenience stores and more, focusing its efforts on tenants that are typically resilient to recessions and e-commerce pressures.
While Real Estate Income remains the envy of the retail REIT industry, it has spread its wings beyond retail over the past few years. It has established a rental business in the gaming industry and through Digital Real Estate Trustwhich plans to lease customized enterprise data centers.
The bottom line is, Real Estate Income stocks have an interesting value proposition. The stock is currently valued at less than 13 times estimated 2026 cash flow per share, which is a 19% discount to the average cash flow multiple over the past five years.
Public companies don’t need to have a brand name or be an industry leader to generate safe, ultra-high-yielding payouts. Business Development Company (BDC) PennantPark Floating Rate Capital(NYSE: PFLT)whose monthly dividend currently yields an annual yield of 13.1%, is a practical example.
PennantPark is primarily a debt-focused BDC, although it holds about $241 million in common and preferred shares in its portfolio. The senior financing brings the weighted average yield on its debt investments to 10.2%. Additionally, 99% of its loan portfolio consists of floating-rate investments, meaning a higher interest rate environment will boost its profits.
In addition to generating significant loan proceeds, PennantPark protects its investment principal in a number of ways. More than 99% of its $2.53 billion in debt is first-lien secured notes. If one of the borrowers defaults, the holder of the first-lien secured debt will be at the front of the repayment queue. PennantPark Floating Rate Capital’s average investment size is also just $16.9 million, which means no one investment can sink this ship.
Keeping with the theme, there’s a value proposition here too. BDCs typically hover close to their book value. As of this writing on January 3, PennantPark trades at a 13% discount to its book value.
The Fifth Safe Ultra-High-Yield Dividend Stock You Can Buy with Confidence in 2026 One of the biggest names in healthcare, Pfizer(NYSE: PFE). Share price declines in recent years have caused Pfizer’s dividend yield to rise to nearly 7%.
What’s interesting about Pfizer is that it’s been punished for its success during the COVID-19 pandemic. Its COVID-19 vaccine (Comirnaty) and oral treatment (Paxlovid) generated combined revenue of more than $56 billion in 2022, but sales of both drugs have since fallen sharply. But sales have increased about 48% since the end of 2020, based on the company’s full-year 2025 sales guidance of $62 billion. The introduction of new therapies, coupled with organic growth of existing therapies, will only make Pfizer a stronger company.
Pfizer’s completion of the acquisition of cancer drug developer Seagen in December 2023 also laid the foundation for the company’s success. The deal significantly expands Pfizer’s oncology pipeline, adds billions of dollars in annual cancer drug sales, and enhances its cost synergy efforts that could significantly improve margins in 2026 (and beyond).
All told, Pfizer is valued at 8.4 times forward earnings per share, a 14% discount to the average forward earnings multiple over the past five years.
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Sean Williams holds positions at PennantPark Floating Rate Capital, Pfizer and Sirius XM. The Motley Fool owns and recommends Digital Realty Trust, Pfizer and Realty Income. The Motley Fool recommends enterprise product partners. The Motley Fool has a disclosure policy.
The 5 safest ultra-high-yield dividend stocks you can buy with confidence in 2026 was originally published by The Motley Fool
