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With the S&P 500 Index yielding less than 1.5% on average right now, high-dividend stocks are still appealing for income investors. Interest rates may also be reduced as soon as next month, which would be a tailwind for stocks.

Even better, investors can buy high-yield stocks have sustainable dividends. The following 3 ultra-high dividend stocks have yields above 7%.

Ultra-High Dividend Stock: Altria Group (MO)

Altria Group is a consumer staples giant. It sells the Marlboro cigarette brand in the U.S. and a number of other non-smokeable brands, including Skoal and Copenhagen. The flagship brand continues to be Marlboro, which commands over 40% retail market share in the United States.

Altria has increased its dividend for over 50 years, placing it on the exclusive Dividend Kings list.

Altria has generated steady earnings and dividend growth for many years after accounting for the spin-offs of Kraft Foods and Philip Morris International. This, however, is a period of transition for Altria. The decline in the U.S. smoking rate continues.

In response to the negative long-term trend, Altria has invested heavily in new products that appeal to changing consumer preferences. They are also investing heavily into share repurchases to try to support continued earnings-per-share and dividend-per share growth.

Altria invested billions of dollars in Canadian marijuana producer Cronos Group for a 55% equity stake (including warrants) and a 35% equity stake in e-vapor manufacturer Juul Labs. In light of these large investments, Altria announced a cost-cutting program designed to reduce annual expenses by $500 million to $600 million.

Altria ranks very highly in terms of safety because the company has tremendous competitive advantages. It operates in a highly regulated industry, which virtually eliminates the threat of new competition in the tobacco industry. Altria enjoys strong brands across its product portfolio, including the No. 1 cigarette brand. As a result, it has pricing power and brand loyalty.

MO stock currently yields 7.6%.

Ultra-High Dividend Stock: Walgreens Boots Alliance (WBA)

Walgreens Boots Alliance is the largest retail pharmacy in both the United States and Europe. Through its flagship Walgreens business and other business ventures, the $13 billion market cap company has a presence in 9 countries, employs more than 330,000 people and has about 12,500 stores in the U.S., Europe, and Latin America.

 On June 27th, 2024, Walgreens reported results for the third quarter of fiscal 2024. Sales grew 3% but earnings-per-share decreased 36% over last year’s quarter, from $0.99 to $0.63, due to intense competition, which has eroded profit margin. Earnings-per-share missed the analysts’ consensus by $0.08. Walgreens has exceeded the analysts’ estimates in 13 of the last 16 quarters.

Over the long-term, an aging population and a focus on becoming a health destination should provide tailwinds. Walgreens proved to be a vital healthcare component in the pandemic as well, accounting for a significant portion of the COVID-19 vaccinations and tests. Due to the low comparison base formed in fiscal 2024 amid the fading tailwind from the pandemic and intense competition, we expect 4.0% growth of earnings-per-share over the next five years.

Walgreens’ competitive advantage lies in its vast scale and network in an important and growing industry. The payout ratio is healthy and should continue to add an income ballast for investors. WBA stock currently yields 9.5%.

Ultra-High Dividend Stock: Western Union (WU)

The Western Union Company is the world leader in the business of domestic and international money transfers. The company has a network of approximately 550,000 agents globally and operates in more than 200 countries. About 90% of agents are outside of the US. Western Union operates two business segments, Consumer Money Transfer (CMT) and Consumer Services (bill payments, foreign exchange, prepaid cards, and money orders).

Approximately 93% of revenue is now from CMT. Western Union divested the Speedpay (US bill payments) and Paymap (mortgage payments) businesses in 2019, and Business Solutions in 2023. The company had ~$4.36B in revenue in fiscal 2023. Western Union reported Q2 2024 results on July 30th, 2024. Companywide revenue decreased 9% diluted GAAP earnings per share decreased 13% to $0.41 in the quarter compared to $0.47 in the prior year.

Revenue fell on challenges in Iraq despite higher retail and branded digital transactions. Growth occurred in North America, and Latin and Central America. But lower revenue in Europe, Middle East, and Asia were headwinds. CMT revenue fell 10% to $965.0M from $1,072.2M on a year-over-year basis even with 4% higher transaction volumes.

Branded Digital Money Transfer CMT revenues increased 5% as volumes rose 13%. Digital revenue is now 24% of total CMT revenue and 31% of transactions. Cross border fell 5% in constant currency. Consumer Services revenue rose 21% to $101.4M from $83.5M on new products and expansion of foreign exchange offerings.

WU stock currently yields 8.1%.

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