Investors love dividend stocks, especially the high-yield variety, because they offer a significant income stream and have massive total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. Let’s take a closer look at the concept of total return. Imagine you purchase a stock at $20 that offers a 3% dividend. If the stock price rises to $22 within a year, your total return is 13%. This is calculated by adding the 10% increase in stock price to the 3% dividend.
While the December interest rate cut of 25 basis points may be the last for some time, it is an excellent bet that federal funds will stay at today’s effective rate of 4.33%, below the long-term average of 4.61%, and the current target range for the fed funds rate, which is 4.25% to 4.50%. Unless there is a stock market meltdown in 2025, the current levels may stay in place for some time. Investors looking for total return to balance the need for passive income and desire to add growth to combat inflation should focus on quality companies that can deliver dependable recurring dividends. Our four top stock picks for February deliver both, and all are rated Buy at many of the top firms across Wall Street we cover.
Why do we cover high-yield dividend stocks?
Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciations have contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations.
Bloomin’ Brands
This restaurant holding company owns several American casual dining restaurant chains.
With a portfolio of well-known restaurants and a massive 8.12% dividend, this is a solid idea for 2025. Bloomin’ Brands Inc. (NASDAQ: BLMN) owns and operates casual, upscale casual, and fine dining restaurants in globally.
The company operates through two segments: U.S. and International. Its restaurant portfolio has four concepts:
- Outback Steakhouse, a casual steakhouse
- Carrabba’s Italian Grill, a casual Italian restaurant
- Bonefish Grill
- Fleming’s Prime Steakhouse & Wine Bar, a contemporary steakhouse
The company owns and operates more than 1,450 restaurants in 46 states, Guam, and 13 countries, some of which are franchise locations. Given the current trading level under $15 and the huge dividend, this could be an incredible 2025 total return idea.
British American Tobacco
This British multinational company manufactures and sells cigarettes and other tobacco and nicotine products.
European giant British American Tobacco PLC (NYSE: BTI | BTI Price Prediction) is a consumer-centric, multi-category consumer goods company that pays shareholders a hefty 8.15% dividend.
The company provides tobacco and nicotine products. Its segments include:
- United States
- Asia Pacific
- Middle East
- Africa
- The Americas
- Europe
The company’s product categories include:
- Vapor
- Tobacco Heating Products (THPs)
- Modern Oral, Traditional Oral, and Combustible cigarettes
Vapor products are handheld, battery-powered devices that heat a liquid (called an e-liquid) to produce an inhalable aerosol known as vapor. THPs are a new category of tobacco product designed to heat rather than burn tobacco.
Modern Oral products are smoke-free oral nicotine products called nicotine pouches, designed for use in the mouth. Traditional oral products include snus and snuff.
British American Tobacco brands include:
- Vuse
- glo
- Velo
- Grizzly
- Dunhill
- Kent
- Lucky Strike
- Pall Mall
- Rothmans
- Newport
- Natural American Spirit
- Camel
- Vogue
- Viceroy
- Kool
- Peter Stuyvesant
- Craven A
- State Express 555
- Shuang Xi
Barclays has a price target of £32.50, which is equal to $40 U.S.
Plains All-American Pipeline
Plains All-American pipeline owns an extensive network of pipeline gathering and transportation systems.
This stock has been locked in a tight trading range, looks ready to break out, and pays a fat 8.12% dividend. Plains All American Pipeline L.P. (NYSE: PAA) engages in the pipeline transportation, terminalling, storage, and gathering of crude oil and natural gas liquids (NGLs) in the United States and Canada.
Its Crude Oil segment offers:
- Gathering and transporting crude oil through pipelines
- Gathering systems
- Trucks, barges, or railcars
- Terminalling, storage, and other facilities-related services and merchant activities
The Natural Gas Liquids segment provides:
- Gathering
- Fractionation
- Storage
- Transportation
- Terminalling activities
- Ethane, propane, normal butane, iso-butane, natural gasoline, and crude oil refining processes
Western Union
The Western Union is an American multinational financial services corporation.
While the demand for telegrams is long gone, the demand to transfer money is not, and this famous company has grown as a result. It pays a strong 9% dividend and trades at a ridiculous 6.1 times estimated 2025 earnings. Western Union Co. (NYSE: WU) provides worldwide money movement and payment services. The company operates in two segments.
The Consumer-to-Consumer segment facilitates international cross-border and intra-country money transfers, primarily through a network of retail agent locations, websites, and mobile devices.
The Business Solutions segment provides payment and foreign exchange solutions, primarily cross-border and cross-currency transactions for small and medium-sized enterprises, other organizations, individuals, and foreign currency forward and option contracts.
It also offers bill payment services that facilitate payments from consumers to businesses and other organizations, as well as offers money orders and other services.
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