2 High Yield Dividend Stocks That Are Now Actively Buying

Generous dividend yield may be dangerous. Double-digit dividend yields often indicate a company is in deep trouble, and a series of higher payouts may not lift share prices. At the same time, ATM businesses can earn payouts from excess cash flows, resulting in high returns that can last for many years.

Fortunately, the couple are completely healthy high yield dividend stocks on sale now. Read on to find out how International business machines (IBM -1.70%) And Darden Restaurants (DRI -1.63%) would fit into an income-oriented stock portfolio today.

Why are the returns so outstanding?

The average American savings account offers an annual percentage yield of approximately 0.5%. S&P 500 index (^ GSPC -0.03%) The market index averaged 1.6% dividend yield over the last 5 years and is currently just 1.3%.

With a dividend yield of 3.5% on Darden stock and 3.1% on IBM stock, these cash distribution veterans are on another level. Among these popular wealth storage options, only individual stocks can outperform long-term government investments. inflation target about 2% per year.

Diverse giants with common strengths

At first glance, these two common nouns have little in common. Big Blue is a legend in the computer sector who has created a promising company. artificial intelligence (AI) business is just in time for a massive artificial intelligence boom. Darden operates a full-service restaurant chains such as Olive Garden, Bahama Breeze and Longhorn Steakhouse. The company is expanding its international business while renovating many of its domestic premises. Apples, meet oranges.

IBM Free Cash Flow data on YCharts.

But they actually have a lot in common where it matters most. Both businesses increase their sales and make solid cash profits. They also have a commitment to share their cash flow with investors in the form of strong and growing dividends.

IBM earned $12.4 billion. free cash flows over the last four quarters. 49% of this excess cash was used to pay dividends. Darden used 64% of its $992 million in free cash flow for the same purpose. Both dividend policies are funded entirely by current cash earnings and have room to grow without causing a financial crisis.

IBM price to free cash flow data on YCharts.

DRI price to free cash flow data on YCharts.

It’s time to capture those rich harvests

Finally, Darden and IBM are established leaders in their industries with compelling growth plans for the foreseeable future. However, their shares look quite affordable compared to value-priced peers. Buying the stock now will lock in that juicy dividend yield and provide plenty of opportunity to enjoy price appreciation over the long term.

Remember, Darden has been around for almost a century, and IBM is even more experienced. These rich sources of income should remain afloat for decades to come, while increasing shareholder wealth through a generous dividend policy.

Anders Bylund holds positions at International Business Machines. The Motley Fool has positions and recommends Chipotle Mexican Grill, CrowdStrike, Microsoft and Wingstop. The Motley Fool recommends International Business Machines and recommends the following options: long January 2026 $395 calls on Microsoft, short December 2024 $54 puts on Chipotle Mexican Grill, and short January 2026 calls. year for $405 at Microsoft. The Motley Fool has disclosure policy.