MW 10 dividend stocks with yields up to 6.92% and plenty of cash flow for higher payouts

By Philip van Doorn

Free cash flow yields show plenty of headroom for these companies to increase their dividends

Many investors want to invest in companies that pay dividends to their shareholders. If your focus is on attractive current dividend yields, the stock market builds in warnings. Very high dividend yields mean some investors are shying way, keeping share prices low because they worry the companies will lower their dividends. So investors need to look harder to limit the risk of dividend cuts.

Last week we ran a screen that narrowed the 168 real-estate investment trusts in the Russell 3000 Index RUA to a group of just six companies that passed strict criteria for that industry group. Those stocks had dividend yields ranging from 4.42% to 6.58%, with the payouts appearing to be very well supported by the REITs' operations.

Now we have screened dividend stocks within the S&P Composite 1500 Index XX:SP1500, excluding REITs, all of which were covered in last week's screen.

The S&P 1500 is made up of the S&P 500 SPX, the S&P MidCap 400 MID and the S&P Small Cap 600 SML. While the Russell 3000 is designed to represent about 98% of publicly traded equities in the U.S. by market capitalization, these S&P indexes are more exclusive. Companies are required to meet eligibility criteria, including four consecutive quarters of profitability, before their initial inclusion in one of the indexes making up the S&P Composite 1500.

The dividend screen

One way to measure a company's ability to maintain or raise its dividend is to look at its free cash flow yield. A company's free cash flow, or FCF, is its remaining cash flow after capital expenditures. This is money that can be used to pay dividends or to repurchase shares, which can raise earnings per share if the buybacks are of sufficient quantity to lower the share count. FCF can also be used for other corporate purposes, such as acquisitions or to fund organic expansion.

If we divide a company's FCF per share for a 12-month period by its share price, we have an FCF yield that can be compared with the current dividend yield to see if there is "headroom" to support the dividend and possibly to enable dividend increases.

Within the financial sector, FCF figures typically aren't available for banks or insurance companies. But for these heavily regulated industries, earnings per share can serve as a pretty accurate proxy for FCF. For large banks, EPS provides the basis for annual regulatory reviews of planned dividend increases.

To begin the new screen, we narrowed the S&P Composite 1500 to companies for which trailing FCF yields were at least 2% higher than the current dividend yields. Then we looked ahead, using consensus 12-month FCF estimates among analysts polled by FactSet to narrow the list to companies with estimated forward FCF yields that were at least twice as high as the current dividend yields.

As part of the screening process, we eliminated any company covered by fewer than five analysts polled by FactSet.

Here are the 10 stocks that passed the screen with the highest dividend yields. We used trailing and estimated forward FCF yields for all of the companies except for Lincoln National Corp. (LNC), for which the FCF yield columns actually used trailing and estimated EPS.

   Company                        Ticker   Dividend yield  Trailing FCF yield  Estimated forward FCF yield 
   Civitas Resources Inc.        CIVI               6.92%              32.48%                       24.22% 
   Crescent Energy Co.           CRGY               5.68%              38.87%                       28.13% 
   Viatris Inc.                  VTRS               5.39%              17.95%                       19.35% 
   Lincoln National Corp.        LNC                5.28%              20.62%                       21.65% 
   Clearway Energy Inc. Class C  CWEN               5.23%              13.96%                       15.69% 
   Kohl's Corp.                  KSS                4.80%               9.77%                       36.79% 
   Nexstar Media Group Inc.      NXST               4.09%              20.88%                       19.57% 
   Omnicom Group Inc.            OMC                3.98%              12.80%                       13.47% 
   Travel + Leisure Co.          TNL                3.94%              11.68%                       14.66% 
   Comcast Corp. Class A         CMCSA              3.77%              12.32%                       12.57% 
                                                                                           Source: FactSet 

Any stock screen is limited to a small amount of information. If you are considering an investment in an individual company, you should do your own research to form your own opinion about how likely that business is to remain competitive over the next decade, at least. One way to begin that process is to click on the tickers for more information.

Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page

More recent coverage of dividend stocks:

-- JPMorgan Chase, Goldman Sachs and others boost dividends - check out how they have rewarded their committed shareholders over the past five years

-- 17 bargain dividend stocks that are primed for growth - consider this before you buy

-Philip van Doorn

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July 26, 2025 09:56 ET (13:56 GMT)

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