9 Dividend Stocks That Check 5 Key Boxes—and Offer Up to 51% Upside | Investing.com

• Wall Street ended August lower as renewed US-Iran tensions pushed Treasury yields higher and revived Fed rate-hike concerns.
• Dividend stocks are gaining appeal, with yield, dividend history, payout ratio, Fair Value and Financial Health key selection criteria.
• Nine US dividend stocks meet the screen, offering 4.2%–6.5% yields and 27.6%–51.3% Fair Value upside.

Wall Street ended August on a cautious note Monday. The fell 0.33% to 7,686.14, the slipped 0.12% to 26,370.89, and the dropped 374.09 points, or 0.7%, to 53,185.90, as renewed tensions between the United States and Iran weighed on sentiment. Meanwhile, the climbed to 4.73%.

The renewed tensions come as investors reassess expectations for the Federal Reserve’s September 15 to 16 meeting. Chairman Kevin Warsh’s hawkish tone at Jackson Hole has increased the probability of a rate hike, with futures now pricing in nearly a 50% chance, compared with expectations of a hold just a few weeks ago. At the same time, volatility remains close to its lowest level of the year, although it has historically tended to rise as September and October approach.

In this environment, with interest rates under pressure and uncertainty increasing, dividend-paying stocks are once again attracting investor attention. They can provide a steady income stream and, when backed by strong fundamentals, greater resilience during periods of market turbulence. However, careful selection remains essential, as a high dividend yield alone does not guarantee a quality investment.

Yield, dividend history, payout ratio: The basic criteria

The first step is to examine the dividend yield, which measures the annual dividend relative to the stock price. While a high yield may look attractive, it can sometimes simply reflect a sharp decline in the share price.

The second criterion is dividend consistency. Companies that have maintained and, ideally, increased their dividends over many years, including through economic downturns, demonstrate financial discipline and an ability to navigate different stages of the economic cycle.

Finally, the payout ratio, which measures the share of earnings distributed to shareholders, provides an indication of dividend sustainability. A ratio above 70% to 80% can leave a company with limited flexibility during difficult periods and increase the risk of a future dividend cut.

Fair Value and Health Score Combination to Avoid Pitfalls

However, these three criteria alone are insufficient. A stock can offer a generous yield and a long dividend history while still being overvalued or supported by weak fundamentals.

Two additional tools can help complete the picture:

• InvestingPro’s Fair Value, which combines several recognized valuation models, helps determine whether a dividend stock remains reasonably valued and offers further upside potential.
• The InvestingPro Financial Health Score, which evaluates more than 100 factors across five dimensions on a scale of 1 to 5, helps assess whether a company has the financial strength to maintain or increase its dividend.

Combining these indicators with dividend yield, payment history, and payout ratio makes it easier to identify stocks offering a stronger mix of income, financial resilience, and potential upside, rather than simply chasing the highest yields.

9 US Dividend Stocks with High Yields and Strong Upside Potential

We therefore turned to the Investing.com screener to identify U.S. stocks that meet the following criteria:

• Market capitalization greater than $1 billion

• Dividend yield greater than 4%

• Dividends paid for more than 10 years

• Payout ratio below 60%

• Upside potential of more than 20% according to InvestingPro Fair Value

• InvestingPro Financial Health Score greater than 2.5/5

This analysis identified 9 stocks:

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Specifically, these U.S. stocks offer dividend yields ranging from 4.2% to 6.5%, while InvestingPro’s Fair Value points to upside potential of 27.6% to 51.3%.

Among these stocks are:

• (LNC), a U.S. insurer focused on life insurance, annuities, and group protection, stands out among undervalued dividend stocks with a 4.2% yield and historically low valuation. Second-quarter results exceeded expectations, with adjusted EPS of $2.24 versus a consensus of around $2, extending the streak of consecutive quarters with higher adjusted operating income to eight. Adjusted operating income reached $439 million, up 3% year over year. The sale of $5.8 billion in legacy life insurance reserves is also expected to increase annual free cash flow by $30 million to $40 million.
• (BBWI), the U.S. personal care and home fragrance retailer, offers a 4.2% dividend yield with a payout ratio of around 26%, providing a solid cushion for shareholders. Second-quarter adjusted EPS of $0.62 easily exceeded the $0.24 consensus, although the comparison benefited from $80 million in tariff refunds. Management raised its full-year adjusted EPS guidance to $2.60 to $2.80, but its third-quarter outlook of $0.07 to $0.12 falls well short of the $0.26 consensus, highlighting the fragility of the recovery. However, all other stocks on the list offer a higher dividend yield.

Disclaimer: This article is written for informational purposes only. It is not intended to encourage the purchase of any assets and does not constitute an offer, solicitation, recommendation, or advice to invest. I would like to remind you that all assets are evaluated from multiple perspectives and are highly risky; therefore, any investment decision and the associated risk are the sole responsibility of the investor. Additionally, we do not provide any investment advisory services.