Holding shares of strong companies that pay consistent dividends can help you preserve and grow your savings. Three Motley Fool contributors recently selected their favorite high-yield dividend stocks to buy now. These businesses have a long record of paying dividends and currently offer yields well above the S&P 500 average of 1.45%. Here's why they think Target (TGT 1.99%), General Mills (GIS +0.09%), and British American Tobacco (BTI +2.01%) could pay you passive income forever.
A Dividend King with a high yield
Jennifer Saibil (Target): Target has been dealing with a tale of woes for several years already, and the new tariff program hasn't done anything positive for its stock. It's now down 48% over the past year.
NYSE: TGT
Key Data Points
There's been a string of issues plaguing the business, including supply chain backups, too much inventory, and consumer cutbacks in spending. Unlike discount retailers Walmart and Costco Wholesale, which are focused on the grocery space, Target differentiates itself by focusing on discretionary categories like apparel and home improvement.
Under better circumstances, this is usually a benefit, and consumers would enjoy shopping for finds at Target's more than 1,800 U.S. stores. These days, it's creating pressure, since people are shopping more discriminately in the tough economy.
In fiscal 2024 (ended Feb. 1), comparable-store revenue, which adjusts for an extra week, increased 1%, and comparable earnings per share (EPS) were up 3%. Results according to generally accepted accounting principles (GAAP) were slightly down. This was at the same time that Walmart and Costco both demonstrated strong performance.
In its favor, Target is still a champion in omnichannel shopping, and digital options are driving its sales. Comparable digital sales were up 8.7% year over year in the fourth quarter, and same-day delivery orders were up 25%. These important metrics give some confidence about the retailer's ability to improve when conditions are better.
In the meantime, as the stock price goes lower, the dividend yield has soared; it's more than 5% at the current price. Plus, Target is a Dividend King, having raised its payout annually for the past 53 years.
Management is guiding for a steady 2025, with revenue expected to increase 1% and comparable-store sales to be flat, plus some increase in EPS. That guidance included uncertainty regarding tariffs when it was given, and management has not updated it since the new tariff announcements.
There could be continued pressure in the near term, but Target is well positioned to recover and go on to bigger and better things. And investors can expect reliable passive income for the foreseeable future.
Top food brands make resilient dividend stocks
John Ballard (General Mills): High inflation has increased costs and made things tough on food companies over the last few years. General Mills owns some of the top cereal brands like Cheerios and has been very resilient through economic cycles for decades. The stock is an excellent income investment right now after falling to an attractive valuation and offering an above-average dividend yield over 4%.
NYSE: GIS
Key Data Points
Dividend investing doesn't get any simpler than owning shares of top food brands. General Mills has a strong portfolio of brands that include Pillsbury, Blue Buffalo pet foods, and Wheaties. People have a tendency to turn to familiar brands in the grocery store, and this advantage fuels consistent sales and earnings, which have led to 126 years of dividend payments to shareholders.
The company's adjusted net sales fell 1% year over year through the first three quarters of fiscal 2025. Adjusted earnings per share also fell 1% to $3.47 over the same period. But investors are excessively punishing this top consumer staples retailer, with the stock trading at just 13 times earnings. The company's record of consistent operating performance appears undervalued.
The attractive valuation is further supported by the quarterly dividend of $0.60. It pays out just over half of its annual earnings and free cash flow, bringing the forward dividend yield to 4.14% at the time of this writing. General Mills will very likely be paying dividends for decades to come, as it has over the last century.
A cash cow that's more than tobacco
Jeremy Bowman (British American Tobacco): The tobacco industry has traditionally been a powerhouse for dividend payments, and that's true of British American Tobacco, the global parent of brands like Camel, Newport, and Lucky Strike as well as next-gen products like Velo oral nicotine pouches, Vuse e-cigarettes, and Glo, a heated tobacco product that competes with Philip Morris' Iqos.
The company now offers a 7.1% dividend yield, and while it took a massive write-down on its American cigarette operations in 2023, the business is stable enough and supported by the growth of smoke-free products that investors can count on that dividend continuing. It also offers a much better yield than tobacco industry peers like Philip Morris.
BAT has a steady track record of raising its dividend over its history, though currency conversions can affect that for American investors, and the business is highly profitable. In 2024, it raised its dividend 2%, and the company plans to spend about $1.2 billion on share buybacks in 2025.
It delivered modest increases in organic revenue in 2024 at 1.3% and organic profit at 1.4%, while revenue from new categories rose 9% on an adjusted organic basis to $5.1 billion. On an adjusted basis, BAT's operating margin was an impressive 46% as the company and its peers have demonstrated pricing power and have been able to pass along price increases.
Tobacco is typically considered a recession-proof product -- consumers buy it in good times and bad -- which makes British American Tobacco a good choice for dividend investors at a time of economic uncertainty. As more of its business goes to new categories, its growth rate should improve, and the dividend should steadily increase as well.
