Many investors rely on the stock market to provide strong income streams. Particularly for conservative investors and retirees, dividend stocks are an integral part of meeting financial goals. However, particularly in the realm of ultra-high dividend stocks, risk abounds. In many cases, high yields occur because the underlying company has some structural flaws or weaknesses that put the dividend at risk. As such, investors should be prudent when buying high-yield income names.
There is good news, though. After sifting through the realm of high-yielders, there are some trustworthy options for investors. These dividend stocks with 10% yields are the top high-yield dividend stock picks for 2023.
Banco de Chile (BCH)
Banco de Chile (NYSE:BCH) is a leading Chilean financial institution. Shares have been listed in New York for more than twenty years and have historically delivered strong results. However, BCH stock has not been a winner in recent years. This is largely due to the macroeconomic backdrop. Chile is reliant on the export of commodity goods for much of its economic activity. Leading exports include copper, gold, fresh fruit, and fish.
As you can imagine, the economic outlook for Chile, and thus its bank, has brightened considerably over the past 18 months. Prices of numerous commodity goods have soared amid the current inflationary environment. In addition, there is now a rush to find new sources of copper and lithium to meet the insatiable need for batteries. The electrification of the transportation industry relies on access to metals that Chile has in huge quantities. As for Banco de Chile itself, the bank is exceptionally profitable. It sells at just 6 times trailing earnings while offering a 16.6% dividend yield.
OneMain Holdings (OMF)
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OneMain Holdings (NYSE:OMF) is a specialty personal lender. It operates in 49 U.S. states, making personal loans to people that often struggle to obtain credit from traditional banks. OneMain was created out of Citigroup (NYSE:C) many years ago. It benefitted from Citi’s ample access to historical data and lending information. More recently, OneMain invested heavily in digital product and distribution solutions. This proved invaluable during the pandemic when customers no longer wanted to walk into physical branch locations.
OMF stock is now selling for just 6x earnings. Investors are understandably worried about how a so-called subprime lender may perform during a recession. That said, OneMain’s credit has held up well so far, with just 2.7% of its loans being 90-day delinquent as of last quarter. That’s a great performance given how high the interest rates are on OneMain loans. OMF stock currently yields 10.62%.
Starwood Property Trust (STWD)
Starwood Property Trust (NYSE:STWD) is a broadly diversified mortgage REIT. It lends against single-family housing, apartments, hotels, and offices among many other categories. The company has a current portfolio of more than $28 billion.
The firm is known for using floating-rate loans. This has proved invaluable in the current interest rate environment as Starwood can earn more from its portfolio as rates rise. The company also holds special servicer status which gives it protection if the underlying credit quality behind one of its loans declines.
STWD stock has fallen 25% over the past year. In doing so, it has fallen to less than 9 times forward earnings. Shares offer an 11.3% dividend yield today.
Ecopetrol (NYSE:EC) is the state-run oil company of the nation of Colombia. The Colombian government owns 88% of Ecopetrol shares, with the other 12% being publicly traded in both Colombia and on the New York Stock Exchange. This state ownership gives Ecopetrol a favored status within Colombia. The company remits most of its earnings to shareholders via dividends, with 88% of said dividends going to the government.
This has become particularly relevant now, as Colombia elected a strongly left-wing government in 2022. The government has frequently railed against the exploitation of fossil fuels and has sought to stop the licensing of new oil production in Colombia. However, at least to date, Ecopetrol has been able to keep operating without too much hassle — as would be expected for the state company — even as private producers have struggled.
Given the political uncertainties, Colombian shares, including Ecopetrol, have slumped over the past year. As a result, EC stock is now selling at just 4x earnings and offers an eye-popping 17.52% dividend yield. There is a high level of uncertainty here, but investors are certainly getting richly compensated for taking said risk.
Sociedad Quimica y Minera de Chile (SQM)
Sociedad Quimica y Minera de Chile (NYSE:SQM) is Chile’s leading chemicals company. It benefits from some of the same macroeconomic factors described in the above Banco de Chile pick. And, more specifically, SQM is the largest producer of lithium in Chile. It has enjoyed windfall profits over the past few years as lithium demand has soared.
Indeed, SQM’s revenues soared from $1.9 billion in 2019 to $10.7 billion in 2022. SQM stock has sold off this year amid fears of a slowdown in demand out of China. That’s fine in the short term, but there’s little doubt that lithium demand is only going up in the bigger picture. SQM stock currently yields 14.8%.
As the name would suggest, Bancolombia (NYSE:CIB) is one of Colombia’s three large banking franchises. The firm, hailing from Medellin, was founded way back in 1875 and has traded on the New York Stock Exchange since the 1990s.
Like Ecopetrol, Bancolombia is currently going through a challenging stretch thanks to the elevated political uncertainty. That said, Bancolombia earned record profits in 2022 and analysts expect another increase in profits in 2023. Colombia’s GDP continues to grow in 2023 thanks in part to strong commodity prices and rising levels of tourism.
CIB stock is currently selling for 4x forward earnings and offers a 10.22% dividend yield. Typically, Bancolombia shares have sold for closer to 8-10x earnings and should regain that valuation sooner or later once the political concerns start to fade. In the meantime, shareholders can reap an outsized dividend yield.
Blackstone Mortgage Trust (BXMT)
Blackstone Mortgage Trust (NYSE:BXMT) makes commercial mortgages. Given a great deal of consternation about the commercial real estate market, shares of BXMT stock have plunged in recent months.
But, perhaps things aren’t as bad as the market would suggest. For one thing, only 25% of Blackstone Mortgage Trust’s exposure is to U.S. office space. Blackstone Mortgage is diversified with exposure to apartments, life sciences buildings, and international properties among other things in addition to its office loans.
97% of the company’s loans are currently performing as planned. And earnings remain high enough to cover the dividend; the trust saw earnings of 68 cents per share and distributable earnings of 79 cents last quarter versus its dividend of 62 cents per share. There is the risk here around a further decline in the office market or a recession more broadly. But the 13.5% dividend yield rewards investors greatly for that.
On the date of publication, Ian Bezek held a long position in CIB, EC, SQM, and BCH stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.