Five High-Yield Dividends Pass the Coverage Test, but Risks Differ

A high dividend yield is only useful when the underlying business produces enough cash to keep paying it. Five income stocks now pass that first test, but they do so with different accounting measures and very different risks.

Verizon offers the cleanest cash comparison. The telecom generated $18.0 billion of free cash flow in the first nine months of 2026 and paid $8.8 billion of dividends. The payout therefore consumed about 48.9% of free cash flow. Verizon also raised its full-year free-cash-flow growth outlook to about 12% after third-quarter free cash flow reached $7.8 billion, up 12.1% from a year earlier.

That cushion matters because Verizon still carried $136.1 billion of unsecured debt at quarter-end. Net unsecured debt was 2.3 times adjusted EBITDA. The business is improving, with 406,000 postpaid phone additions in the quarter, but debt reduction and revenue per account remain important tests.

Realty Income uses a different yardstick. For a real estate investment trust, adjusted funds from operations, or AFFO, is more informative than reported earnings because it adds back large noncash real-estate depreciation charges and adjusts for recurring property economics. Realty Income produced $1.09 of AFFO per share in the second quarter and paid $0.8115 of dividends, a payout ratio of about 74.4%. It raised 2026 AFFO guidance to $4.44 to $4.45 per share.

The REIT's 98.8% occupancy and A credit rating support the payout, but leverage rose to 5.4 times annualized adjusted EBITDA. Nearly two-thirds of annualized base rent came from tenants without investment-grade ratings, so coverage depends partly on tenant health.

Enterprise Products Partners reported $2.31 billion of operational distributable cash flow in the third quarter. That covered its declared distribution 1.9 times and left $1.1 billion after distributions. The partnership also has $6.3 billion of growth projects under construction. Its main near-term risk is that unusually favorable commodity-price spreads boosted results earlier in the year and have since normalized.

Main Street Capital's second-quarter distributable net investment income before taxes was $1.08 per share. Three monthly regular dividends of $0.265 each would total $0.795 for a quarter, implying coverage of about 1.36 times. Supplemental dividends can raise the cash yield, but they depend on portfolio performance and realized gains. Main Street's preliminary third-quarter estimate put distributable net investment income before taxes at $0.96 to $1.00 per share, still above the regular payout but below the second-quarter result.

Altria's annualized dividend of $4.44 equals about 77.9% of the midpoint of its new adjusted earnings guidance of $5.66 to $5.74 per share. The tobacco company raised the quarterly payment 4.7% in August, its 61st dividend increase in 57 years. The risk is not current coverage but the shrinking cigarette base: domestic cigarette shipments fell, leaving price increases and smoke-free products to carry more of the growth burden.

These ratios are not interchangeable. Free cash flow, AFFO, distributable cash flow, investment income and adjusted earnings each reflect a different business model. Taken together, they show that all five regular payouts have a current cushion. They do not show that the cushion will survive weaker tenants, lower interest rates, normalized pipeline spreads, heavy debt or continued cigarette-volume declines.