Should You Buy Best Buy Stock for Its 4.9%-Yielding Dividend?

Finding a good, high-yielding dividend stock isn't easy these days. Stock prices have been rising, and that's been pushing yields down in the process. One stock that still offers a fairly high yield, however, is Best Buy (NYSE: BBY), which currently yields about 4.9%. That's more than four times the S&P 500 average of just over 1%.

Could this retail stock, which is coming off a strong quarterly performance, be a solid income investment to put in your portfolio today?

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The company shows progress in its recent earnings report

A common concern for income investors is that when it comes to a high-yielding stock, there's often some risk or worry attached with it. Best Buy, while it's a big name in retail, has been struggling in recent years to generate growth, and its shares have declined by around 35% over the past five years.

But when the company reported its first-quarter earnings for Fiscal 2027 last month, the results were encouraging. The company beat expectations on both its top and bottom lines, and it generated comparable sales growth of 2%. That's a key metric for investors because it means that organically, the business has been growing, without simply relying on acquisitions or new store openings.

Even more encouraging was that the growth was across most of its product categories, and it achieved this while also improving its margins along the way. The results were positive across the board for Best Buy, and if it can build on them, the retail stock could be due for much better days ahead.

Is Best Buy a good dividend stock to own?

Best Buy has been paying dividends for decades, and it currently pays shareholders $0.96 per share every quarter. In its most recent quarter, its diluted per-share profit was $1.31 -- comfortably above the rate of its dividend. And if it were to maintain that level of profitability, its dividend payout ratio would be approximately 73%.

It's a sustainable payout that should give investors confidence in the dividend. Along with some solid results of late, there are plenty of reasons to like Best Buy's stock right now. Trading at just 12 times its projected earnings (based on analyst expectations), it also comes at a fairly low price tag, potentially making this a great dividend stock to buy right now. While its yield may seem a bit high, Best Buy's payout looks safe, and it may generate a lot of recurring income for your portfolio.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Best Buy. The Motley Fool has a disclosure policy.