Black Friday Sale for Income Investors: These Ultra-High-Yield Dividend Stocks Are Bargain Buys
Key Points
Energy Transfer LP sports an exceptionally low EV-to-EBITDA multiple.
UPS remains attractively valued and is well-positioned to deliver higher profitability going forward.
Verizon is a bargain stock with an impressive track record of dividend increases.
- 10 stocks we like better than Energy Transfer ›
Black Friday. For millions of Americans, the day means waiting in long lines to buy gifts for the holidays while stores are running their best sales of the year.
Income investors can benefit from their own version of a Black Friday sale, without dealing with the crowds and the traffic. These three ultra-high-yield dividend stocks are bargain buys.
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1. Energy Transfer LP
Energy Transfer LP (NYSE: ET) is a limited partnership (LP) that operates around 140,000 miles of pipeline and other energy infrastructure assets related to transporting and storing crude oil, natural gas, and natural gas liquids (NGLs). It also owns Lake Charles LNG Company, roughly 15% of Sunoco LP (NYSE: SUN), and around 38% of USA Compression Partners, LP (NYSE: USAC).
Income investors should love Energy Transfer's distribution yield of 8.2%. The LP expects to increase its distribution by 3% to 5% annually. That goal seems quite attainable at the moment, with Energy Transfer enjoying its strongest financial position ever.
As a bonus, Energy Transfer sports a dirt cheap valuation. Its units trade at 10.7 times forward earnings, compared to an average forward earnings multiple of 15.7 for the S&P 500 (SNPINDEX: ^GSPC) energy sector. The midstream leader's enterprise value-to-EBITDA ratio is 7.7, the second-lowest level among its peers.
There's more good news for Energy Transfer as well. The LP should deliver solid growth over the next few years as coal-fired power plants switch to natural gas and new data centers hosting electricity-hungry artificial intelligence (AI) applications are built that are powered by natural gas.
2. United Parcel Service
Most Americans routinely benefit from what United Parcel Service (NYSE: UPS) does. The company delivers around 22.4 million packages daily across more than 200 countries and territories.
UPS is another exceptional pick for income investors. Its forward dividend yield tops 6.9%. The package delivery giant has increased its dividend for 16 consecutive years and has either maintained or grown its dividend since going public 26 years ago.
In a stock market that's seemingly priced for perfection, UPS looks like a bargain. Its forward earnings multiple is 12.8. UPS' low EV-to-EBITDA of 8.9 is even more attractive.
Sure, the company faces some challenges, including headwinds from the Trump administration's tariffs. However, I think that management's strategy to phase out much of its Amazon (NASDAQ: AMZN) shipments, restructure its operations accordingly, and focus on higher-margin business, such as healthcare logistics, should pay off. In my opinion, UPS is on the right track to deliver stronger profitability and free cash flow.
3. Verizon Communications
Like UPS, Verizon Communications (NYSE: VZ) is a household name. The telecommunications leader serves more than 146 million wireless customers and 99% of the Fortune 500.
Verizon has been a longtime favorite for income investors. It still is, with a juicy forward dividend yield of 6.8%. The company has also increased its dividend for an impressive 19 consecutive years.
Is this telecom stock a bargain buy for Black Friday? I think so. Verizon's forward price-to-earnings ratio is 8.3. That's well below the forward earnings multiples for the company's major rivals, AT&T (NYSE: T) and T-Mobile US (NASDAQ: TMUS). Similar to Energy Transfer and UPS, Verizon appears even more attractive based on its low EV-to-EBITDA ratio of 6.5.
Verizon's new CEO, Dan Schulman, who formerly served as CEO of PayPal Holdings (NASDAQ: PYPL), seems to be the right leader to move the company forward. He promised in the Q3 update, "We will aggressively transform our culture, our cost structure, and the financial profile of Verizon in order to put our customers first, compete effectively, and deliver sustainable returns for our shareholders."
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Keith Speights has positions in Amazon, Energy Transfer, United Parcel Service, and Verizon Communications. The Motley Fool has positions in and recommends Amazon, PayPal, and United Parcel Service. The Motley Fool recommends T-Mobile US and Verizon Communications and recommends the following options: long January 2027 $42.50 calls on PayPal and short December 2025 $75 calls on PayPal. The Motley Fool has a disclosure policy.
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