3 Ultra-High-Yield Dividend Stocks -- Sporting an Average Yield of 9.5% -- Which Are No-Brainer Buys in October

Key Points

• Dividend stocks have more than doubled up the average annual return of non-payers over the previous 51 years.

• Yield and risk tend to correlate, which means investors have to be particularly careful when vetting high-octane dividend stocks.

• Three time-tested income stocks, with yields ranging from 7.2% to 13.4%, are historically inexpensive and ripe for the picking by opportunistic investors.

• 10 stocks we like better than Pfizer ›

For more than a century, the stock market has reigned supreme as the most-decorated wealth creator. No asset class has come close to matching the average annual return of stocks -- and with thousands of publicly traded companies to choose from, there's likely one or more securities that can help you reach your investment goals.

But among the countless ways to grow your wealth, buying and holding high-quality dividend stocks tends to be among the most successful strategies.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

In The Power of Dividends: Past, Present, and Future, the researchers at Hartford Funds, in collaboration with Ned Davis Research, compared the annualized returns of dividend stocks to non-payers over a 51-year period (1973-2024). They discovered that income stocks crushed non-payers on an annualized basis (9.2% for dividend payers to 4.31% for non-payers) and did so while being less-volatile than the benchmark S&P 500.

Image source: Getty Images.

Ideally, investors want to generate the highest yield possible with the least risk. However, history tells us that risk and yield tend to correlate. In other words, the higher the yield, the more likely it is you'll fall into a yield trap with a struggling/failing business.

The good news is that ultra-high-yield dividend stocks -- those with yields four or more times greater than the average yield of the S&P 500 -- with secure payouts do exist. The following three ultra-high-yield stocks, which are sporting an average yield of 9.5%, make for no-brainer buys in October.

Pfizer: 7.24% yield

The first supercharged dividend stock you'll likely regret not adding in October is pharmaceutical behemoth Pfizer (NYSE: PFE), whose 7.2% yield is more than six times higher than the average yield of the S&P 500, as of Sept. 26.

Pfizer is an interesting stock in the sense that it's been punished for its own success. Following the development of a COVID-19 vaccine (Comirnaty) and COVID-19 oral therapy (Paxlovid), Pfizer witnessed combined sales of these therapies soar to north of $56 billion in 2022. But with the worst of the pandemic firmly in the rearview mirror, combined revenue for these drugs fell to $11 billion in 2024, and is likely to drop further this year.

While kissing $45 billion in sales goodbye in two years might be a tough pill to swallow for some on Wall Street, let's remember that Pfizer wasn't generating a cent in COVID-19 sales when this decade began. The inclusion of Comirnaty and Paxlovid, coupled with growth from its existing therapies and newly introduced drugs, increased Pfizer's net sales by more than 50% from 2020 to 2024. In other words, this is a company that's only grown stronger as its stock sank to a 13-year low.

Another catalyst for Pfizer is its December 2023 acquisition of cancer-drug developer Seagen. While bolt-on acquisitions are par for the course with big pharma, this $43 billion buyout of Seagen made waves. In addition to significant cost synergies being recognized by this combination, Seagen vastly expands Pfizer's exceptionally high-margin oncology pipeline. As cancer-screening diagnostics improve, so should Pfizer's cancer drug sales.

Pfizer's historically inexpensive valuation is the icing on the cake. Shares can be scooped up by opportunistic investors for 7.5 times forward-year earnings, which is 25% lower than its average forward price-to-earnings (P/E) multiple over the last half-decade.

Image source: Getty Images.

United Parcel Service (UPS): 7.84% yield

A second high-octane dividend stock that makes for a no-brainer buy in the month of October is logistics titan United Parcel Service (NYSE: UPS), which most consumers know better as "UPS."

Shares of UPS have plummeted 34% in 2025, representing a 46-percentage-point underperformance to the benchmark S&P 500. This pessimism is the result of a January announcement that it would be focusing on margin quality over volume moving forward. More specifically, UPS aims to reduce its shipments from the world's No. 1 e-commerce player Amazon by more than 50% come the second-half of 2026.

There's no question that UPS is going to take a revenue hit from lessening its volume reliance on Amazon. But the fact of the matter is that most Amazon deliveries generated very low margins. UPS is purposely choosing to pivot to higher-margin opportunities, including small- and medium-sized businesses, as well as temperature-controlled shipping for healthcare companies.

As I've previously opined, the brand value that UPS brings to the table can't be overlooked. Most consumers are instantly familiar with its big brown trucks. There's also a sizable barrier to entry for logistics companies, with vehicles and planes costing a pretty penny. A lack of new competition and an established brand go a long way.

United Parcel Services' management team intends to hold firm on its payout, which is currently supporting a 7.8% yield. With a forward P/E ratio of less than 12, UPS stock clocks in at a 27% discount to its average forward-earnings multiple over the last five years.

PennantPark Floating Rate Capital: 13.41% yield

The third and final ultra-high-yield dividend stock that can pack a punch with its payout and makes for a screaming buy in October is small-cap business development company (BDC) PennantPark Floating Rate Capital (NYSE: PFLT). PennantPark pays its dividend monthly, and I assure you its 13.4% yield isn't a misprint.

BDCs are businesses that typically invest in or lend to unproven companies, known as "middle-market companies." As of the end of June, PennantPark had a $2.4 billion investment portfolio, of which $2.15 billion was put to work in various debt securities. This makes it a predominantly debt-focused BDC.

The obvious reason to angle toward lending is simple: yield! Many of the middle-market companies PennantPark finances lack access to traditional banking solutions. This means it's able to net a considerably higher average yield on its debt investments. According to the company, it closed out its fiscal third quarter (June 30) with a weighted-average yield on debt investments of 10.4%.

But perhaps the best thing about PennantPark Floating Rate Capital's operating model is that 99% of its loans sport variable rates. When the Federal Reserve aggressively raised interest rates to tackle a rapid increase in the prevailing rate of inflation from March 2022 to July 2023, PennantPark's weighted-average yield on debt investments soared by more than 500 basis points. Even though the nation's central bank is now cutting rates, it's doing so slowly and telegraphing its moves, which has allowed PennantPark to maintain a superior yield on its loan portfolio.

The final piece of the puzzle is PennantPark's historically cheap valuation. The share price of BDC's typically hover around their book value. PennantPark is currently trading at more than a 16% discount to its book value.

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Sean Williams has positions in Amazon, PennantPark Floating Rate Capital, and Pfizer. The Motley Fool has positions in and recommends Amazon, Pfizer, and United Parcel Service. The Motley Fool has a disclosure policy.