2 High-Yield Dividend Stocks to Buy and 1 to Avoid

Investing in high-yield dividend stocks can be a solid portfolio move and give investors some nice supplemental income. However, not all dividend stocks are created equal. Two dividend stocks I'd be buying now are Energy Transfer (NYSE: ET) and Verizon (NYSE: VZ), while one I would avoid is Pfizer (NYSE: PFE).

Let's take a closer look at each, starting with why I'd avoid investing in Pfizer.

Pfizer: High debt and a patent cliff

At one point, Pfizer was as blue chip of a pharmaceutical company as there was. However, the stock's 6.2% yield and cheap valuation reflect a company facing challenges ahead.

Pfizer took on significant debt when it acquired Seagen for $43 billion in December 2023 to strengthen its oncology portfolio. That has left the company with over $60 billion in debt and high interest expenses. The company paid out $9.7 billion in dividends last year while generating $9.1 billion in free cash flow, so it paid out more in dividends than it generated in cash. That has continued through the first six months of 2026.

To make matters tougher, Pfizer faces a steep patent cliff over the next few years as patents on blockbuster drugs like Eliquis and Ibrance expire soon. Pfizer is looking to return to growth in 2029, forecasting high-single-digit revenue growth from year-end 2028 through 2033. However, it will need its drug pipeline to come through, as it is already struggling to generate enough cash to support its dividend payout. If some drugs don't live up to commercial expectations or fail to get approved, the stock and its dividend could be in trouble.

Energy Transfer: An AI winner

While I would pass on owning Pfizer, one of my favorite high-yield stocks to own is Energy Transfer. The pipeline master limited partnership (MLP) is one of the biggest beneficiaries of rising natural gas demand stemming from the AI data center build-out. It has one of the largest natural gas systems in the U.S. and a strong position in the Permian Basin and Texas, which is leading to a plethora of high-return projects with long-term commitments.

While the company is in a growth phase and plans to spend up to $5.9 billion in growth capex this year, it still pays out a robust and growing distribution. The stock currently yields 6.4%, and Energy Transfer plans to increase its payout by 3% to 5% annually. The company has a steady, predictable business model with about 90% of its earnings before interest, taxes, depreciation, and amortization (EBITDA) coming from fee-based operations, but it is also great at taking advantage of any energy arbitrage opportunities, which frequently lead to bonus cash flow.

Best of all, the stock is cheap, having one of the lowest valuations in the midstream space, trading at a forward enterprise value-to-EBITDA multiple of just 8.5. Its combination of growth and value makes this a top high-yield stock to own.

Image source: Getty Images.

Verizon: New strategy is paying off

Another high-yield stock I really like at current levels is Verizon, which has a 5.5% yield. The company has long positioned itself as the technology leader with the best coverage in the wireless space, but a shift in strategy to become more consumer-centric has started to pay off with less churn and more subscriber additions. This showed up last quarter when it added 184,000 postpaid phone subscribers, its best quarter in five years. Churn, meanwhile, improved sequentially for the second straight quarter.

Verizon's dividend is easily covered by its robust free cash flow, and the company's balance sheet is in solid shape. It also has some solid growth opportunities. The first is with bundling, following its acquisition of Frontier and its large fiber network. Second, it is also looking to start supplying fiber optic networks to connect AI data centers.

With a forward price-to-earnings (P/E) ratio of just 10 based on 2026 earnings estimates and a solid set of growth drivers, the stock is a great option for dividend investors.

Geoffrey Seiler has positions in Energy Transfer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.