The recent surge in the 10-year Treasury yield to 5.15%—its highest level since the 2008 financial crisis—has put dividend-paying equities under the spotlight. The sharp move, triggered by hotter-than-expected PMI data, has revived concerns about further Federal Reserve tightening. With the central bank having already raised its benchmark rate by 25 basis points this month, its first increase since 2023, and another hike projected for later this year, income investors are questioning the resilience of traditional yield plays.
Despite the challenging environment, three dividend stocks stand out for their ability to maintain attractive payouts relative to Treasuries: Verizon Communications (VZ), Energy Transfer (ET), and AGNC Investment (AGNC). Each offers a yield that remains meaningfully above the 10-year's peak, supported by solid cash flows and reasonable valuations.
Verizon: A Low Valuation and Stabilizing Subscriber Base
Verizon currently yields 6.08%, still about a percentage point higher than the 10-year's peak. The stock trades at roughly 9.5 times forward earnings, and its free cash flow consistently covers the dividend. The company's underlying business is also improving: last quarter, it added 184,000 postpaid phone subscriptions, its best result in five years, as churn declined under a service-first strategy. This combination of low valuation and steadier subscriber growth suggests the yield premium may persist even as Treasury yields remain elevated. Wall Street rates Verizon at Overweight, with a mean price target of about $51, implying nearly 10% upside from current levels.
Energy Transfer: Fee-Based Cash Flows and AI-Driven Demand
Energy Transfer's distributable cash flow covered its capital returns by 2.2 times in the latest quarter, and about 90% of its adjusted EBITDA is fee-based, providing stability. Management plans 3% to 5% annual distribution growth, and its Permian gas position ties it to AI data center power demand and natural gas liquids exports. The stock's dividend yield of 6.64% sits well above the 10-year yield. After a recent pullback, the forward multiple has contracted to an attractive 12 times. Analysts rate Energy Transfer at Overweight, with a mean price target of about $25, indicating significant upside potential.
AGNC Investment: High Monthly Income with Book Value Risks
For investors seeking substantial income to offset yield pressures, AGNC Investment offers a staggering dividend yield of about 14.5%, paid monthly. As a mortgage real estate investment trust (mREIT), it invests heavily in agency residential mortgage-backed securities backed by the U.S. government. While rising interest rates and mortgage spread volatility pose ongoing book value risks, the company's net spread and dollar roll income continue to easily cover its payout. Analysts currently rate AGNC shares at Hold, but the mean price target of over $11 still represents nearly 15% upside from current levels.
These three names illustrate that even in a high-yield environment, selective dividend stocks can still offer compelling income and total return potential. However, investors should weigh the risks, particularly for AGNC given its sensitivity to interest rate movements.
This article is for informational purposes only and does not constitute financial advice.
