3 Unstoppable Dividend Stocks Yielding More Than 3% to Buy Now

Some investors target a certain yield to help supplement income in retirement or achieve passive income goals. Others may simply be looking for a yield that is considerably above the 1.3% available from a low-cost S&P 500 exchange-traded fund (ETF) like the Vanguard S&P 500 ETF.

Yields come down when stock prices outpace dividend growth rates, which has been the case across many stock market sectors, given the broader market rally. But United Parcel Service (NYSE: UPS) and utilities American Electric Power (NASDAQ: AEP) and Southern Company (NYSE: SO) still sport yields above 3%. Here's why all three dividend stocks are worth buying now.

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UPS' 4.9% dividend yield is compelling, and its dividends look sustainable

Lee Samaha (UPS): The company's recent third-quarter earnings report wasn't great, and there are question marks around its full-year guidance. Moreover, its "better not bigger" framework has been challenged by customers switching to cheaper delivery options. As such, its revenue per piece declined again on a year-over-year basis.

That said, the report had several positives, and most of its metrics are moving in the right direction. Although UPS is taking on more lower-priced deliveries (something not implied by the "better not bigger" approach), the reality is its delivery volumes are increasing. Meanwhile, UPS and the industry continue to reduce capacity, which should improve future pricing power.

Moreover, UPS' investments in productivity-enhancing technology (automation and smart facilities), job cuts, and facility rationalizations are good news for its costs, and overall UPS operating margins improved in the third quarter.

Everything points to earnings improvement next year, and Wall Street analysts have UPS growing earnings per share from $7.47 in 2024 to $8.78 in 2025.

As noted earlier, there are some questions around its full-year guidance, which implies an adjusted operating profit of $2.95 billion in the fourth quarter compared to just $1.98 billion in the third quarter. But the company is taking a tactical approach to difficult end markets while improving its underlying business.

An improved end-market environment in 2025 and a reduced industry capacity should ensure further improvement next year, and the dividend looks sustainable.

American Electric Power is attentive to rewarding shareholders -- and it shows no signs of losing focus

Scott Levine (American Electric Power): An early lesson new investors learn quickly is that past performance doesn't ensure future results. While this is true, looking in a company's rearview mirror can provide insight into the road that lies before it. Take American Electric Power (AEP), for example. The electric utility has paid consecutive quarterly dividends for 114 years. Though this doesn't guarantee it will continue paying dividends for the next century, it's certainly an auspicious sign that management is committed to returning capital to shareholders. For this reason, income investors should consider powering their passive income machines with AEP and its 3.8% forward-yielding dividend.

While many companies fail to achieve lengthy histories of steady dividend payments, AEP has thrived. This is due in large part to its reliable business model. The company, which has 5.6 million customers spread throughout 11 states, mostly operates in regulated markets, in fact, it characterizes itself as a "pure-play regulated utility." Operating in this way means that although the company can't arbitrarily raise prices when it likes, it is afforded certain guaranteed rates of return. Consequently, management receives ample foresight into future cash flows, helping it to plan for capital expenditures such as dividend payments and infrastructure upgrades.

Over the next five years, for example, the company projects cash from operations will grow from $6.7 billion in 2024 to $8.6 billion in 2028; moreover, it expects to pay $1.9 billion in common dividends in 2024, hiking it higher in the following years to $2.6 billion in 2028.

In addition to the company's projection that it will generate enough operational cash flow to support its dividend payments, investors will see that management is further committed to the company's financial health with its target of distributing 60% to 70% of operating earnings as dividends -- a target that seems attainable considering AEP's dividend payout ratio over the past five years has averaged 70%.

This top-tier utility is worth buying on the dip

Daniel Foelber (Southern Company): After hitting an all-time high in mid-October, Southern Company sold off after reporting third-quarter 2024 earnings. Now down nearly 7% from that all-time high, the sell-off seems more related to Southern Company's valuation than the results -- which were excellent.

Southern Company booked $1.40 in third-quarter earnings per share (EPS) compared to $1.30 in the same period in 2023.

For the nine months ended Sept. 30, 2024, it earned $3.9 billion or $3.53 per share compared to $3.3 billion or $3.01 -- excluding certain items.

Despite Southern Company's stock price gaining over 25% in the past year, its price-to-earnings ratio is still just 20.6 thanks to its strong earnings growth.

Southern Company stands out as an ultra-safe utility stock for passive income investors. The company has an excellent balance of fossil fuels, wind, solar, and nuclear. Its core market is the southeastern U.S., but it also has power generation assets across the U.S. For example, most of its wind assets are in Texas and Oklahoma. Outside of its core market, its solar assets are concentrated in the Southwestern U.S.

All told, Southern Company is a balanced utility in terms of its end markets and its energy mix. In April, Southern Company increased its dividend for a 23rd consecutive year to $2.88 per share -- giving it a yield of 3.3%.

After being the single best-performing sector year to date, the utility sector was vulnerable to a sell-off. And since Southern Company is one of the largest utilities by market cap, it makes sense why it could be dragged down with the rest of the sector.

Given the strength of its results, the sell-off in Southern Company is a compelling buying opportunity for investors looking for a quality utility stock they can count on that also has an attractive yield.

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Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.