When it comes to investing, returns come either as capital gains or dividend income. Dividend stocks are aptly named as they return a substantial chunk of profits back to shareholders regularly. In other words, investors can receive a relatively stable flow of passive income from such investments.

Generally, young companies prefer to put any spare capital to use. That’s why most dividend stocks belong to larger, more mature firms whose share prices don’t tend to move much. This investing style is often seen as less risky, as wild fluctuation in share prices is less common than a growth stock. Of course, nothing is risk-free. And these do have their fair share of threats, as I will shortly explain. But even with that in mind, here are three high-yielding dividend stocks I’d buy today for my portfolio.

Dividend Stocks: #1 Altria Group Inc.

This tobacco company is a market leader in the U.S. Tobacco industry. Altria Group Inc. (NYSE:MO) has consistently paid dividends each quarter for over a decade.  

Recently, the dividend stock announced that its increasing its regular quarterly dividend by 4.7% to $0.90 per share compared to the previous rate of $0.86 per share. And with the next record date set for 15 September, later this month now seems like a prudent time for me to jump onto this passive income opportunity.

The runner up: IBM 

International Business Machines (NYSE:IBM) used to be the leading giant within the world of tech stocks. Over the years, more innovative companies have stolen its crown. However, while its glory days are likely over, the business continues to provide vital database services that many companies rely upon. What’s more, with its recent foray into cloud computing, the business may be able to continue expanding its dividend cheques over the long term.

The company is expected to pay its 2021 Q2 dividend of $1.64 on 10 September. After this payout is completed, the company will have consistently paid out a dividend every year since 1916! 

In third place: Verizon Inc. 

While declaring its most recent quarterly dividend of $0.63 per share, Chairman and CEO Hans Vestberg of Verizon Communication Inc. (NYSE:VZ) had this to say. 

“With the strength of our business and revenue growth trajectory, we look forward to putting the Board in the position to raise the dividend again later this year, which we have done for 14 consecutive years.”

The dividend is payable on 2 August to all Verizon shareholders of record as of 9 July.

Risks with dividend stocks

Seeing such impressive track records from established businesses certainly helps paint a low-risk picture for dividend stocks. However, this can often lead to a false sense of security.

Dividends are sourced from the cash flows of the underlying business. So any disruption to those cash flows can jeopardise the dividends of even the most established firm. The pandemic has provided countless examples of companies being forced to cut or even outright cancel dividends payments due to operational disruptions. 

Another prominent issue with some of these dividend aristocrats is the lack of re-investment. After all, if most profits are being used to pay shareholders rather than develop new projects or technologies, competitors can swoop in and start stealing market share. And if revenues start to fall, so do cash flows, and in turn, dividends.

Final thoughts

With interest rates at an all-time low, the passive income generating abilities of instruments like bonds have dwindled over the past decade or so. That’s why dividend stocks have become a popular alternative in recent years. And why I’m always looking for new opportunities to bolster my passive income portfolio.