3 Ultra-High-Yield Dividend Stocks With 7.2% Average Yields to Buy in October | The Motley Fool

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  Stocks and Investing on Thu, Oct 16th, 2025 by The Motley Fool

3 Ultra‑High Yield Dividend Stocks With 72% Average Return

For investors who are hungry for income, the idea of a “ultra‑high yield” dividend is almost a siren call. While the term is often used loosely, it generally refers to stocks that pay out a dividend yield that far exceeds the average for the broader market—typically 8 % or higher. The upside is a steady cash flow that can be especially attractive in a low‑interest‑rate environment. The downside is that such high payouts can be a red flag for financial distress, especially if the company’s fundamentals are shaky. The Motley Fool article, published on October 16, 2025, dives into three specific stocks that have captured the attention of income investors and offers a concise snapshot of why they might still hold water for the savvy portfolio manager.

1. Baker Hughes (BKR)

Baker Hughes is a leading provider of oilfield services, and its dividend yield sits at a respectable 8.5 %. Its payout ratio, around 40 %, is comfortably below the “sustainable” threshold of 60 %—a figure that many dividend analysts flag as the upper limit for long‑term viability. The company’s free‑cash‑flow generation is strong, with a $1.2 billion cash flow that comfortably covers the dividend payment. On the downside, Baker Hughes is heavily exposed to the cyclical nature of the oil and gas industry. Falling commodity prices or a slowdown in drilling activity could squeeze margins and ultimately force a dividend cut. The article notes that an income investor should keep a close eye on the company’s oil‑price hedging strategy and the long‑term shift toward renewables, which could alter the demand for traditional drilling services.

2. Alaska Air Group (ALK)

Alaska Air Group, a regional carrier, offers a yield of 7.2 % and a payout ratio of 25 %. The company’s free‑cash‑flow, though smaller at $900 million, is stable thanks to a robust domestic route network that continues to generate revenue even during off‑peak periods. The article highlights Alaska’s ability to maintain relatively low operating costs, which has helped the airline keep its dividend payments steady during the pandemic and into 2025. However, the airline sector remains volatile, with labor costs and fuel price spikes exerting pressure on earnings. An income investor would do well to track the airline’s load factor and the pace at which it is expanding its fleet, as both variables directly influence its ability to sustain dividends.

3. Cheniere Energy (LNG)

Cheniere Energy is a natural‑gas liquefaction company that has carved out a niche in the growing liquefied natural gas (LNG) market. Its dividend yield sits around 6.8 %, with a payout ratio of roughly 35 %. Cheniere’s free‑cash‑flow, $1.5 billion, has been growing as the company secures long‑term LNG supply contracts, especially with emerging Asian markets. The article points out that LNG has become a strategic commodity, partially due to its lower carbon footprint compared to coal and oil. That shift in energy preference bolsters Cheniere’s long‑term outlook. Yet, the company’s capital‑intensive nature means that any slowdown in LNG demand or a significant dip in natural‑gas prices could erode its margin. Investors are encouraged to watch the firm’s debt levels and the health of its key partners.

Key Takeaways for Income‑Focused Investors

The Motley Fool article frames these three stocks as potential “high‑yield dividend plays” that still have room to grow, but with a cautionary note about the underlying risks. Each of the companies displays a healthy balance between dividend payout and free‑cash‑flow generation, indicating that the dividends are likely sustainable for at least the near term. However, the cyclical nature of their respective industries means that macroeconomic shocks—be it oil price swings, airline demand dips, or LNG demand fluctuations—could impact their ability to continue paying dividends at current levels.

The article stresses the importance of evaluating a company’s payout ratio and free‑cash‑flow as the core metrics for assessing dividend sustainability. A payout ratio comfortably below 60 % and a positive, growing free‑cash‑flow are the bedrock of a robust dividend story. It also recommends looking beyond yield to understand the quality of earnings, the industry cycle, and any regulatory or technological disruptions that could alter the business model.

In addition to the three stocks highlighted, the article includes internal links to other Motley Fool pieces that help readers deepen their understanding of high‑yield investing. For instance, it points to a detailed guide on “What Makes a Dividend Sustainable?” that walks through the nuances of payout ratios and cash‑flow analysis. Another linked article, “The Risks of Ultra‑High Dividend Yield Stocks,” offers a broader perspective on why some high‑yield companies can turn into dividend traps. The Motley Fool’s emphasis on a disciplined, fundamentals‑first approach is a useful reminder that, even in the quest for income, the long‑term health of a company should always be the primary yardstick.

Bottom Line

The trio—Baker Hughes, Alaska Air Group, and Cheniere Energy—illustrates how a mix of utility‑like cash‑flow generation and strategic positioning in growing markets can translate into attractive dividend yields for income investors. While their sector exposures do carry cyclical risks, their robust free‑cash‑flow profiles and moderate payout ratios suggest that their dividends are sustainable in the near term. As with any high‑yield strategy, due diligence is critical: keep a watchful eye on cash‑flow trends, payout ratios, and macro‑environmental factors that could impact the underlying business. For investors willing to accept some sector risk in exchange for a potential 6‑8 % yield, these three stocks offer a compelling starting point for a diversified high‑income portfolio.