Best 5 High-Yield Dividend Stocks for Options Trading in 2024

Thanks to the diversity of stock market trading, every market participant now has a large selection of financial instruments to choose from, including shares, different funds, and indexes. Investors choose the optimal investment plan based on their financial goals and their risk tolerance in a very volatile market.

Options trading is one such option that traders use. They develop their trading technique to trade options in the day-trading market segment and make money despite the market's extreme volatility. There are two ways to options trading: Calls and puts. A call option grants the right to purchase stock, while a put option grants the right to sell shares. Traders might mix options in vertical spreads to leverage movement between two levels. It assists in lowering upfront costs by exchanging one contract to help pay for another. Turbulence in the market might be suitable for choices. Since calls and puts fix the buying and selling prices, they may be worth more if underlying values fluctuate quickly. Traders can position themselves for fluctuations in volatility by using strategies like straddles and strangles.

When traders want to dive deep into the world of Options Trading, they start looking for many factors. When it comes to options trading related to stocks, the traders look at high-volatility stocks with significant price movements. However, it is a lesser-known fact that dividends play an important role when deciding on the stocks to be picked up for traders to trade options.

Dividend payments affect options related to the particular stock because they have a bearing on calls and puts, while those who hold the equities receive such amounts. It signifies that Call options will decline in price and Put options will increase in price when the firm goes ex-dividend because the stock price already captures the value of the dividend to be paid. American-style calls that are deeply in the money may be exercised early by their holders before the ex-dividend date to get the dividend due to the related shares.

While we are seven months into the year 2024, let’s have a look at the five high-yield dividend stocks that can be good picks for option traders:

AT&T Inc ($T)

Telecommunications behemoth AT&T Inc. has historically delivered a strong dividend yield, making it popular among dividend lovers. Wireless services are the major segment of the operations, but the company also offers media and entertainment services. With a market capitalization of $138 billion and a dividend yield of around 5.7%, AT&T has always been the darling of dividend hunters. The company has faced particular challenges in the recent past, most notably due to the company’s debt and competition. Nevertheless, restructuring processes and the company’s attempt to concentrate on the key activities have proven their efficiency. Options on AT&T are rather popular. The average daily trading volume of such contracts is approximately 55 thousand, which creates narrow bid-ask spreads and assists traders with increased position flow. The high dividend yield benefits covered call options as the trader can get a relatively high added income from the dividend. The consistent generation of cash and the company’s attempts at decreasing its debt levels also support the case for options trading on this telecommunications giant.

Verizon Communications Inc. ($VZ)

Verizon Communications is another major player in the telecommunications sector, known for its consistent dividend payouts and stronghold in the market. With a market capitalization of $169 billion, a dividend yield of 6.71%, and an impressive P/E ratio of 15.15, this telecommunication player has been involved in expanding its 5G network, aiming for future growth.  The company’s robust financials and hard-core commitment to providing sweet returns to its investors make it a perfect candidate for high-yield dividend stocks. Verizon’s options market boasts an average daily trading volume of approximately 37k, which speaks to sufficient market depth for implementing various options tactics. It pays dividends regularly and has a solid financial position, so Verizon is appropriate for covered calls and cash-secured puts. It is also comfortable for traders since the stock is balanced and gives good dividends; options, in turn, can help increase revenue.

Exxon Mobil Corp. ($XOM)

One of the biggest publicly listed oil and gas corporations, Exxon Mobil, provides substantial options trading opportunities and a strong dividend payout. Notwithstanding changes in oil prices, Exxon Mobil has been able to sustain its dividend payments, with a market value of $524 billion and a dividend yield of 3.30%. The company's varied businesses and robust balance sheet bolster this stability. With an average daily volume of around 81k, Exxon Mobil's options are among the most traded in the oil industry. It is helpful for traders wishing to use options methods because of the prevalent high liquidity. The cyclical nature of the oil sector and the company's high dividend yield provide prospects for growth and income and are a decent option for options trading of dividend stocks.

Altria Group Inc. ($MO)

With a market capitalization of $85 billion and a dividend yield of 7.93%, the world’s leading tobacco company – Altria Group, Inc., has a strong market presence. Its dominant position in the tobacco industry and its strategic investments in sectors like vaping and cannabis have helped it provide continuous dividends to its investors, with the options trading volume of approx. 46,000 daily, coupled with the company’s stable cash flows and a whooping P/E ratio of 10.40, this stock should be considered for options trading as executing strategies would be very efficient for traders.

Realty Income Corp. ($O)

Popularly known as “The Monthly Dividend Company,” Realty Income Corporation is a Real Estate Investment Trust whose monthly dividends are supported by cash flows from over 15,000 real estate establishments and properties primarily owned under long-term net lease agreements with commercial clients. Throughout its operations, the business has declared more than 600 consecutive monthly dividends on its common stock, and since Realty Income went public in 1994, the dividend has been raised 124 times. Realty Income's options market has an average daily trading volume of around 4,600 contracts. While it might seem minor compared to other stocks, it still offers sufficient liquidity for options trading with an implied volatility of around 17%. Realty Income's high yield and monthly dividend payments are compelling for options traders seeking a steady income stream. Monthly dividend distributions can be obtained while optimizing returns through strategies like covered calls, giving two-way returns.

Dividend stocks with high yields are a complete package on their own. They mix income and potential profit growth, giving investors two-way rewards. Options trading strategies and their proper implementation can boost these stocks' returns and help manage risks. If you are a novice options traders be sure to select a good easy-to-use options trading brokerage as it can make all the difference in your success. For 2024, the stocks mentioned above top the list, as these picks boast hefty dividend payouts, solid money performance, and active options markets.

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