Down 97%, Should Investors Buy This High-Yield Dividend Stock in February?
Key Points
This company’s 5.17% dividend yield is much higher than what 10-year Treasuries offer.
Rising free cash flow and lower debt mean that the dividend is safe for now.
If it’s capital gains that you're after, maybe it's best to avoid this stock.
Investors can have totally different objectives. The stock market is a massive arena where participants don't have to play the same games. Some are just after a steady stream of income.
If this sounds like you, maybe it's time to look at this business that Berkshire Hathaway has a 37% stake in. It's trading 97% below its peak (as of Feb. 18). Should investors buy this high-yield dividend stock in February?
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Yielding more than 10-year Treasuries
The company whose share price has gotten hammered is Sirius XM (NASDAQ: SIRI), the only satellite radio operator in the U.S. Dividend investors have their eyes wide open, since this stock currently carries a dividend yield of 5.17%. On a $10,000 investment, this translates to $517 in annual passive income.
At the same time, 10-year U.S. Treasuries currently provide a yield of 4.08%. Buying Sirius XM appears to be a reasonable move for income-hungry investors.
Sirius XM's dividend is safe for now
Sirius XM paid out $365 million in dividends in 2025. It generated $1.26 billion in free cash flow (FCF) last year. The leadership team expects FCF to total $1.35 billion in 2026.
The balance sheet is also getting cleaned up. "We reduced total debt by $669 million during the year, including nearly $371 million in the fourth quarter," CFO Zach Coughlin said on the Q4 2025 earnings call. Management also touts the company's liquidity position.
It doesn't appear that the dividend is at any risk of being cut or eliminated. Returning capital to shareholders is a priority.
Investors shouldn't bet on meaningful capital gains
Sirius XM makes sense for investors who only care about earning a high yield. It generates 76% of its revenue from subscriptions, which are stable and add predictability to the business model. Since this is a company that earns consistently positive FCF, investors can depend on receiving their quarterly payout of $0.27 per share.
Investors who are after capital gains, however, will probably want to avoid this stock. Sirius XM's self-pay subscriber base declined by 301,000 in 2025. This is a business that appears to be in a long-term cycle of decline. The blame can be traced to technological progress.
Sirius XM is facing an uphill battle when it comes to expanding its user base and top line. Think about the competitive forces that have become more pronounced over the past decade. There are popular streaming platforms out there that, when combined with capable smartphones and faster connectivity speeds, give consumers what is perhaps a better value proposition.
So, there is no guarantee that Sirius XM's stock price will rise in the years ahead.
Should you buy stock in Sirius XM right now?
Before you buy stock in Sirius XM, consider this:
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
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