Look up “yield” in the dictionary. One of the first definitions you’ll find is something along the lines of to give up or surrender. Of course, investors have another meaning in mind when they think about yield. They’re thinking about the dividends they can receive by buying stocks.
Unfortunately, the investing definition of yield sometimes comes joined at the hip with the surrender definition. Investors can at times feel like they have to give up a lot to gain a high dividend yield. That doesn’t have to be the case, though. Here are three high-yield dividend stocks I’d buy right now.
You won’t have to give up much at all investing in AbbVie (NYSE:ABBV). The big drug stock offers income, value, and growth.
AbbVie’s dividend yield currently stands at close to 4.5%. The company has increased its dividend by a whopping 225% since its spin-off from Abbott in 2013. It’s also a Dividend Aristocrat with 49 consecutive annual dividend increases.
Many investors would also consider AbbVie a bargain. Its shares trade at a little over nine times expected earnings. That’s well below the forward earnings multiple of 13.5 for the pharmaceutical companies in the S&P 500.
AbbVie should even deliver solid long-term growth. Granted, there will be a blip in 2023 when the company’s top-selling drug Humira faces biosimilar rivals in the U.S. However, the company expects a quick rebound with strong revenue growth through the rest of the decade.
Easterly Government Properties
Easterly Government Properties (NYSE:DEA) ranks as one of the best — and perhaps most boring — dividend stocks around. It’s a real estate investment trust (REIT) with a dividend yield of 5.2%. You can’t count on annual dividend hikes with Easterly, but the payout is rock-solid.
As Easterly chairman Darrell Crate said in the company’s Q1 conference call, “We’re not a complicated story. We keep it simple. We purchase and develop the U.S. government-leased assets and pass along the stable cash flows and superior tenant credit quality to our shareholders, generating strong risk-adjusted returns.”
Leasing properties to the U.S. government might not be super-exciting. However, it’s super-safe. The rent always gets paid on time. If there’s ever a point where Uncle Sam can’t make a payment, the world has much bigger things to worry about than dividend yields.
This business model has worked really well for Easterly. The company has increased its funds from operations (FFO) at a compound annual growth rate of around 4% while paying a dividend yield that’s typically close to 5%. That’s the kind of boring stock that I suspect income-seeking investors will really like.
Enterprise Products Partners
Enterprise Products Partners’ (NYSE:EPD) dividend yield of 7.6% is the juiciest of these three stocks. The midstream energy company has increased its distribution for 22 consecutive years, an impressive track record considering that EPD operates in a relatively volatile industry.
Volatility isn’t always a negative thing, though. EPD’s shares have soared more than 20% year to date with several factors driving fuel prices higher.
But does the shift to clean energy sources jeopardize EPD’s prospects? Not anytime soon. The demand for fossil fuels is likely to continue increasing over the next several decades even as renewable energy gains additional traction. EPD views areas such as hydrogen and carbon capture and storage as opportunities rather than threats. The company could expand more into these technologies in the future.
I expect that the stock will remain volatile going forward. That’s just the nature of the energy business. However, I also think that investors will be able to count on continued strong distributions from Enterprise Products Partners for years to come.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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