By Steve Dinnen
If you’re in the market for dividend-paying stocks, reach high. Any portfolio of high dividend stocks will start with Verizon Communications Inc. The telecom giant pays a robust annualized dividend of 6.84%, much better than the 2% average paid by Dow Jones 30 stocks, or the 4.03% recent yield from 10-year Treasuries.
Here’s a brief list of popular high dividend stocks:
11.15% — LYB. LyondellBasell Industries NV; a dividend trap?
7.40% — CAG. Conagra Brands, hot dogs, olive oil, Chef Boyardee.
7.63% — UPS. United Parcel Service, airborne package delivery.
6.84% — VZ. The aforementioned Verizon.
6.55% — PFE. Pfizer Inc., Big Pharma stalwart.
6.36% — MO. Altria Group Inc., puffing profits from cigarettes.
6.29% — KHC. Kraft Heinz Co., mayo and ketchup; breakup pending.
These are solid companies with long histories of paying out an outsized portion of their earnings, but they’re not guaranteed winners. The Dutch chemicals company LyondellBasell has seen profits slump, and its share price has fallen 50% over the past year. That has pushed its yield into double digits, creating a potential dividend trap as investors pile on to grab that fat payout only to see it cut. There is no word from LYB that it will do that, but just three months ago another chemicals conglomerate, Dow Inc., slashed its dividend by 50% amid a downturn in business. It remains a strong 6.78%.
High-dividend stocks have traditionally come from banks, utilities and Big Pharma. In recent decades, real estate investment trusts (REITs) and business development corporations (BDCs) have joined the list, thanks to federal legislation that allows these entities to pay shareholders directly.
REITs came first, in 1960. They invest in real estate and by law are required to pay 90% of their taxable income to shareholders. They number more than 200, including:
8.34% — DEA. Easterly Government Properties.
7.73% — ALX. Alexanders Inc., New York City metro real estate.
7.25% — NSA. National Storage Affiliates Trust, self-storage.
6.76% — OHI. Omega Healthcare Investors Inc.
The yields you see vary depending on the amount of the firm’s profits. And of course, the share prices fluctuate.
As for BDCs, they’re basically non-bank lenders to businesses, and there are dozens. Here are a few:
18.89% — OFS. OFS Capital Corp.
16.93% — FSK. FS KKR Capital Corp.
12.89% — SCM. Stellus Capital Investment Corp.
Yields right now are high, due largely to a widespread share price slump caused by falling interest rates. Going forward, share prices will rebound or dividends will be cut. This is not risk-free investing.
Preferred shares also offer relatively high dividends. These are a share class favored by banks. U.S. Bancorp, for instance, pays a decent 4.38% dividend on its common shares and then offers six different preferred shares, with dividends as high as 7%.
Closer to home, Iowa has a few solid dividend payers, including Principal Financial Group (PFG) at 3.93% and West Bancorporation (WTBA) at 5.02%.
A dozen paydays, one portfolio
Publicly traded companies issue earnings reports quarterly, and those that pay dividends typically announce payout dates at the same time. Some, however, opt to pay monthly.
Realty Income (O), one of the best-known monthly dividend payers, is structured as a real estate investment trust (REIT) and owns about 15,000 retail properties nationwide. It pays an annualized dividend of $3.23, distributed in monthly installments.
Another notable monthly dividend payer is STAG Industrial Inc., also a REIT, which specializes in industrial properties. It spreads its current $1.49 payout over 12 months. Other examples include Main Street Capital Corp. (MAIN), mortgage REIT AGNC Investment Corp. (AGNC), Gladstone Commercial (GOOD) and hotel operator Apple Hospitality (APLE).
A number of exchange-traded funds (ETFs) also go the monthly dividend route. The list includes JPMorgan Equity Premium Income ETF (JEPI) and Global X Nasdaq 100 Covered Call ETF (QYLD). Fixed-income ETFs appear here, too, including BondBloxx CCC Rated USD High Yield Corporate Bond ETF (XCCC) and Global X U.S. Preferred ETF (PFFD).
Fewer companies choose to pay dividends annually. Many are European, such as Logitech International SA (LOGI) of Switzerland and SAP SE (SAP) of Germany. The U.S. steelmaker Nucor (NUE) also pays its dividend just once a year, as does the racetrack operator Churchill Downs (CHDN), at 41 cents per share — amounting to a modest yield of 0.46%.
While the frequency of payouts varies, the principle is the same: Steady dividend income can be a reliable way to smooth out market swings and reward long-term investors. Whether you prefer a monthly check or an annual bonus, consistency is the real prize.
