A combination of high yield and stable outlook should get anyone’s attention. The past year of a frothy bull market has pulled attention away from the slow-and-steady dividend payers, but retirees and income investors still need to find lower-risk stocks that will generate cash returns regardless of market performance.
There’s no one-size-fits-all dividend investing strategy. But these three dividend stocks that produce strong yields without taking on too much risk are worth considering for any income investor.
Stag Industrial (NYSE:STAG) is a real estate investment trust (REIT) with over 400 properties across numerous U.S. states. The company focuses on single-tenant industrial properties, most of which are warehouses and distribution centers. The global pandemic has created all sorts of problems for real estate, both in terms of immediate shocks and the emergence of long-term trends. The sharp decline in business activity has threatened REIT cash flows, with many of their tenants struggling to meet lease obligations. Long-term demand for brick-and-mortar retail, office space, and residential properties in some geographies is also uncertain.
Stag’s footprint of warehouses and distribution centers is dependent on industrial activity and e-commerce volume, both of which are performing well in the current economy. The REIT’s market price has been influenced by the same forces shaping the entire real estate sector, but the company is definitely in a more stable position than many of its peers. That’s created a compelling dividend play with the opportunity for appreciation if and when real estate stocks start attracting more capital.
Stag pays a monthly dividend, which many income investors love. Retirees who live off their dividend income are likely to enjoy those monthly distributions. Stag also pays a healthy 4.5% forward dividend yield, meaning it’s producing a lot of income per dollar invested. Importantly, the REIT’s distributions seem sustainable. The company produced $1.90 in funds from operations (FFO) during 2020, an increase of more than 3% over the prior year through the pandemic crisis. Stag’s cash available for distribution rose more than 20% during the year to $243 million. That is more than enough to support its current annualized distribution of $1.45 per share.
Verizon Communications (NYSE:VZ) is a North American telecommunications behemoth, and it leads the U.S. market in mobile subscribers. The company reported slightly lower revenue and profits in 2020 compared to 2019, but it delivered strong free cash flows through a challenging economy. There is also some concern that it is losing ground to T-Mobile (NASDAQ:TMUS) in the 5G rollout because the challenger was quicker to market with next-generation service.
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