High-Yield Dividend Stocks to Invest In
Stocks with high dividend yields are attracting my attention more than ever these days. But dividends aren't my only consideration. I also focus on solid underlying businesses and growth prospects. There are plenty of good investment alternatives on the market, but a few especially stand out.
Here are my top high-yield dividend stocks to buy now.
1. Dominion Energy
Utility stocks might seem boring to many investors. However, boring is beautiful in some cases. I think that's the case with Dominion Energy (NYSE: D).
Dominion's stock chart over the last two months could be described as beautiful. The company's share price has soared recently, driven by investors' anticipation of interest rate cuts. If the Federal Reserve reduces rates, I fully expect Dominion Energy stock to continue its momentum, as recent remarks suggest that cuts are increasingly likely.
Lower interest rates cause bond yields to fall, making bonds less attractive to income investors. This, in turn, makes Dominion more attractive with its juicy forward dividend yield of 4.8%. Lower rates also make it cheaper for Dominion to finance its borrowing.
The best aspect of Dominion Energy is its rock-solid business. The company provides electricity or natural gas to more than 4.5 million customers across various states. Its home state has become a significant hub for data centers, presenting a key growth opportunity.
2. Realty Income
I truly believe Realty Income (NYSE: O) ranks among the best dividend stocks around. Its forward dividend yield of 5.1% is a strong selling point. Moreover, Realty Income pays its dividends monthly, which sets it apart.
Realty Income's most impressive feature is its long-term dividend growth. The real estate investment trust (REIT) has increased its dividend payout for 29 consecutive years by a compound annual growth rate of 4.3%.
Lower interest rates should benefit Realty Income for similar reasons as Dominion Energy. Income investors shifting from bonds will find the REIT's high dividend yield appealing. Realty Income borrows heavily to fund acquiring new properties; thus, lower rates will make it less expensive to expand.
Data centers represent a growth opportunity, and Realty Income is also poised to increase its presence in Europe, tapping into a larger market compared to the U.S.
3. United Parcel Service
In some ways, United Parcel Service (NYSE: UPS) might seem like a dividend stock you'd want to avoid due to its recent stock decline. Revenue and earnings fell year over year, and competition from major customers such as Amazon is intensifying.
However, UPS anticipates a significant rebound. The package delivery giant expects improved performance in the latter half of the year. Most of the higher costs from a recent contract were in the first year, allowing for better margins going forward. The company is also focusing on expanding its higher-margin healthcare logistics services.
UPS' management indicates confidence in their recovery plan. They are restarting their stock buyback program, planning to repurchase around $500 million of shares this year and escalating it to approximately $1 billion annually.
UPS' forward dividend yield stands at a hefty 5.1%. The continuous demand for package delivery should empower the company to maintain robust free cash flow, facilitating an ongoing streak of consecutive dividend increases.
Should you invest in Dominion Energy right now?
Before you decide, consider the current market conditions and personal investment strategy. Dominion Energy offers investor stability and is becoming increasingly attractive due to its strong fundamentals.
Frequently Asked Questions
What are high-yield dividend stocks?
High-yield dividend stocks are shares that provide a higher-than-average dividend payout relative to their share price, often attracting income-focused investors.
Why invest in Dominion Energy?
Dominion Energy is appealing due to its solid business model, consistent dividend payments, and potential growth opportunities in emerging markets like data centers.
What is Realty Income known for?
Realty Income is known for its monthly dividend payments and consistent dividend growth, making it a favored choice among income investors.
Is UPS a good investment right now?
UPS shows potential for growth in the latter half of the year, and its dividend yield could provide excellent returns despite recent challenges.
How can I evaluate dividend stocks?
To evaluate dividend stocks, consider factors like dividend yield, payout ratio, company growth, historical performance, and financial health.
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