If you're looking to pump up your passive income stream, there are a handful of high-yield dividend stocks that deserve your attention. AbbVie(NYSE: ABBV), Ares Capital(NASDAQ: ARCC), and Realty Income(NYSE: O) have what it takes to deliver heaps of dividend payments to your portfolio in the years ahead.
Whether you're interested in a high yield up front, rapid payout growth, or a little of both, these dividend payers have what it takes to deliver heaps of cash over the long run. Best of all, you don't have to lift a finger after tapping the buy button.
1. AbbVie
By revenue, AbbVie is the world's fourth largest drugmaker. It's raised its dividend payout a healthy 45% over the past five years despite going through the most significant patent cliff in its industry's history.
Humira, an injection used to treat arthritis, psoriasis, and inflammatory bowel diseases, was the world's top-selling drug, with U.S. sales that reached $18.6 billion in 2022.
AbbVie's stock price has been under pressure because the company lost patent-protected exclusivity for Humira in the U.S. last year. The pharma stock offers a 3.6% dividend yield at recent prices. and despite Humira-related losses, the payout could keep rising quickly over the next five years.
Global Humira sales sank by 36% year over year in the first quarter, but total revenue climbed by 0.7% thanks to strong growth from Skyrizi, a new psoriasis treatment, and Rinvoq, a new arthritis treatment.
Skyrizi and Rinvoq launched in 2019, but they've been so successful that AbbVie thinks that in 2027, they'll contribute more than $27 billion in combined annual sales.
2. Ares Capital
Ares Capital is a business development company (BDC) that offers a huge 9.3% dividend yield at recent prices. It's only raised its dividend payout by 14.3% over the past five years. With such a high yield up front, though, simply maintaining its current payout is enough to deliver a return that satisfies most investors.
Ares Capital and its BDC peers are essentially lenders to misize businesses that are too big for small-business loans but too small for consideration by a traditional American bank. About 82% of its loan originations have gone to companies that earn more than $25 million annually before interest, taxes, depreciation, and amortization (EBITDA).
With plenty of businesses hungry for capital, Ares Capital's underwriting team can pick and choose highly reliable borrowers. At the end of March, just 1.7% of its portfolio at cost was on non-accrual status. That's less than half the average rate of non-accruals across the BDC industry. With a highly experienced underwriting team and an already large list of existing borrowers, this BDC could continue to maintain and raise its payout for many years to come.
3. Realty Income
Realty Income is the largest publicly traded net lease real estate investment trust (REIT). It's also one of the most reliable dividend growers in history. The REIT pays a monthly dividend that it has raised 126 times since it started trading publicly in 1994.
At recent prices, Realty Income shares offer a 5.9% dividend yield. The company's raised its dividend payout by 16.1% over the past five years, and many years of steady dividend payout raises seem likely.
Realty Income benefits from a diverse portfolio. Its top three clients -- Dollar General, Walgreens, and Dollar Tree -- are responsible for less than 10% of annual contracted rent. It has clients in retail, but many are grocery store and home improvement store operators that are insulated from changing consumer behavior.
Decades of rising cash flows earned Realty Income an A3 credit rating from Moody's. That means it can borrow at lower interest rates than nearly all of its peers. This might not be the fastest-rising dividend payout in your portfolio, but it could be the most reliable. Adding some shares now looks like a smart move for most investors.
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Cory Renauer has positions in Ares Capital. The Motley Fool has positions in and recommends Moody's and Realty Income. The Motley Fool has a disclosure policy.
