Soaring stock prices over the past year have driven down dividend yields. The S&P 500(SNPINDEX: ^GSPC) currently yields 1.2%, its lowest level in 20 years.
However, income-seeking investors still have some attractive options. For example, the following five high-yield dividend stocks could turn a $5,000 investment into more than $330 of annual passive income:
Dividend Stock | Investment | Current Yield | Annual Dividend Income |
|---|---|---|---|
Clearway Energy (NYSE: CWEN)(NYSE: CWEN.A) | $1,000.00 | 6.13% | $61.30 |
Enterprise Products Partners (NYSE: EPD) | $1,000.00 | 6.67% | $66.70 |
EPR Properties (NYSE: EPR) | $1,000.00 | 7.71% | $77.10 |
Verizon(NYSE: VZ) | $1,000.00 | 6.40% | $64.00 |
W.P. Carey (NYSE: WPC) | $1,000.00 | 6.25% | $62.50 |
Total | $5,000.00 | 6.63% | $331.60 |
Data source: Google Finance.
For comparison, that same investment in an S&P 500 index fund would only generate about $60 of annual income each year.
Here's a look at each company.
1. Clearway Energy
Clearway Energy is a leading clean power producer. The company generates renewable energy and electricity from environmentally sound natural gas-fired power plants. It sells this power to utilities and large corporate customers under long-term, fixed-rate power purchase agreements.
The company pays most of its stable cash flow to investors in dividends. It uses the cash it retains and its financial flexibility to acquire additional income-generating clean power assets.
Clearway cashed in on the value of its thermal assets a few years ago and has been recycling the capital into higher-returning renewable energy assets. That strategy has it on track to deliver dividend growth near the top end of its 5% to 8% target range through 2026. Meanwhile, it's already securing growth for 2027 and beyond, positioning it to continue increasing its dividend within its target range in the future.
2. Enterprise Products Partners
Enterprise Products Partners is a master limited partnership (MLP) focused on the energy midstream sector. It generates stable cash flow backed by long-term, fixed-rate contracts and government-regulated rate structures. The company distributes a little more than half its cash flow to investors, retaining the rest to fund expansion projects and maintain its elite balance sheet.
The MLP has increased its distribution for 26 years, which should continue. Enterprise has $6.9 billion of major growth capital projects underway, giving it visibility into its ability to grow its cash flows through the end of 2026. That visible growth makes the MLP an ideal passive income investment for those comfortable receiving a K-1 federal tax form each year.
3. EPR Properties
EPR Properties is a real estate investment trust (REIT) focused on owning experiential properties, like movie theaters, eat-and-play venues, and attractions. It leases these properties to operating companies. Those leases provide it with relatively stable rental income.
The REIT pays investors about 70% of its steady cash flow via its monthly dividend. It retains the rest to invest in additional income-generating experiential real estate.
The company invested $214.6 million through the first nine months of the year. It has also committed to invest $150 million into experiential development and redevelopment projects over the next two years. These investments should grow its income, enabling the REIT to continue increasing its dividend.
4. Verizon
Verizon is a leader in the telecom sector. The company's mobile and broadband businesses generate lots of recurring revenue and cash flow. That gives Verizon money to invest in expanding its infrastructure while also paying a lucrative dividend.
The company has increased its payout for 18 straight years -- the longest current streak in the U.S. telecom sector. That upward trend should continue.
Verizon produces more cash than it needs to invest in its business and pay its dividend, which has enabled it to strengthen its balance sheet. That's allowing Verizon to buy Frontier Communications in a $20 billion all-cash deal to bolster its fiber network. That deal will also increase its earnings, driven in part by the expectation that it will capture over $500 million in annual cost savings.
The growing cash flow from these investments should enable Verizon to continue increasing its dividend payment.
5. W. P. Carey
W. P. Carey is a diversified REIT. It owns operationally critical warehouse, industrial, and retail properties. Those properties produce stable rental income that steadily rises at either a fixed rate or one tied to inflation.
The REIT is in the middle of a portfolio refresh. It has exited the office sector and sold off some other noncore properties over the past year. It's recycling that capital into new properties, predominately in the stronger industrial sector.
W.P. Carey has already completed nearly $1 billion of new investments this year and had more than $500 million of additional deals in its pipeline. Those new investments are growing the REIT's cash flow, allowing it to rebuild its dividend (it has increased its payment three times after resetting it last year as part of its office exit). With a strong balance sheet, alower dividend payout ratio after the reset, and more noncore properties to recycle, W. P. Carey is in an excellent position to continue growing its portfolio, cash flow, and dividend.
Great stocks for generating income
The average stock currently has a low dividend yield these days due to surging prices. However, there are still some great income stocks available, including Clearway Energy, EPR Properties, Enterprise Products Partners, Verizon, and W. P. Carey. They can enable you to generate a lot more income for every dollar you invest.
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Matt DiLallo has positions in Clearway Energy, EPR Properties, Enterprise Products Partners, Verizon Communications, and W.P. Carey. The Motley Fool recommends EPR Properties, Enterprise Products Partners, and Verizon Communications. The Motley Fool has a disclosure policy.
