Dividend Stocks – High dividend stocks appeal to many retirement investors because they provide passive income. Unlike fixed interest rates on bonds, dividends can be increased each year to keep up with inflation.
But not all high-dividend stocks are safe. From aggressive liquidity ratios to risky debt and trading in a secular recession, high dividend stocks require additional research to avoid investing in yield traps.
We examine the universe of high dividend stocks to identify safe dividend companies. The business maintains a prudent dividend policy, a strong balance sheet and operations that generate predictable cash flow.
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Let’s take a look at the top 25 highest-paying stocks that can help investors secure income in retirement.
The highest dividend paying stocks below are ranked by how many consecutive years they have held or increased their dividends, starting with the shortest.
Named after its founder and established in 1973, V.P. Cary (WPC) has more than 1,300 family-owned properties that primarily include industrial, warehouse, retail and self-service markets.
Despite going public in 1998 and paying a higher dividend each year, the REIT surprised investors in September by announcing plans to exit all of its office properties (15% rent) and cut dividends to account for cash flow.
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We provide further analysis of this event and believe the rest of the business remains attractive for long-term returns and capital preservation.
The REIT’s diverse portfolio leases to more than 320 tenants operating in more than 20 industries across the US. and Europe. No tenant has more than about 3% of sales and W.P. Carey is not overly dependent on any one market.
V.P. Carey’s risk profile is strengthened by the firm’s focus on buildings that serve critical tenant functions. Examples include major distribution facilities, profitable manufacturing facilities, and retail stores.
These operationally critical properties are also mostly occupied by larger companies, such as U-Haul and Marriott, which are better prepared to weather the economic crisis.
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Combined with an average lease term of over 11 years, W.P. Cary has historically maintained high occupancy rates of nearly 100% and collected nearly all of its rent during the 2020 pandemic.
Further backed by a credit rating of BBB+ and a healthy payout ratio of around 70%, W.P. Carey is an attractive high-yielding dividend stock that should be able to build a long streak of higher dividend payments.
Founded in 1898, International Paper (IP) derives approximately 85% of its sales from the production of paperboard and food and beverage cartons, other durable materials such as chemicals and textiles, and durable goods. in e-commerce and shipping.
The container market has consolidated over time, is dominated by a small number of companies, and International Paper is the largest player with over 30% share in North America.
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As a result, almost all of the company’s production capacity was put on the global cost curve in the first quarter, and the reduction in the number of competitors helped speed up and price discipline in the industry.
Apart from a 10% dividend cut linked to the disposal of International Paper’s low-margin printing paper business in 2021, which accounts for about 20% of sales, the company has cut its dividend only once since its first payment in 1946.
The layoffs occurred in 2009 and were linked to the company’s heavily leveraged balance sheet, which swelled in 2008 after completing a $6 billion deal to buy Weyerhaeuser’s packaging assets.
International Paper looks set to become a reliable high dividend stock today. For example, the BBB-rated company’s balance sheet is the healthiest it has been in at least a decade, reflecting management’s efforts to reduce debt and avoid large acquisitions.
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Looking ahead, demand for durable boxes is likely to grow slowly but steadily as a result of increased e-commerce activity and sustainable delivery in key markets such as food manufacturing.
While pricing and operating rates will remain sensitive to the broader economy, International Paper can maintain its position as a high-dividend stock for investors in line with industry cycles.
AT&T ( T ) has disappointed investors for years. From overpaying for acquisitions to stretching the company’s balance sheet and cutting dividends in 2021, management has found no shortage of ways to destroy stock value.
But the future looks brighter. After losing DirecTV and its media business, wireless and Internet services now make up the majority of AT&T’s profits.
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These businesses have a high barrier to entry due to their capital intensity and generate predictable cash flows over the economic cycle due to the basic needs they serve.
With management’s increased focus on its core business, AT&T has the potential for strong wireless and broadband revenue growth as well as improved margins.
Combined with a healthy payout ratio of around 50% and steady cash flow generation to bolster BBB’s balance sheet, AT&T’s high dividend is more supportive.
However, recent allegations of the company’s connection to lead-tainted wiring could hamper the company’s efforts to reduce debt. We are monitoring these developments to determine whether they may have a material impact on AT&T’s balance sheet.
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Also, as the company continues to return to its telecom roots and no longer focuses on empire building, contrarian investors interested in high-yielding dividend stocks may want to take another look at AT&T.
Since its founding in 1997, Kinder Morgan (KMI) has grown into the largest midstream infrastructure company in North America. The company makes most of its money from pipelines with a balance between refined products and pipelines, storing and selling the carbon dioxide used in oil production.
Kinder Morgan’s pipelines, storage facilities and terminals are integrated into nearly every part of the US energy industry, including all major shale gas, oil formation and Gulf Coast export markets.
Despite generating steady cash flow from its core infrastructure assets, Kinder Morgan burned 75% of high-income investors in 2015 by cutting its dividend. (The company has
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The payout reduction is due to the company’s high leverage and reliance on share issuance to finance expansion projects.
Management prioritized spending growth and maintained Kinder Morgan’s credit rating over dividends as oil prices tumbled in 2015, unsettling the industry’s mainstream investors and cutting off access to capital financing.
Since then, Kinder Morgan has reduced its business profile by implementing a self-financing model (no need to issue shares), reduced its growth ambitions, reduced its debt and raised its credit rating by one notch to BBB.
Combined with a conservative payout ratio of around 50% and steady cash flow supported mostly by long-term contracts and take-or-pay cash contracts, Kinder Morgan should be one of the more reliable high-dividend stocks going forward.
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Founded in 1994, Crown Castle (CCI) is the nation’s largest provider of shared wireless infrastructure with thousands of towers, small cell nodes and miles of fiber-backed communications networks in every major US market.
T-Mobile, AT&T and Verizon account for about 70% of Crown Castle’s revenue. These carriers use communication equipment on REIT towers to transmit signals between the tower and nearby mobile devices.
Crown Castle’s small cell antennas and the fiber optic cables that connect them are typically placed on poles and street lights in densely populated areas to supplement the network capacity provided by the tower.
Carriers have no substitute for wireless infrastructure, which is a core function of their business. Renting tower space is also more cost-effective than owning it, since Crown Castle has equipment from multiple customers on a single infrastructure.
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The end result is a steady stream of income supported by long-term leases with an almost 100% renewal rate. As demand for wireless data continues to grow, operators will need to use more spectrum and strengthen their networks, securing more business for Crown Castle over time.
While slowing 5G spending and higher interest rates have dampened near-term cash flow and dividend growth prospects, management believes Crown Castle is likely to return to annual payout growth of 7% to 9% going forward.
Also backed by a BBB credit rating, Crown Castle is a high-yield REIT that offers attractive income and growth over time.
Founded in 2011, Physicians Realty Trust (DOC) owns approximately 300 medical office buildings (MOBs) in more than 30 states. The REIT’s portfolio is balanced between MOBs located on campus, with hospitals and off-campus properties closer to where patients live.
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This is a recession-proof business. Physicians Realty generates a steady stream of rental income from its long triple net leases with tenants such as physicians and health care systems that benefit from continued demand for their healthcare services.
A strong and diverse tenant profile further reduces the risk. More than 60% of the REIT’s tenants are considered investment grade, with no tenant exceeding 6% in annual rent. MOB Physicians Realty is spread across many markets, including areas outside major cities, with 7% of leasable square footage.
These features have kept Physicians Realty’s rental collection rate at or above 98% each month throughout 2020, even as numerous healthcare providers experienced business disruptions due to pandemic-related restrictions. The REIT’s occupancy rate also remains consistently above 90%.
Combined with a BBB credit rating and various demands due to higher healthcare costs caused by an aging population, Physicians Realty is expected to keep its salary line intact.
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