With the market continuing its upward move this year, dividend yields have continued to fall. The S&P 500‘s yield is around 1.2%, near its lowest level in over two decades.
However, several stocks still offer attractive dividend yields. Here are five high-quality dividend stocks with yields well over 5%.
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Brookfield Infrastructure Partners(NYSE: BIP) currently yields around 5.8%, which is higher than the yield of its economically equivalent corporate twin, Brookfield Infrastructure Corporation(NYSE: BIPC), at 4.4%. While both entities provide investors with access to Brookfield’s global infrastructure assets, BIP offers a higher payout due to its partnership structure and because it sends investors a Schedule K-1 federal tax form, which can complicate tax returns. BIPC, in contrast, delivers a lower yield but issues a 1099-DIV, a simpler tax report for investors.
The global infrastructure operator generates stable cash flow. About 85% of its funds from operations (FFO) comes from long-term contracts or regulated frameworks. Meanwhile, Brookfield pays out a conservative portion of its stable cash flow in dividends (60%-70%). It also has a solid investment-grade balance sheet.
Those features give it the flexibility to continue investing in growing its business. Brookfield expects to deliver FFO per share growth of 10% or more, fueled by inflation-driven rate increases, expansion projects, and acquisitions. This easily supports its plan to provide annual dividend increases of 5% to 9% over the long term, further extending its 16-year growth streak.
EPR Properties(NYSE: EPR) currently yields 6.7%. The real estate investment trust (REIT) pays its dividends monthly, making it highly attractive for those seeking a lucrative passive income stream.
The REIT focuses on investing in experiential real estate such as movie theaters, eat & play venues, attractions, and fitness and wellness properties. It leases these properties back to operating tenants under long-term, primarily triple net agreements (NNN). Those leases provide it with predictable rental income to cover its high-yielding dividend.
EPR Properties utilizes a combination of excess cash flow generated after paying dividends, noncore property sales, and balance sheet capacity to invest in additional experiential properties. It aims to invest between $200 million and $300 million annually in acquisitions, development projects, and redevelopments. This investment rate should grow its income per share by 3% to 4% annually, supporting a similar dividend growth rate.
Main Street Capital(NYSE: MAIN) is a business development company (BDC) with a rather unique dividend policy. It pays a monthly dividend set at a sustainable level, allowing investors to receive a recurring income stream they can count on. It has never decreased or suspended this payment. Instead, it has raised it by a cumulative 132% since going public in late 2007. Additionally, Main Street periodically pays a supplemental quarterly dividend. The company’s most recent payments gave it a 6.6% yield.
The BDC supports its dividend payments with a portfolio of debt and equity investments that generate interest and dividend income. The company sets its monthly dividend below its expected income to enhance durability. It also maintains an investment-grade credit rating. Main Street Capital uses its financial flexibility to make more income-generating investments, enabling it to steadily increase its monthly dividend and provide higher supplemental payments.
MPLX(NYSE: MPLX) is a master limited partnership (MLP), similar in structure to Brookfield Infrastructure Partners. Like Brookfield, MPLX also sends a Schedule K-1 tax form to its investors, which affects tax reporting. The energy midstream company yields more than 7.5%.
The MLP generates stable cash flow backed by long-term contracts and regulated rate structures. MPLX currently produces enough cash to cover its lucrative distribution by 1.5 times. That allows it to retain cash to fund expansion projects while maintaining its strong financial profile. It currently has a 3.1 times leverage ratio, well below the 4.0x range its stable cash flows can support.
MPLX recently agreed to acquire Northwind Midstream in a $2.4 billion deal and has multiple organic projects slated to start commercial service through the end of the decade. These growth investments should support continued distribution increases, building on its history of annual payout raises since 2012 and a compound annual distribution growth rate above 10% since 2021.
Realty Income(NYSE: O) currently yields more than 5.5%. The REIT owns a diversified portfolio of commercial real estate (retail, industrial, gaming, and other properties such as data centers) net leased to many of the world’s leading companies. That lease structure provides it with very stable rental income because tenants cover all property operating expenses. The company pays out a conservative portion of its stable income in dividends (around 75% of its adjusted FFO).
Realty Income has increased its dividend 131 times since its public market listing in 1994 (including the last 111 quarters in a row). That steady growth should continue as the REIT acquires more income-producing real estate. With one of the strongest financial profiles in the industry and $14 trillion of real estate suitable for net leases, Realty Income has plenty of room to continue expanding.
These five companies have excellent dividend-paying track records. That’s due in part to their stable and growing cash flows, as well as their strong financial profiles. With these strengths, they should be able to continue growing their high-yielding payouts well into the future. If you’re looking to boost your income and build a solid foundation for your portfolio, these dividend stocks are great ones to consider buying and holding for the long term.
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Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, EPR Properties, Main Street Capital, and Realty Income. The Motley Fool has positions in and recommends EPR Properties and Realty Income. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.
