Many dividend investors immediately gravitate to the stocks that have the highest yields available. Yet if you only look at yield, you can easily find yourself in a dividend trap that eventually springs when the company has to reduce or eliminate its quarterly payout. In today's low interest rate environment, finding stocks that yield more than 6% with complete safety is nearly impossible. Yet if you're willing to accept at least some risk, then there are several stocks with 6% yields that are worth a closer look.
For years, BP (NYSE:BP) has been on the outs with U.S. investors. After the Gulf oil spill cost the company billions and led to a brief suspension of dividends, BP shareholders have never seen their stock recover. Years of litigation held back the oil giant even when energy prices were high, and the recent swoon in crude and natural gas has only further damaged the company's share price.
Yet through it all, BP was able to restore dividend payments, albeit at a lower level, and has since given investors regular increases to their quarterly payouts roughly every year. Today, BP's $0.60-per-share dividend every three months works out to a yield of more than 7%. Those following the stock expect earnings to fall again in 2016, but by next year, BP should earn enough to cover its dividend payments. If energy prices can continue to recover as they have during the early part of 2016, then BP could have the ability finally to claw back some of its extensive losses from the post-spill and energy-crash periods. Moreover, the company has repeatedly said that its first priority is sustaining its dividend, and clarity in legal liability is finally putting BP in a position to move forward.
Real estate has long been an area that has produced solid income for investors, and real estate investment trusts (REITs) have gotten increasingly popular over the past 20 years. HCP (NYSE:HCP) is a REIT that focuses on the healthcare field, owning senior living properties, post-acute care facilities, medical office buildings, and life-science laboratories and facilities. The market for healthcare-related real estate has been strong, in large part because demographic trends indicate that a growing segment of the population is aging and will need more extensive healthcare services in the near future.
HCP has a long history of treating shareholders well, raising its dividend every single year for more than 30 years. Currently, the healthcare REIT has a yield of 6.8%. Investors should be aware that HCP is looking at spinning off its skilled nursing facility properties into a separately traded entity, and bullish investors are hopeful that the move will increase the value of their total holdings in HCP. Regardless, the income potential that HCP gives its shareholders is something that many shareholders find is worth any risk of a slowdown in healthcare-related growth in the future.
Las Vegas Sands
The odds are always in the house's favor, and casino stocks like Las Vegas Sands (NYSE:LVS) have taken full advantage of that fact to produce impressive profits. The Sands name started in the U.S. gaming capital of Las Vegas, but the company is now a worldwide powerhouse in the industry. In fact, Las Vegas Sands owes most of its long-term success to the Asian gaming capital of Macau, where the company was one of the first-movers in the industry to see the city's potential to draw visitors from across the entire region.
Sands' current dividend yield is 6.2%, and that comes largely because of share-price declines stemming from the industrywide slowdown in gaming activity in Macau. Over the past couple of years, revenue from Macau has plunged, and that has hit Las Vegas Sands' stock price hard, along with those of its peers. However, investors now believe that the worst might finally be behind Las Vegas Sands with respect to the Asian gaming capital.
Many see danger with Sands' dividend, especially given the cash flow needs involved with casino construction and expansion. If China and other Asian economies remain sluggish, Las Vegas Sands could have trouble earning enough to sustain its payout. However, if a turnaround is coming, then the potential for share-price appreciation could be too good to pass up.
High-yield dividend stocks always come with potential risks. Yet for those willing to accept those risks, the rewards can be enticing. These three stocks are worth a closer look, and if things go well for them, then the dividends they pay could continue for a long time into the future.