In today's low-interest-rate environment many investors are turning to the stock market in order to generate yield. However, not every dividend-paying stock is worth owning, so investors need to be choosy about which companies they buy.

So which high-yield stocks do I think can be safely purchased today? My top picks are Retail Opportunity Investments (NASDAQ:ROIC)National Grid (NYSE:NGG), and Pfizer (NYSE:PFE). Here's why.

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A grocery-anchored REIT

The growth in e-commerce sales has turned the retail industry on its head. In recent years several high-profile retailers have been forced into bankruptcy, while others have been rapidly closing stores. Investors need to be aware of these realities before putting any money to work in the space.

One retail-focused business that has sailed through this carnage with ease is Retail Opportunity Investments Corp, or ROIC. This company is organized as a real estate investment trust and it focuses on owning shopping centers that are located in affluent areas on the West Coast. That might sound like a risky business model, but ROIC buys shopping centers that are anchored by grocery stores in population-dense markets. The logic is that groceries are nondiscretionary purchases that require frequent trips, and therefore grocery stores should not be easily disrupted by the internet. In addition, investing in a densely populated area limits competition since it would be difficult for a competitor to build a rival shopping center nearby.

These factors make ROIC's properties highly desirable to retailers. In turn, ROIC gets to charge a premium for its space and regularly pass along rent increases that its customers happily pay.

ROIC's history shows that its business model is a thing of beauty. Since the company's IPO in late 2009, its dividend payment has tripled and its share price has more than doubled. That's provided investors with a total return that has blown past the S&P 500.

While ROIC isn't dirt cheap, it does offer investors a 3.5% dividend yield and a chance at above-average growth. That's an attractive combination that makes it worthy of consideration.

An ultra-low-risk utility 

Income investors are naturally attracted to the utility industry since it offers recession-proof dividend payments. That's a big reason why I'm such a big fan of National Grid.

Unlike most utilities, National Grid has assets on two continents. The company owns nearly all of the electricity and gas transmission lines in the United Kingdom, providing it with near monopoly status. What's more, National Grid also owns transmission assets in the U.S., in several northeastern states such as Rhode Island, New York, and Massachusetts. This geographic diversification provides investors with an extra layer of financial safety.

Another attribute that makes National Grid unique is that it is primarily focused on power transmission, not on power generation. This means that National Grid acts as a key middleman between power producers and consumers. That's attractive since transmission is a less regulated business than energy generation. It also protects the company from having to deal with big swings in energy commodity prices. These factors make National Grid a business that investors can count on. 

Despite the company's predictability, shares of National Grid have been tossed aside over the past year over concerns of rising interest rates and the fallout of Brexit. That's pushed its dividend yield up to 4.6%, which makes right now a great time to consider getting in.

A big pharma with a big payout

Pfizer has been a go-to stock for income investors for quite some time, and it isn't hard to figure out why. The company has a long history of buying or developing next-generation drugs that healthcare providers welcome with open arms. In turn, sales and profits grow rapidly as new drugs hit the market.

Currently, Pfizer boasts a number of newly launched drugs that are posting double-digit growth rates. This includes the breast cancer drug Ibrance, the rheumatoid arthritis drug Xeljanz, the blood thinner Eliquis, and more. The combined sales of these drugs are more than offsetting the decline in revenue from Pfizer's product portfolio.

Looking ahead, Pfizer appears to be set up for growth. The company has been on an acquisition binge over the last few years, adding several new businesses to its empire. This includes Hospira, a leading player in the rapidly growing field of biosimiliar drugs. Last year Pfizer ponied up billions to buy out Anacor and Medivation, which added the atopic dermatitis drug Eucrisa and the prostate cancer drug Xtandi to its portfolio. Both of these drugs promise to be top sellers and should quickly be accretive to Pfizer's earnings.

With revenue and profits expected to rise in the coming years, Pfizer looks poised to continue its long streak of buying back stock and increasing its dividend payment. With shares trading around 12 times forward earnings and the dividend yield above 3.7%, Pfizer looks like a solid choice for any income investor. 


This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.