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3 Stocks to Buy With Dividends Yielding More Than 4%

By Dan Caplinger – Aug 19, 2017 at 10:33AM

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Look out for stocks with good dividend growth and solid yields.

Smart dividend investors balance the desire for high yield against the need for safety and attractive business prospects in the dividend stocks they buy. It takes some effort, but there are ways that investors can get high yields and attractive characteristics in a single stock. Among solid picks for dividend investors, you'll find Enbridge (ENB 0.27%), Qualcomm (QCOM 1.23%), and Duke Energy (DUK 0.21%), all of which have dividend yields of more than 4% and solid prospects for the future.

Get some energy into your portfolio

The energy sector has been under pressure lately, but you'd be hard-pressed to tell from the way that Enbridge has performed. The Canadian pipeline company has been remarkably stable even as crude oil prices plunged in 2015, reflecting the ongoing need for midstream delivery services as long as production levels remained strong. Enbridge has amassed a huge hoard of backlogged business, with key strategic projects that will dramatically expand Canada's ability to export energy products from the middle of the country as well as seeking to boost U.S. transportation capacity as well.

For dividend investors, Enbridge has many attractive features. Not only does it yield 4.6% at current prices, but it has also given its investors higher payouts for 22 consecutive years. The recent acquisition of Spectra Energy further enhances the potential for growth in Enbridge's fundamental business, which could spur additional dividend growth in the future. Even if the company encounters some setbacks, Enbridge is taking full advantage of being in the right place at the right time in energy.

Workers using cranes to connect segments of a pipeline.

Image source: Enbridge.

Betting on technology

Technology stocks have made unlikely dividend candidates in the past, but the giants of the industry have increasingly embraced dividends as a key part of their value proposition to investors. Qualcomm has one of the highest yields in tech, with a current figure of 4.25% rewarding shareholders for their investment in the chipmaker.

Qualcomm has historically driven a lot of revenue from its portfolio of intellectual property, but recent challenges have arisen that have left some investors nervous about the company's ability to keep growing. In addition, a major strategic move that Qualcomm made by paying $38 billion to acquire NXP Semiconductors has failed to move forward because antitrust regulators in Europe are closely scrutinizing the proposed combination. Yet even though the market is focusing mostly on Qualcomm's setbacks recently in light of greater competition, potential gains if things go better than a worst-case scenario for Qualcomm are worth the risk -- especially with solid dividend income going into investors' pockets.

Duke Energy keeps powering up

Finally, Duke Energy continues to be a dividend leader. The utility giant has traditionally been generous with its payouts, following the typical utility business model of offering high yields to its shareholders. At 4.1%, Duke Energy's yield is competitive with its peers and far better than what investors can get from high-quality fixed-income securities.

Duke Energy has three key growth opportunities to look forward to in the future. The company's core regulated business hopes to benefit from proposals to upgrade existing infrastructure, with higher capital spending guaranteeing profits for the utility. Duke has signaled its intention to diversify more fully into the natural gas industry, and expansion through the acquisition of Piedmont Natural Gas added to its existing customer base. Lastly, renewable energy has been a priority for Duke Energy, and even though industry peers are also moving forward with their own plans, Duke hopes to capitalize on rising demand for clean power to boost this relatively small part of its overall business.

The best dividend stocks combine solid yields and good growth opportunities. For Duke Energy, Qualcomm, and Enbridge, yields of more than 4% could be just the beginning of the total returns that shareholders earn from investing in their stocks.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool owns shares of Qualcomm. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Qualcomm Stock Quote
$119.08 (1.23%) $1.45
Duke Energy Stock Quote
Duke Energy
$98.15 (0.21%) $0.21
Enbridge Stock Quote
$40.97 (0.27%) $0.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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