Dividends that are built to last can be hard to come by, especially in a business environment that changes extremely rapidly. But there are high-yield dividend stocks that are worth investing in over the long term, even today.
We asked three of our investors for their favorite high-yield dividend stock for this century and the picks ran across some of the biggest industries in the world. Here's why Crown Castle International Corp. (CCI -1.29%), General Electric Company (GE 1.30%), and Las Vegas Sands Corp. (LVS -0.63%) are dividends to bet on for the long term.
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A new generation of dividends
Travis Hoium (Las Vegas Sands): The 21st century's entertainment will be all about experiences and the bigger, the better. In the U.S., that means visiting Las Vegas and its mega resorts with gambling, world-class restaurants, nightclubs, Cirque du Soleil shows, and more. In Macau, experience entertainment means massive resorts with baccarat tables and a growing number of Las Vegas-style entertainment options. And Las Vegas Sands is a leader in both markets.
The wonderful thing about the gaming industry for dividend investors is that most of the investment is up front when a resort is built and then casinos are a cash flow machine. In the last 12 months, Las Vegas Sands has generated $4.61 billion in adjusted property EBITDA, a proxy for a resort's cash flow generation, and that figure will likely grow as Asia's gaming market recovers.
The cash flow generation drives a 4.8% dividend yield and Las Vegas Sands has grown the dividend each year since it was introduced in 2012. With the demand for entertainment experiences growing and the gaming business generating excess cash flow year after year, Las Vegas Sands is a great dividend to own for this century.
Riding the data boom
Brian Feroldi (Crown Castle International): U.S. smartphone users are likely gleefully aware that T-Mobile and Sprint started offering unlimited data plans about a year ago in an effort to steal market share away from Verizon and AT&T. Thankfully, the strategy worked, which forced the two lumbering giants to follow suit. This development has been a blessing for data hogs who use loads of bandwidth each month, but it's been rotten news for the wireless providers themselves. The reason is that all of that extra data demand is going to put a lot of strain on their networks. As a result, these companies are going to have to invest in extra capacity to ensure they can handle the surging demand.
This chain of events should be music to the ears of Crown Castle International's investors. This real estate investment trust specializes in leasing out space on its vast network of 40,000 cell towers to carriers that need to beef up their networks. What's more, this should be a just one-time gain for Crown Castle, either. The reason is that the company makes its customers sign long-term agreements that have annual rent increases before they can add the additional equipment.
Amazingly, there's more to this company's growth story than just increased demand for tower space. Crown Castle also looks poised to grow from the expansion of its vast fiber optic network. The company recently announced plans to more than double its footprint thanks to its pending acquisition of Lightower. After this $7.1 billion deal closes, the company will own or have the rights to more than 60,000 miles of fiber that is located near several top metro markets.
Between its tower and fiber business, Crown Castle looks built for substantial growth in the years ahead. What's more, management believes that once the Lightower acquisition is complete, it will be able to grow its dividend by 7% to 8% annually. That's an attractive growth rate for a company that already boasts a dividend yield of 3.8%, which makes this a high-yield stock that even growth investors can learn to love.
An industrial giant selling at a high-yield price
Tyler Crowe (General Electric): General Electric isn't typically what you would consider a high-yield dividend stock. If you look at the stock today, though, its dividend yield of 3.7% is flirting with high-yield territory. Wall Street has been questioning Jeff Immelt's ability to turn this company around and has hammered its stock as a result. For those that want to invest in the next great leap in productivity, then General Electric is a company to consider.
Immelt's plan to transform General Electric over the past several years has been two pronged: shed ancillary assets to focus on industrial manufacturing again, and integrate remote sensing and machine learning -- the Industrial Internet of Things -- into its products. A lot of attention has been given to the former but not as much to the latter, even though GE's Predix cloud platform is more likely to drive bottom-line results for years. In fact, Predix is already a $5-billion-a-year in revenue business and should help drive higher margins across its industrial segments as more customers use Predix-based applications for predictive maintenance and operations optimization.
I am not so naive to say that Wall Street is completely mispricing this stock right now. Several of its business segments have struggled recently and management has overpromised and underdelivered on earnings. That said, incorporating Predix into its various offerings is a major catalyst for the company that can't be overlooked. With GE's dividend as high as it is right now, it seems as good of a time as any to invest.
