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3 Top Dividend Stocks With Yields Over 3%

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If you're frustrated with the low dividend yields of many popular stocks, here are three to check out.

The average stock in the S&P 500 pays a dividend yield of just over 1.8%, and stocks with dividends of 3% or more have become somewhat of a rarity, thanks to soaring stock prices in recent years. However, lower-risk, high-yield stocks do exist -- you just need to look for them. Fortunately, our contributors have decided to do some of the work for you. Here are three stocks, EPR Properties (EPR -0.34%), ONEOK (OKE -1.58%), and Tanger Factory Outlet Centers (SKT 0.20%), all of which yield considerably more than 3% and could be excellent additions to your dividend stock portfolio.

A 6% dividend and lots of room to grow

Matt Frankel (EPR Properties): One of the most noticeable trends in the millennial generation is that they value experiences over ownership. In other words, they prefer to spend their money on doing things instead of buying things. And over the next decade or so, the millennial generation will be entering its peak-earning years.

Jar of coins labeled dividends

Image source: Getty Images.

One smart way to play this trend, especially if dividends are a priority for you, is with EPR Properties, a real estate investment trust that primarily invests in experience-based properties. EPR currently owns 378 properties in 43 states.

About half of EPR's properties are occupied by entertainment businesses, primarily megaplex movie theaters. Theater revenue has risen steadily as millennials have come of age, as higher-end experiential factors such as premium seating and in-theater meal service have added to the average spending per consumer.

Another one-fourth of the portfolio is made up of recreation properties, such as golf entertainment complexes, ski parks, and water parks. In total, approximately three-fourths of EPR's property portfolio is made of experience-based properties that especially appeal to millennials.

Finally, the rest of EPR's portfolio is primarily made of education properties, such as public charter schools, early childhood education facilities, and private schools. With more than a million students on charter school waiting lists and a 12% annualized growth rate in recent years, this is another rapidly growing type of real estate and adds an element of diversification to the portfolio.

A 5.6% yield with room to grow

Sean O'Reilly (ONEOK, Inc.): Perfect dividend stocks offer a high-yield, safety, and the potential for growth. For the reasons I'm about to convey, ONEOK is an ideal candidate for investors in search of yield (above, say, 3%).

ONEOK, Inc. is the general partner and owner of ONEOK Partners. The limited partnership through which the company operates is a midstream natural gas company. To the layman, this means it gathers, transports, processes, and in some cases markets, natural gas. Based in Oklahoma, ONEOK has a substantial presence in some of the hottest natural-gas producing regions in the country. Namely, the Williston (think North Dakota) and Delaware (a sub-basin within the Permian of West Texas) Basins.

Recent results have been respectable. Third quarter revenue was up 23% year over year. Alas, thanks to expenses associated with the company's expansionary initiatives and Hurricane Harvey, costs were up and profits flat. Investors should look past the present.

Rates for the company's natural gas pipelines continue to rise (One can own all the natural gas in the world, but if you can't get it to market, you're out of luck. In the 3rd quarter, ONEOK's gathering and processing division charged an average fee of 86 cents per MMBtu of gas, up from 76 cents last year.) This is a direct result of the company's midstream assets in prime natural-gas production areas.

And finally, we come to its dividend: currently a juicy 5.6%. All the better, OKE chalked up a 1.29 dividend coverage ratio in Q3 -- the payout is secure. For investors in search of yields north of 3%, ONEOK is a must-consider.

A 5.2% yielding contrarian play

Reuben Gregg Brewer (Tanger Factory Outlet Centers Inc.): Matt Frankel noted how important experiences are to millennials, which is a solid backdrop for his stock highlight. But don't lose sight of the forest for the trees, as I believe most investors have with regard to the "retail apocalypse" that's being driven by changing shopping habits, notably within the millennial ranks.

Truth is, I'd be hesitant to jump into a retailer during this retail shakeout, but what about one of the leading companies in the mall space? That's where real estate investment trust (REIT) Tanger Factory Outlet Centers and its 5.2% yield comes in.

I just bought this stock myself because it has an incredible record of success behind it, including 24 consecutive years of annual increases. But there's more to it than that, the REIT has an investment grade rated balance sheet, a long history of high occupancy levels (even during recessions), and its funds from operations payout ratio was roughly 55% in 2016. It has ample room to muddle through the current retail shakeout.   

Tanger is a top name in the factory outlet arena, known for building and operating industry leading properties. Although it doesn't have any new malls in the works, sticking with its current roster of 44, it just completed one in late 2017 and expanded another. Thus, 2018 should see improved results even if management hunkers down to further assess the market. I'm certain it will adjust as needed and reward me well for owning it. The yield, by the way, hasn't been this high since the last recession, suggesting now could be a good time to jump in.   

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Stocks Mentioned

Tanger Factory Outlet Centers, Inc. Stock Quote
Tanger Factory Outlet Centers, Inc.
$14.69 (0.20%) $0.03
EPR Properties Stock Quote
EPR Properties
$47.14 (-0.34%) $0.16
ONEOK, Inc. Stock Quote
$54.23 (-1.58%) $0.87

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

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