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3 Stocks to Buy With Dividends Yielding More Than 6%

By Dan Caplinger - Dec 28, 2017 at 7:59AM

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Early in your career, growth is the most important characteristic for a stock. As you get closer to retirement, income becomes more of a factor in determining which investments you make. Dividend stocks can give you both growth and income, and you can even find some stocks that pay out 6% or more in dividend yields.

Among the stocks that have 6% yields are Apple Hospitality REIT (APLE 0.67%), Cheniere Energy Partners (CQP 0.79%), and Enterprise Products Partners (EPD 0.97%). Below, you'll learn more about these companies and how they can help provide the income you need.

The REIT stuff for hotel investors

Real estate investment trusts (REITs) can be a great way for investors to get exposure to real estate. REITs are required to pay out at least 90% of their income in order to obtain favorable pass-through tax status, and the resulting dividends make for extremely strong yields. Apple Hospitality currently pays out about 6.1%, and many have high hopes for the REIT's future prospects.

Architect rendering of a Courtyard by Marriott location, U-shaped with a courtyard in the middle.

Image source: Apple Hospitality.

Apple Hospitality focuses on select-service hotel properties, which offer simple accommodations without the amenities that full-service hotels provide, such as restaurants. Among its portfolio, you'll find well-known brands like Courtyard by Marriott, Hampton Inn, and Homewood Suites. With about 30,000 rooms in more than 200 properties across the nation, Apple Hospitality has been able to make smart partnerships with hotel-management companies. With a focus on mid-market properties, Apple Hospitality hopes to be able to weather cyclical downturns and still pay out lucrative income distributions to its REIT shareholders.

Banking on gas

Natural gas has been in a price slump in the U.S. for years, but overseas, the cleaner-burning fuel commands premium prices. That has motivated companies like Cheniere Energy Partners to look for ways to take advantage of arbitrage opportunities, and limited partnership parent Cheniere Energy (LNG 0.87%) has focused on building terminals for exporting natural gas in liquefied form. In particular, Cheniere Energy Partners operates the Sabine Pass LNG export facility, as well as the Creole Trail pipeline that provides it with natural gas for export.

Sabine Pass is mostly complete, with four of its five trains fully done and a fifth expected to be finished within the next year or two. Once LNG shipments began, Cheniere Energy Partners was able to start making distributions based on the contract revenue it brought in. The partnership hopes to see even stronger revenue as more capacity comes online, and that could boost distribution payments even higher in the foreseeable future than the current 6.2% yield it pays.

An Enterprise-ing opportunity

Finally, Enterprise Products Partners is a giant in the pipeline and infrastructure segment of the energy sector. The stock yields 6.3%, taking full advantage of the demand to transport energy products from production areas across the nation to established markets for refining.

Enterprise didn't have the strongest 2017, with challenges like Hurricane Harvey in Texas and volatile oil prices having a negative impact on its product shipment volumes. Moreover, Enterprise disappointed dividend investors by deciding not to grow its distributions at as quick a pace as it had in the past. Nevertheless, by using capital to invest back into the business and find new opportunities for expansion, Enterprise Products Partners hopes eventually to produce even faster distribution growth that should satisfy long-term dividend investors for years to come.

Be smart with high-yield dividend stocks

There aren't that many stocks that yield more than 6%, but it's still essential to be picky about the ones you add to your portfolio. The energy sector is full of high-risk plays, but Enterprise and Cheniere have both done a good job of proving their stability in a tough market. Meanwhile, the real estate exposure that Apple Hospitality can provide could help you round out your income portfolio exposure in 2018.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Enterprise Products Partners and Marriott International. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Enterprise Products Partners L.P. Stock Quote
Enterprise Products Partners L.P.
EPD
$25.95 (0.97%) $0.25
Cheniere Energy Partners, L.P. Stock Quote
Cheniere Energy Partners, L.P.
CQP
$46.22 (0.79%) $0.36
Apple Hospitality REIT, Inc. Stock Quote
Apple Hospitality REIT, Inc.
APLE
$16.47 (0.67%) $0.11
Cheniere Energy, Inc. Stock Quote
Cheniere Energy, Inc.
LNG
$147.71 (0.87%) $1.27

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

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