Investors are often told that they can safely withdraw 4% of their portfolios upon retirement to help fund their living expenses. While this typically requires selling off assets, there are some high-quality dividend stocks that currently yield more than 4%. Filling your portfolio with these types of investments could make it possible for you to live off your dividend income alone, thereby reducing the need to decide which assets to sell -- and when.
If that sounds appealing, read on to learn about two outstanding businesses that can help you satisfy your income requirements.
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Fun for thrill- and yield-seekers alike
Cedar Fair (FUN -0.57%) is a familiar name to amusement park fans, but perhaps less so for dividend investors. That's a shame, because its master limited partnership units yield a thrilling 5.3%.
The company's 11 parks and 120 rollers coasters serve up stomach-dropping fun to more than 25 million annual guests. They also generate strong and stable cash flow that allow Cedar Fair to reward its unit holders with an ample dividend even as it continues to invest heavily in new rides and attractions.
That's important, because new experiences give people more reasons to visit Cedar Fair's parks, which tends to boost attendance and guest spending. It's a powerful growth driver that's helped to fuel steady increases in revenue and earnings in recent years. As Cedar Fair's cash profits have risen, so has its dividend payout to investors -- and its unit price.
FUN Dividend data by YCharts.
Cedar Fair has a slate of new rides and attractions scheduled to come online in the coming years. These investments should help to boost attendance at its parks and drive further increases in revenue. Moreover, by upgrading the quality of its amusement park assets, Cedar Fair is also strengthening its long-term profit- and cash flow-generating abilities. In turn, investors can expect plenty of additional dividend increases in the years ahead.
Better still, Cedar Fair's units can currently be had for about 19 times analysts' estimates of 2017 free cash flow -- a relative bargain considering its long-term cash-production potential. So if you're searching for an investment with a high yield and a high-quality underlying business, you may want to take a look at Cedar Fair.
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Gas-powered dividends
As one of the country's largest natural gas pipeline companies, Spectra Energy Partners (SEP) owns a nearly irreplaceable collection of assets. Like Cedar Fair's amusement parks, Spectra's more than 15,000 miles of transmission pipelines produce copious free cash flow. And also like Cedar Fair, Spectra offers investors a bountiful yield, currently checking in at 6.8%.
Pipelines such as the ones owned by Spectra are expensive to build and difficult to get approved. This gives Spectra monopoly-like competitive advantages in the regions in which it operates.
Moreover, 90% of Spectra's revenue comes from fees backed by long-term contracts. Spectra can, therefore, be thought of as a tollbooth-like business. Yet while a toll road's revenue depends on the number of vehicles that use it, Spectra gets paid these fees regardless of the actual volume of gas that passes through its pipeline network. In turn, the pipeline titan enjoys strong, recurring cash flows. And with $4 billion in growth projects scheduled to come online in the coming years, investors can count on Spectra to deliver a steadily rising stream of dividend income.
Best of all, Spectra's units are trading at a bargain-basement price of about 12 times distributable cash flow. That's too good of a deal to pass up for a business of Spectra's quality, making now a great time for yield-seekers to consider investing in the pipeline giant.
