The S&P 500 might be on one of its strongest bull runs ever, but there are several solid dividend stocks out there that haven't quite kept pace with the market and are now yielding 4% or higher. If you're wondering where to find such high-yield stocks, waste no time in adding these five to your watchlist: utility Dominion Energy (D -0.04%), real estate investment trusts (REIT) Welltower Inc (WELL 0.10%) and STAG Industrial (STAG 0.25%), infrastructure giant Brookfield Infrastructure Partners (BIP 2.44%), and midstream energy major Enbridge Inc. (ENB -0.20%).
Dominion Energy: Dividend yield 4.7%
After a steep fall in the first half of the year, Dominion Energy shares are recovering. Aside from rising interest rates, investors are worried about Dominion's impending acquisition of SCANA Corp and regulatory changes that will hurt its earnings from its master limited partnership (MLP), Dominion Energy Midstream.
While its true that Dominion's plans to raise nearly $8 billion from the sale of pipeline assets to its MLP have come to an abrupt halt, the company doesn't expect cash flows from its MLP to take a big hit, even as it chalks out alternative plans to fund growth, dividends, and deleverage. This includes the disposal of non-core assets and the sale of its natural-gas export terminal Cove Point to its MLP.
As for SCANA, Dominion still is keen to acquire the company, despite market fears that the deal could fall through if SCANA fails to recover costs related to an abandoned nuclear project. Ultimately, I believe Dominion will find a way through, and I don't see any threat to its 15-year streak of annual dividend increases. Dominion raised its dividend by 10% last year and expects to offer similar hikes in 2018 and 2019, followed by 6%-10% increases in 2020.
Welltower: Dividend yield 5.2%
Rising interest rates and oversupply in the senior housing space have driven Welltower shares down 10% in one year, but the company's growth catalysts are exciting.
As a healthcare REIT, Welltower owns properties in senior housing, post-acute care, and outpatient medical, and leases them to healthcare providers. Currently, it owns more than 1,500 properties. Because a REIT is required to return at least 90% of taxable income to shareholders as dividends, Welltower shareholders have reaped rich returns over the years.
The U.S. Centers for Medicare and Medicaid Services projects healthcare spending to rise 5.5% annually between 2017 and 2026 and hit $5.7 trillion by 2026 as the population ages rapidly. If that bodes well for Welltower's occupancy rates and rental incomes, the company's ongoing efforts to sell non-core assets and explore higher-margin urban markets should bump up its cash flows, bringing good news for dividend investors.
STAG Industrial: Dividend yield 5%
STAG Industrial also is a REIT, but in a different industry. It owns and leases industrial properties, mostly single-tenant, such as warehouses, distribution centers, and light manufacturing facilities.
I consider STAG one of the best ways to gain exposure to industrials for a couple of reasons. First, STAG has a hugely diversified portfolio in terms of the number of and types of tenants it caters to. To put that in perspective, the company has more than 300 tenants and its largest is a government agency that accounts for less than 3% of its rental income. An average lease term of 4.8 years further secures STAG's income for the considerable future.
STAG estimates that its single-tenant industrial property market size is worth $250 billion, of which it currently owns only about 1%. An e-commerce boom, in particular, should be a solid growth catalyst, given STAG's portfolio of warehouses and storage facilities. In fact, some of the top logistics companies are already STAG's customers.
STAG pays a monthly dividend and has increased its dividend every year since it started paying one in 2011. With the company's revenue and cash flows growing at a steady pace, STAG is a promising high-yield stock.
Brookfield Infrastructure Partners: Dividend yield 4.7%
Shares of Brookfield Infrastructure Partners are down nearly 15% so far this year, partly because of rising interest rates and partly due to fears that accelerated asset sales could hurt its cash flows in the near term. Shrewd investors should know better.
Brookfield's growth depends entirely on how effectively it uses existing assets to generate returns and how competently it builds up its portfolio. For those of you who do not know, Brookfield hunts for value assets in transport, utilities, energy, and telecommunications sectors, operates and ramps them up profitably, and resells some of them as and when they mature. It buys more assets with the sale proceeds, and the cycle continues.
Brookfield struck several deals in recent months, including acquisitions of HVAC company Enercare, the Canadian natural gas processing business from Enbridge, and data centers from telecom giant AT&T. Importantly, if these deals close on time, Brookfield estimates incoming cash flows to more than make up for any loss of cash flow from asset disposals. With the company also targeting 5%-9% growth in annual dividends in the long run, high-yield chasers can consider backing up the truck on Brookfield Infrastructure Partners.
Enbridge: Dividend yield 5.9%
Enbridge shares are down almost 13% year to date. High debt has been a constant worry for Enbridge investors, especially after the Canada-based midstream company added another $14.5 billion in debt when it acquired Spectra Energy last year. The pipeline operator, however, isn't sitting on its hands. While integrating Spectra Energy into its portfolio, Enbridge is striving to become leaner with a more simplified corporate structure.
Enbridge has put up for sale its non-core assets worth 7.5 billion Canadian dollars, including its Canadian and U.S. natural gas gathering and processing businesses and some renewables power assets. The company believes that offloading these businesses will not only raise funds but also help it become a more regulated and focused pipeline company. Meanwhile, Enbridge has projects worth CA$22 billion scheduled to come online by 2020 and is already working on some more to drive growth beyond 2020.
With so many plans up its sleeve, Enbridge is confident it can grow dividends at a compound annual rate of 10% between 2018 and 2020. Last year, it raised its dividend by 15%, marking its 23rd straight year of dividend increases. Cheap valuation and a hefty dividend yield make Enbridge a great stock to put on your radar.