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3 Top Dividend Stocks With Yields Around 5%

By David Butler - Updated Jan 30, 2020 at 4:27PM

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Dividends are awesome. It's even better when you find top companies offering juicy payouts.

The beauty of compound interest cannot be overstated. Moreover, the beauty of collecting dividends is a great feeling. With so much emphasis on growth, it never hurts to take a look at some dividend-yielding investments. Here are a few companies that offer big yields. 

Telecom/media remains big

The telecommunications industry is so prevalent in our lives today, and AT&T (T 1.67%) is right in the heart of it. The telecom business is vast, and the company also has tons of media assets after going on an acquisition spree in recent years: Think CNN, TBS, Warner Bros., New Line Cinema, and HBO. AT&T has seemingly become a behemoth of news, entertainment, and phone services in a very short period of time.

With a solid 5.6% dividend yield at this writing, AT&T is a quality dividend payer. The payout ratio is a bit high at around 90%, but the company carries so much cash on the books that I think its dividend is safe right now. The catch here is the uncertain outcome of rising content wars with other streaming services. Walt DisneyNetflix, and Comcast all have their hands in the streaming game. To that end, a lot of money is going to be spent in a more congested market, and I think it will eat into earnings. Nonetheless, AT&T boasts massive revenue and income to work with.

table with money and "dividend" post it notes

Image source: Getty Images.

A play on healthcare

Medical Properties Trust (MPW 2.42%) carries a yield around 4.3%. This real estate investment trust (REIT) invests in healthcare-related real estate, including hospitals in the U.S. as well as abroad in strong markets. These include established European markets like Germany, Switzerland, and the U.K., as well as Australia. I like Medical Properties because of the segment it operates in -- healthcare is one of those indispensable things that consumers will always need. As the U.S. population continues to age, demand seems primed to expand. This creates somewhat of a buffer against the effects of a recession.

REITs are required to pay at least 90% of their taxable income as dividends, making Medical Properties a solid source of dividend yield. Between 2014 and 2018, revenue soared from $312.53 million to $784.52 million. Over that same period, funds from operations (FFO) -- the REIT equivalent of earnings -- rose even faster, from $106.7 million to $485.3 million. While sales have fallen back by about 5% over the past 12 months, FFO has continued to grow, up almost 3% over that same period.

Pharmaceutical exposure with a beautiful dividend

It's been an underwhelming year for AbbVie's (ABBV 0.42%)stock, but that doesn't mean it's down and out. Investors were less than happy when the pharmaceutical giant announced it was acquiring Allergan for a whopping $63 billion. AbbVie needed a new outlet for growth, as its blockbuster drug Humira lost its patent in Europe last year (mitigated by the fact that the bulk of Humira's sales still come from the United States). Adding Allergan's Botox to the mix, AbbVie seems more diversified than before, making it safer in my book. We should be mindful of the expensive nature of the merger, but financially, I see little reason that anything will happen to the 5.7% dividend yield. I am not oblivious to the high nature of the dividend payouts relative to earnings, but the company needs the yields to keep investors enticed while they expand. With strong free cash flows, and $10 billion on the books in the most recent quarter, I'm not worried.

Well-researched dividend stocks can add some more stable value to any portfolio. Warren Buffett loves dividends. What more do you need?

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Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
$21.31 (1.67%) $0.35
AbbVie Inc. Stock Quote
AbbVie Inc.
$153.80 (0.42%) $0.64
Medical Properties Trust, Inc. Stock Quote
Medical Properties Trust, Inc.
$15.64 (2.42%) $0.37
Netflix, Inc. Stock Quote
Netflix, Inc.
$179.95 (2.90%) $5.08
The Walt Disney Company Stock Quote
The Walt Disney Company
$96.14 (1.84%) $1.74
Comcast Corporation Stock Quote
Comcast Corporation
$40.29 (2.68%) $1.05
Allergan plc Stock Quote
Allergan plc

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

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