Please ensure Javascript is enabled for purposes of website accessibility

3 High-Yield Dividend Stocks I'd Buy Right Now

By Matthew DiLallo – Jun 27, 2020 at 2:44PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These stocks offer income-focused investors an enticing payout.

Yield-focused investors are facing dwindling options these days. With the Federal Reserve slashing interest rates, yields have compressed on most income investments. Meanwhile, with the stock market bouncing back sharply from its COVID-19 bottom, most dividend yields have fallen, pushing the average to less than 2%. 

However, several attractive payouts still exist these days. Three income stocks that stand out right now for their above-average yields are Clearway Energy (CWEN -1.06%) (CWEN.A)AvalonBay Communities (AVB 1.48%), and Brookfield Infrastructure (BIP 0.56%) (BIPC -2.05%). Those big yields are just part of their attraction, which is why they're currently among my favorite income options. 

A roll of $100 bills next to a sign reading dividends.

Image source: Getty Images.

High-powered dividend growth

Renewable energy producer Clearway Energy currently yields 3.6%. That payout is enticing for several reasons. For starters, it's on a solid foundation. The company's business model generates stable cash flow backed by long-term, fee-based contracts as it sells electricity to utilities. Meanwhile, the company only pays out about 54% of that money to support its high-yielding dividend.

That low payout ratio enables Clearway to retain cash to help finance expansion. The company already has its next three deals lined up, which should all close by early next year. These new additions will help grow its cash flow per share by 9%, giving it more room to increase its dividend. Meanwhile, it has a large slate of potential acquisition opportunities thanks to its relationships with a renewable project developer and private equity fund. Because of those factors, Clearway could deliver fast-paced dividend growth for the next several years, making it a great income stock to buy for the long haul.

In-demand real estate

Apartment owner AvalonBay Communities currently pays a 4.2%-yielding dividend. That payout is on solid ground despite all the turmoil in the real estate sector. That's because the bulk of its residential tenants have continued to pay rent despite the upheaval in the economy. Overall, it has received 95% of the rent it billed in both April and May. While collections might face some additional pressure if the economy goes into a prolonged slump, the multifamily sector isn't facing the same long-term headwinds as retail and office real estate. 

The company further compliments its reasonably stable revenue stream with a rock-solid financial profile. The multifamily REIT boasts a conservative payout ratio of 65% of its cash flow and a solid investment-grade balance sheet backed by a sound leverage profile. That provides it with ample financial flexibility to invest in development projects and make acquisitions, which should enable it to keep growing its dividend.

A big yield with ample growth prospects

Infrastructure operator Brookfield Infrastructure currently offers the highest yield of this trio at 4.7%. That payout is also on solid ground since Brookfield's diversified portfolio of utilities and energy, data, and transportation infrastructure generate steady cash flow, mainly backed by long-term, fee-based contracts or government-regulated rates. The company typically retains 35% of that cash for reinvestment, providing ample coverage of its high-yielding dividend. Meanwhile, it compliments that healthy profile with a strong investment-grade balance sheet.

The company's financial flexibility provides it with the capital to invest in expansion projects and make acquisitions. Brookfield currently estimates that its organic growth drivers alone can support 5% to 9% annual dividend growth. That steadily rising income stream makes it a great option for dividend seeking investors.

Higher yields with lower risk profiles

Clearway, AvalonBay, and Brookfield Infrastructure all offer investors above-average yields. On top of that, they also boast rock-solid financial profiles and ample growth potential. Because of those factors, I'd have no problem adding to my position in any of these dividend stocks right now.  

Matthew DiLallo owns shares of AvalonBay Communities, Brookfield Infrastructure, Brookfield Infrastructure Partners, and Clearway Energy, Inc. The Motley Fool recommends AvalonBay Communities, Brookfield Infrastructure, and Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Brookfield Infrastructure Partners L.P. Stock Quote
Brookfield Infrastructure Partners L.P.
BIP
$35.90 (0.56%) $0.20
AvalonBay Communities, Inc. Stock Quote
AvalonBay Communities, Inc.
AVB
$184.19 (1.48%) $2.69
Clearway Energy, Inc. Stock Quote
Clearway Energy, Inc.
CWEN
$31.85 (-1.06%) $0.34
Clearway Energy, Inc. Stock Quote
Clearway Energy, Inc.
CWEN.A
Brookfield Infrastructure Corporation Stock Quote
Brookfield Infrastructure Corporation
BIPC
$40.70 (-2.05%) $0.85

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
332%
 
S&P 500 Returns
104%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.