Early in 2020, the stock market fell into bear territory, and investors were able to find plenty of bargain dividend stocks. But that opportunity didn't last long, with the stock market quickly roaring back from its mid-March lows back up toward all-time highs.
Don't fret, however, because there are still great dividend stocks available that you can buy at a discount with yields of 4% or more. You just need to be selective.
Here are three dividend payers with generous yields that you should be looking at today.
1. Enterprise Products Partners: An energy industry giant
The energy sector has been out of favor for some time, but low oil prices impact different areas of the sector in different ways. For example, midstream energy giant Enterprise Products Partners (NYSE:EPD) generates roughly 85% of its gross margin from fees it gets paid for moving oil, natural gas, and the products these key commodities get turned into through its system. The price of what's in the master limited partnership's system isn't as important as demand. Oil and natural gas are vital sources of energy today and are expected to remain so for years to come.
To be fair, demand is soft right now because of COVID-19-related shutdowns. That could reduce volumes on Enterprise's system. And low energy prices will likely mean a slowdown in capital spending in the energy sector, which could limit Enterprise's growth opportunities.
But with a yield of roughly 9.5% and a distribution coverage ratio of 1.6 times in the first quarter, the partnership has a lot of room to deal with adversity. Leverage, meanwhile, has historically been at the low end of the midstream sector, highlighting Enterprise's generally conservative business approach.
2. IBM: Big blue did OK
International Business Machines (NYSE:IBM) just announced second-quarter earnings, and they weren't great -- but they weren't bad, either. In fact, they generally beat analyst expectations, and given the economic impact of COVID-19 containment efforts, IBM actually did pretty well. The key here is that IBM's growth platforms, notably cloud computing, continue to grow at a relatively rapid clip. The company's cloud revenue was up 30%, and its RedHat business expanded sales by 17%. IBM also managed to increase its gross profit margin by a full percentage point.
This is all important because IBM is trying to transform its business, selling lower-margin operations (like making computers) and venturing into new, higher-margin areas (such as cloud computing). It has been a long, slow process, but the company could be nearing an inflection point, where new businesses start to drive the overall company's results higher again. With a recession and COVID-19, it's hard to get a clear picture of whether or not that's happening, but the signs are definitely pointing in the right direction. Meanwhile, investors can collect a 5.1% yield while the technology giant continues to work on the shift toward more in-demand offerings.
3. W. P. Carey: A little bit of everything
Last up is W.P. Carey (NYSE:WPC), a real estate investment trust (REIT) that takes a very different approach to the business than most of its closest peers. The key here is diversification, which is just as beneficial for landlords as it is for your portfolio.
While many REITs focus primarily on just one sector, Carey purposely spreads its bets around, with exposure to the industrial (24% of rents), office (23%), warehouse (22%), retail (17%), and self-storage (5%) sectors (the rest of the portfolio falls into other). It also gets about a third of its rents from Europe.
This is no small issue: While other REITs have been struggling to collect rent and maintain their dividends, W.P. Carey has basically sailed through the COVID-19 downturn in stride. It has been getting paid by nearly all of its tenants and it increased its dividend in the second quarter. With a yield of 6.2%, dividend investors would do well to take a closer look at this differentiated REIT.
Time for some deep dives
If you are looking for good income stocks today, Enterprise, IBM, and W.P. Carey should be on your shortlist. There are risks inherent to each, but the rewards look like they more than compensate. Take the time to get to know this trio, and it's likely that one, or more, will end up in your portfolio.