Are you looking for some top dividend stocks that pay more than 6% per year? You likely know how hard of a battle it is to find stocks that not only pay that high of a rate but that are also likely to continue doing so. Many companies are struggling amid the coronavirus pandemic and have cut or suspended their payouts this year. Meanwhile, the stocks that are doing well are likely trading near their highs for the year, pushing their yields down in the process.
It's not easy to find 6% yields that are safe. However, three stocks that pay that much and that are still good buys include National Health Investors (NHI +1.36%), BCE (BCE +0.78%), and H&R Block (HRB +1.69%). Although the stocks are all in negative territory this year, they could be attractive contrarian buys heading into 2021.
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1. National Health Investors
Normally, I would be skeptical about real estate investment trusts (REITs) that hold many senior housing properties in their portfolios, especially nowadays with concerns surrounding COVID-19 still high. But National Health Investors (NHI) isn't plagued by many of the problems that other healthcare REITs face, including struggling financial numbers. And that's a credit to the company's business model. The Tennessee-based business says that its portfolio "is hand selected to ensure high quality properties." NHI has 162 senior housing facilities, 75 skilled nursing properties, three hospitals, and two medical offices in its portfolio.
And that diversification and quality of properties is paying off on the company's financials. Year to date, NHI's revenue of $251.6 million is up 6.6% from the same period last year while its profits of $148 million are 25% higher than they were a year ago. The company also notes that it collected 96.3% of the cash it was due in December, and for the fourth quarter that figure was 93.9%.
Although there's some risk investing in healthcare REITs because of COVID-19, NHI is proving to be fairly stable. In each of the past four quarters, its revenue has come in between $82 million and $84 million, showing little variability even during the pandemic. The company generated $233 million in free cash flow over the past 12 months, and that's more than enough to cover the $191 million in dividend payments that it made during that time.
With a dividend yield of 6.4%, which is well above the S&P 500 average of around 1.8%, this healthcare stock could be an underrated buy given the stability it has demonstrated this year. And with its share price down 14% and underperforming the index which has climbed by the same percentage this year, there's also the potential for the stock to bounce back in 2021 along with the economy and generate some great returns for investors.
2. BCE
If you're looking for a bit of a safer buy, Quebec-based telecommunications company BCE could be a better option for your portfolio. The stock is down around 9% this year and that's brought its dividend yield up to just over 6% today. Since the company's payouts are based in Canadian dollars, U.S. investors will see some variability in their payouts as the exchange rate fluctuates. However, besides the foreign exchange risk, this should make for a fairly stable investment over the long term.
BCE's operating revenue of CA$16.8 billion thus far in 2020 is down 4.2% from a year ago. A big part of that is due to COVID-19 and people traveling less and not spending as much money on roaming while advertisers are also cutting down on their expenditures. But overall, this is generally a fairly stable company to invest in, with BCE reporting sales of no lower than CA$21 billion since 2015. Last year they rose by 2.1% to CA$24 billion. The company's profit margin is also normally at least 10% of revenue.
From a cash flow perspective, the dividend also looks solid. Over the past 12 months, BCE generated free cash flow of CA$4.3 billion, which is more than enough to cover its dividend payments of CA$3.1 billion during that period.
3. H&R Block
One business that could get a boost in the coming months is H&R Block. With 2020 being a tough year financially for the economy (not to mention more complicated with stimulus payments), more businesses and individuals will likely be looking for help to bring down their tax bills and maximize any potential refunds. That could help bump up the tax service company's top line and make it an appealing buy for 2021, especially with its share price falling more than 35% this year.
The company's business is largely seasonal in nature and so looking at just one or two quarters won't give investors a lot of insight into how strong H&R Block is this year. Over the trailing 12 months, the Missouri-based business has reported a profit of $198 million and its free cash flow of $474 million was well above the $201 million that it paid out in dividends during that time.
Today, the stock pays investors a dividend yield of 6.8% -- the highest payout on this list. And with a potentially busy tax season coming up, this could be an under-the-radar buy that pays off for investors next year while also giving them the opportunity to secure a great yield.
