Investors will go to great lengths to find a healthy quarterly payout these days, but it doesn't mean that you have to venture out into industries that lack growth potential. You can find yields north of 4% and still buy into the promising markets of wireless, copper, and bargain shopping.
Verizon Communications, (VZ -0.45%), Southern Copper (SCCO 2.76%), and Tanger Factory Outlet Centers (SKT 0.33%) are all packing yields just above 4% right now. They also have runways for capital appreciation on top of that. Let's check them out.
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1. Verizon: 4.5% yield
I recently sold my stake in Verizon, but this doesn't mean that you should put my "can you hear me now?" recommendation on mute. Verizon and AT&T (T -1.34%) are the country's two largest providers of wireless service. AT&T is about to cut its dividend after a huge shift of its media assets, but Verizon only has room to keep boosting its payouts after unloading 90% of its stake in Yahoo! and AOL for $4.25 billion in cash earlier this month.
Verizon's growth may seem unimpressive right now. Revenue rose just 4% in its latest quarter, and guidance calls for just a 2% advance for all of 2021. Business should pick up as the 5G revolution plays out. Along the way you have a high-yielding telco that has hiked its distributions for 14 consecutive years. It has also landed just above Wall Street profit targets consistently over the past four quarters, and is trading at a reasonable 11 times this year's earnings.
2. Southern Copper: 4.2% yield
Copper is hot these days, nearly doubling over the past year. The real estate construction boom is naturally helping given copper's applications in plumbing and wiring, but it's also a key component fueling the electric vehicle revolution. Freeport-McMoRan gets all of the love as copper mining's darling, but with its 0.7% yield it won't make the cut here.
Southern Copper is smaller -- generating a little more than half of Freeport-McMoRan's revenue -- but the rapidly growing distributions make it a smart play for income investors. Southern Copper did cut its dividend by half to $0.20 a share in early 2020 when the pandemic seemed as if it would be taking its toll on the world's infrastructure growth, but the recovery has been a thing of beauty. Southern Copper's quarterly distributions per share have gone from $0.20 to $0.40 to $0.50 to $0.60 to $0.70 in the past four quarters. If copper keeps climbing it's a safe bet that the payouts will keep increasing alongside analyst profit targets.
3. Tanger Factory Outlet Centers: 4.1% yield
Our shopping trip for income fittingly ends at a chain of factory outlet malls. Tanger operates 36 open-air shopping centers housing the factory outlet stores of many of the country's top brands and retailers. There are some big deals for shoppers scouring for the closeouts, overstocks, and clearance items of full-priced chains, and shoppers are flocking back to Tanger.
Forget year-over-year comparisons which will be wonky with the pandemic providing an easy lift for traditional mall operators this year. Traffic at Tanger is already trending above where it was two years ago. It recently reported that shopping traffic to its outlet malls through the first three months of this year were at 97% of where things were during the first quarter of 2019, but in April that trend cracked the 100% ceiling.
Tanger isn't all the way back to where it was before the pandemic. Its occupancy rate has slipped to 91.7%, so it's going to have to refresh its tenant base with a lot of retailers going under over the past year. Its quarterly dividend rate is also half of where it was when the pandemic hit, but -- as a real estate investment trust (REIT) required to pay out the lion's share of its earnings -- that only means that the distributions will rise substantially in the coming quarters as the turnaround plays out.
Verizon, Southern Copper, and Tanger Factory Outlet Centers have strong stories to tell. There's room for capital appreciation. There's also a clear runway for payouts drifting higher for all three investments.
