It's been proven that reinvested dividends accounted for 84% of the S&P 500's total returns from 1960 to 2020. To this point, a $10,000 investment in the S&P 500 in 1960 would have grown more than $3.8 million by 2020 with dividends reinvested. Had dividends not been reinvested, that same investment would have turned into just $627,000. For investors who still have a long way to retirement, the real takeaway here is if you aren't reinvesting dividends, you're sacrificing a lot of money decades from now.
Here are four ultra-high-yielding dividend stocks you can purchase hand over fist and trust for reliable income to reinvest until you eventually need to access that income in retirement.
1. Philip Morris International: 5.4% yield
If you're looking for the undisputed leader of the next generation of nicotine delivery, you can look no further than Philip Morris International (PM 1.76%).
With combustible or traditional cigarette volumes declining in most geographies throughout the world for years now, Philip Morris International has been well ahead of the curve in preparing for a smoke-free future. This is evidenced by the fact that since its IQOS non-combustible product was first released in Italy and Japan in 2014, its user base has grown to 20.4 million as of its most recent quarter. For those who are unaware, IQOS heats tobacco rather than burning it like combustibles (i.e., cigarettes). This is thought to be less harmful to consumers because there are less harmful chemicals produced when tobacco is heated rather than burned.
As a result, Philip Morris International was able to grow its year-to-date smoke-free product net revenue to nearly 30% as of the third quarter. This puts the company on track to meet its goal of deriving the majority of its total net revenue from smoke-free products by 2025.
And because smoke-free products carry higher margins for Philip Morris International, analysts anticipate that its non-GAAP (adjusted) diluted earnings per share (EPS) should grow 11% annually in the next five years.
With the dividend payout ratio set to be 80% this year, Philip Morris International's dividend is rather safe going forward. That's because the stock operates in an industry that doesn't require much capital to conduct its operations, so Philip Morris International can pay more dividends to shareholders than most other industries. Thus, I believe 4% raises like the one the company announced earlier this year should continue each year for the foreseeable future.
At the current share price of $92, income investors can snatch up shares of Philip Morris International for a forward P/E ratio of 14.2. This is an appealing valuation given the stock's encouraging medium-term growth potential.
2. Magellan Midstream Partners: 9.2% yield
If you believe the trend of the global population growing in size and wealth will keep up in the long term, you'll want to consider buying Magellan Midstream Partners (MMP 1.09%).
The master limited partnership possesses a network of 9,800 miles of refined products pipelines and 2,200 miles of crude oil pipelines. This positions Magellan perfectly to take advantage of a wealthier world that will demand more of the thousands of everyday items that refined petroleum products are used in as inputs.
Because the products that Magellan helps to transport every day are a pivotal part of the global economy, the company has been able to reward unit holders (the MLP equivalent of a shareholder) with growing distributions (the MLP equivalent of a dividend) for the past 20 straight years.
With an investment-grade balance sheet and the distribution expected to be covered more than 1.2 times over this year, yield-starved investors can sleep well at night knowing Magellan's yield isn't too good to be true.
3. Enterprise Products Partners: 8.6% yield
If you liked Magellan, you'll love Enterprise Products Partners (EPD 0.32%). The latter owns over 50,000 miles of natural gas, crude oil, and refined products pipelines, which gives it virtually unmatched size and scale in its industry.
What's really encouraging is that there is hard evidence that management has the best interests of its unit holders in mind. This is backed up by the fact that management owns 32% of the company's units, which means they will do everything in their power to enrich unit holders and themselves.
Enterprise's solid fundamentals have allowed the stock to grow its distribution for 23 consecutive years, which should continue well into the future. That's because the company enjoys an investment-grade balance sheet and has been able to cover its distribution 1.7 times year to date. These factors make Enterprise a steady high-yield stock.
4. VICI Properties: 5.2% yield
Everybody knows that the house always wins, which is what makes it so lucrative to invest in the largest publicly traded casino real estate investment trust (REIT) known as VICI Properties (VICI 0.57%).
VICI Properties will have 43 world-renowned Las Vegas and regional gaming, hospitality, and entertainment properties across 15 U.S. states once its pending acquisitions of MGM Growth Properties and the Venetian Resort close in the months ahead. Two key advantages set VICI Properties apart from just about every other large REIT in the investment universe.
First, the REIT was able to collect 100% of the cash rent that was due on time in the middle of the COVID-19 pandemic last year, despite the fact that Las Vegas was closed for a few months. This is a clear testament to the strength of VICI Properties' business model.
Secondly, VICI Properties has the absolute longest weighted average lease term with tenants on its properties among selected REITs at 43.4 years. This builds a great deal of visibility into the company's financials in the years ahead.
Given that VICI Properties' adjusted funds from operations (AFFO) payout ratio over the last year was just 69.5%, there is plenty of room for the stock to hand out healthy dividend increases going forward. That's what makes VICI Properties such a strong buy at this time.