The bear market has taken a bite out of most investors' portfolios. Share prices are down more than 20% on average as investors fret about the impacts that high inflation and rising interest rates will have on the economy.
However, this plunge also provides some opportunities, because dividend yields generally move in the opposite direction of share prices. As a result, now that share prices are down, investors can lock in much bigger income streams, providing them with higher tangible returns and steady income streams. Three high-quality companies currently offering much higher dividend yields than they did before this bear market are Alexandria Real Estate Equities (ARE 2.49%), Enbridge (ENB 1.41%), and Intel (INTC 0.61%).
A healthy payout
Shares of Alexandria Real Estate Equities have tumbled about 40% from their recent peak. That sell-off has pushed the real estate investment trust's (REIT) dividend yield up to 3.5%. That's double the S&P 500's current 1.7% dividend yield, and the payout is on a sustainable foundation.
While Alexandria is an office REIT, it's not facing the same pandemic-related work-from-home headwinds as others in its niche because it primarily owns lab space that is leased to tenants in the life sciences sector. Demand for these properties has increased since the pandemic as healthcare companies are pouring more money into research and development. Rental rates on leases signed this year are averaging 25% above the prior lease rates on the same spaces.
Alexandria complements its rock-solid property portfolio with a top-notch balance sheet. Its credit rating is in the top 10% of all publicly traded U.S. REITs. It also has a conservative dividend payout ratio of 55% of its projected 2022 funds from operations (FFO) after factoring in a recent 5% increase to its already attractive dividend. That leaves Alexandria with enormous financial flexibility to expand its portfolio, which should allow it to continue growing its dividend.
The fuel to continue growing
Enbridge's stock price has fallen by more than 20% from its peak. That has pushed the energy infrastructure company's dividend yield up to 7.3%. And that payout, too, is on rock-solid ground.
Enbridge's low-risk pipeline-utility business model generates stable cash flow backed by long-term contracts and government-regulated rate structures. Meanwhile, Enbridge only pays out about 65% of its steady cash flow via the dividend. That gives it a solid cushion and allows it to retain funds for expansion. It also has a strong investment-grade balance sheet, which provides it with additional financial flexibility.
Enbridge has the financial capacity and secured project backlog to grow its cash flow per share at a rate of 5% to 7% annually through at least 2024. Meanwhile, it has a growing list of longer-term projects underway and in development. That should give Enbridge the fuel to keep boosting its dividend, which it has done for an impressive 27 straight years.
Down but not out
Intel stock has tumbled more than 50% over the past year. That has driven the technology company's dividend yield up to 5.5%.
On the one hand, Intel faces many headwinds. Slowing demand for its tech due to macroeconomic conditions has put pressure on sales and earnings. Meanwhile, the company is investing heavily to jump-start its growth and get ahead of its competition. That has led some to be concerned that Intel might not have the funds needed to maintain its dividend at its current level while it expands its manufacturing capacity.
However, the company has a cash-rich balance sheet and recently brought in a funding partner to help finance two of its new plants. Factor in the passage of the CHIPS act, which will provide tens of billions of dollars in incentives to promote chipmaking in the U.S., and Intel should be able to continue growing its dividend during this heavy investment phase.
A great opportunity to grab higher yields
The bear market has sent shares of some high-quality dividend stocks much lower. Because of that, investors can now lock in some pretty enticing yields from companies like Alexandria Real Estate Equities, Enbridge, and Intel. Buying those stocks will allow you to get paid well while you wait for the bear market to end -- and for years afterward. Meanwhile, those payments could help you strike back against the bear market because you could potentially use them to capitalize on other new investment opportunities.
