After more than a decade of near-zero interest rates, income investors are faced with a dilemma they haven't had to deal with for a long time. Right now, the average dividend-paying stock in the S&P 500 index offers a 1.7% yield. That's less than half the return you can receive risk-free on cash held in a savings account.
While there are plenty of stocks out there paying above-average yields, they won't help you retire early if they can't continue raising their payouts. All three of these high-yield dividend stocks have a long history of annual payout raises and an ability to raise their distributions without breaking their balance sheets. Here's why they could be excellent options for just about any income-seeking investor.
AbbVie
Shares of AbbVie (ABBV 2.52%) have risen more than 50% from a low point in October. Despite the big run-up, the pharmaceutical stock still offers an attractive 3.6% dividend yield.
NYSE: ABBV
Key Data Points
Right now, AbbVie's dividend doesn't offer much more than a savings account. Patient investors who hold the stock could receive a great deal more in the years to come. AbbVie's payout more than doubled over the past five years, and it could climb even higher.
AbbVie's top-selling drug, an anti-inflammation injection called Humira, will finally lose ground to lower-cost biosimilar versions that are expected to launch in the U.S. in 2023. Humira's losses could be more than offset by newer drugs like Rinvoq for arthritis and Skyrizi for psoriasis. Both of these treatments launched in 2019, and they're already contributing around $8.4 billion in annualized sales.
Prescription drug sales generated a whopping $21.9 billion in free cash flow for AbbVie over the past year. The company needed just 45% of free cash flow to meet its dividend commitment, which means raising the payout in line with earnings growth shouldn't be an issue.
Medical Properties Trust
As its name implies, Medical Properties Trust (MPW 4.19%) is a real estate investment trust (REIT). Its medical property portfolio includes 447 hospitals and other acute care facilities spread across 10 countries and four continents.
NYSE: MPW
Key Data Points
As a REIT, Medical Properties Trust can avoid paying income taxes as long as it distributes at least 90% of earnings to shareholders as a dividend. At the moment, this REIT's dividend offers a mouthwatering 10.2% yield.
Even the COVID-19 pandemic couldn't stop this company from raising its payout year after year. Its payout has steadily climbed by 45% over the past decade, and its best years are most likely ahead of us.
Cash flows from Medical Properties Trust are highly reliable because it doesn't actually run its hospitals. Instead, it simply collects rent from hospital operators that it locks into long-term net leases that leave operators responsible for all the variable costs of building ownership.
Verizon
After 16 consecutive annual dividend increases, Verizon (VZ +1.48%) is the most reliable dividend growth stock on this list. The telecommunications stock has fallen around 29% in 2022, and now it offers a juicy 6.6% yield.
NYSE: VZ
Key Data Points
The telecom industry's days of explosive growth are in our rearview, but the next stage is one that long-term investors want to be a part of. After spending billions of dollars to upgrade its 5G network, Verizon is one of just a handful of companies that can offer Americans a mobile internet service that they can't live without.
The macroeconomy might be headed for a slowdown, but you wouldn't know it by looking at Verizon's results. Wireless service revenue rose 11% year over year to $15.5 billion in the third quarter.
In the first nine months of 2022, Verizon used around 65% of the free cash flow its operations generated to meet its dividend obligation. Investors will get nervous if this payout ratio rises any higher. With an unbeatable position as a leading wireless service provider, though, steady movement in the right direction seems likely.
