Most income investors know a lot about trade-offs. They make them all the time -- especially when it comes to higher yields versus higher risk.
However, you don't always have to accept a big increase in risk to make more money. Want $5,000 of super-safe annual income? Consider investing $91,400 in these three high-yield dividend stocks.
1. Enterprise Products Partners
One-third of that initial $91,400 invested in Enterprise Products Partners (EPD 0.45%) would generate annual income of close to $2,282. That's right -- nearly half of the $5,000 goal can come from just one stock.
Enterprise Products Partners' distribution yield currently stands at nearly 7.5%. But are those distributions really super-safe? I think the answer is a resounding "yes."
NYSE: EPD
Key Data Points
More than 50,000 miles of pipeline plus an impressive number of other midstream energy assets give me a lot of confidence in Enterprise. Sure, the demand for renewable energy sources is rising. However, the natural gas, natural gas liquids, and other commodities that Enterprise transports, processes, and stores aren't going away anytime soon.
Enterprise Products Partners has the kind of track record that income investors should love. The company has increased its distribution for 25 consecutive years. Look for that streak to continue.
2. Pfizer
Pfizer (PFE 1.16%) is a great alternative for investing another one-third of the initial amount. With the big drugmaker's dividend yield at a little under 4.7%, you could pick up an additional $1,423 or so in annual income.
Income investors can sleep peacefully knowing that Pfizer will remain strong. The company has been around for 174 years. Pfizer has brought to market many of the best-selling medicines and vaccines in history.
NYSE: PFE
Key Data Points
Yes, Pfizer faces a few headwinds right now. Sales for its COVID products are declining. The pharma giant will also lose patent exclusivity for several top blockbuster drugs over the next few years, including blood thinner Eliquis, breast cancer drug Ibrance, and autoimmune-disease drug Xeljanz.
But the bigger picture for Pfizer remains upbeat. The company fully expects its new products to more than offset the lost sales from drugs losing patent protection. Business development deals already made and new ones likely on the way should boost Pfizer's sales even more.
3. Public Storage
Using the final one-third of your initial $91,400 to buy shares of Public Storage (PSA +0.09%) would provide nearly $1,300 in additional annual income. That's enough to push your total to a little over $5,000.
Public Storage ranks as one of the largest self-storage real estate investment trusts (REITs) in the U.S. It owns more than 2,900 self-storage facilities across the country. Customers stick with Public Storage because of its convenience and the hassle of finding alternatives to store their items.
NYSE: PSA
Key Data Points
The company generates more than enough funds from operations (FFO) to fund its attractive dividend. And its business is booming. Public Storage recently announced record move-in volume growth in the second quarter of 2023.
Some economists believe that the Federal Reserve's interest rate hikes are over. Others think the end is near, with rate cuts coming in 2024. That's great news for Public Storage since lower interest rates enable the company to finance expansion at lower costs.
What isn't super-safe
I think Enterprise Products Partners, Pfizer, and Public Storage can be super-safe sources of great income. What isn't super-safe, though, is putting all your money into just three stocks. Income investors should diversify their portfolios to reduce their risk. Some trade-offs can't be avoided.
