If you're looking for dividend income, now's a great time to be an investor even if all you have available to put toward stock purchases is $1,000. The recent wave of interest rate hikes has depressed some stock prices, making them more affordable while pushing dividend yields higher.
Even better, there's a handful of dividend stocks sporting yields even higher than high-risk bonds' current yields. If you have $1,000 available to invest that isn't needed for monthly bills, bolstering an emergency fund, or paying down short-term debt, these stocks are worth consideration.
Here's a rundown of three of them you might want to consider adding to your portfolio sooner than later, plugging into their big payouts.
1. British American Tobacco
There's no denying the tobacco industry is living on borrowed time. The World Health Organization reports the prevalence of smoking in nearly all of the world's most populous countries has been falling since the year 2000. And that figure is expected to continue falling toward nil, at which point it's no longer cost-effective to remain in the cigarette business.
Tobacco companies' management teams, however, aren't naïve. They're managing their own demise, so to speak, extending their fruitful lives as long as they can.
Take British American Tobacco (BTI -0.51%) as an example. Its "strategic aim is to progressively transform our portfolio by actively encouraging adult smokers to switch to less risky products compared to smoking." Those alternatives largely include its e-cigarettes and vaping. Although these options may eventually prove just as risky as smoking tobacco, scientific evidence of their danger doesn't yet exist ... at least not in a way that regulators can latch onto. A wind-down that should arguably take years could end up taking decades.
Translation: Even if there's no growth in the cards for British American Tobacco -- parent to Camel, Pall Mall, and Lucky Strike brands of cigarettes -- there's still plenty of cash to be extracted via cigarette sales. Ergo, there's plenty of cash flow to support its dividend payments for years to come. The current quarterly per-share dividend of 57.7 British pence (about $0.72) is well covered in the meantime, too. The company produced a per-share profit of 176.6 pence (roughly $2.21) through the first half of the current fiscal year.
You just won't want to plan on sticking with British American Tobacco for a lifetime. Although the current dividend yield of 8.6% is incredible, the underlying payment will eventually become too difficult to sustain. It's a dividend-paying holding with an expiration date, and you'd be better off getting out too early than too late.
2. Devon Energy
Oil and gas stocks are highly sensitive to changes in oil and gas prices. Devon Energy (DVN 0.19%) is no exception. With a dividend yield of 6.8%, though, the volatility may well be worth it.
Devon Energy is an independent oil and gas exploration and production company. It produced a record-breaking 323,000 barrels of oil per day last quarter, turning it into revenue of over $3.4 billion and a net income of $690 million, or $1.07 per share. That was more than enough to cover the quarterly dividend payment of $0.49 per share.
There is something of a catch here. That is, the dividend payment isn't etched in stone. It can -- and does -- vary widely from one quarter to the next, reflecting changes to Devon's profits stemming from changes in the price of oil. If you need reliable dividend income to pay bills with, Devon isn't your first choice, and certainly not a sole option.
DVN Dividend data by YCharts
On the other hand, if there's some flexibility with your income needs (because you own other dividend stocks) or these payments aren't already spoken for when you collect them, Devon Energy would be a way to add a little more firepower to the income-producing portion of your portfolio.
3. Realty Income
Last but not least, add Realty Income (O -0.17%) to your list of ultra-high-yield dividend stocks to buy while it's yielding a solid 5.2%.
OK, it's technically not a stock. It's a real estate investment trust, or REIT. These companies own rental real estate, collecting rent and passing the bulk of the profits on the rent payments along to shareholders. Realty Income is a curious holding even by REIT standards though, for a couple of reasons.
The first of these reasons is its specialty. Whereas most real estate investment trusts own hotels, industrial sites, or residential facilities, Realty Income specializes in retail properties.
While its retail focus leaves it seemingly subject to economic headwinds, its tenants tend to be the consumer-facing companies with staying power. Dollar General, Walgreens Boots Alliance, 7-Eleven, and Walmart are some of its biggest customers. These powerhouses push through economic weakness, making their rent payments when others can't. To this end, this REIT's management team believes that its current occupancy rate of over 98% will be maintained through the remainder of the year despite flashes of economic turbulence.
The other oddity? Rather than making quarterly payments, Realty Income's dividends are dished out on a monthly basis. If you're using dividend income to cover your monthly bills, this REIT is perfectly suited for the job.
And its dividend pedigree is impressive, to say the least. Not only has Realty Income paid a dividend every single month for the past 53 years, but it has also raised its payment a total of 121 times since going public in 1994. You'd be hard-pressed to find another dividend-paying stock yielding this much with that sort of track record.
