Investing in dividend stocks is a great way to start collecting passive income. Many companies pay dividends, with some offering very attractive payouts. Several high-quality dividend stocks currently yield over 5%, significantly above the S&P 500's average of around 1.3%.
Here are five great higher-yielding dividend stocks to buy right now for passive income.
Generating lots of income
Dominion Energy (D 1.75%) currently has a dividend yield of around 5.5%. The utility generates very stable income backed by government-regulated rate structures and stable electricity demand to support its hefty payout. Its current focus is on providing dividend stability while investing in expanding its operations and transitioning its power generation fleet to lower-carbon energy.
NYSE: D
Key Data Points
Those investments should grow its operating earnings at a 5% to 7% annual rate while steadily reducing its dividend payout ratio (from its current level of around 80% down to its target of 60%). That will put its payout on a stronger foundation and eventually put Dominion into a position where it can start growing its dividend again.
More growth ahead
Enbridge's (ENB 0.75%) dividend yield is currently over 7.5%. The Canadian pipeline and utility company produces very predictable income backed by long-term contracts and government-regulated rate structures. That gives it the fuel to pay dividends and invest in expanding its infrastructure portfolio.
It currently has a multibillion-dollar backlog of expansion projects underway. It also routinely makes accretive acquisitions (it's currently working to close a once-in-a-generation purchase of three gas utilities from Dominion).
Enbridge expects these catalysts to grow its cash flow per share by 3% annually through 2026, and by 5% per year after that. Its growing cash flow should enable it to continue increasing its dividend, which Enbridge has done for 29 straight years.
NYSE: ENB
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Living up to its name
Realty Income (O 1.28%) currently offers a dividend yield approaching 6%. The real estate investment trust (REIT) owns a diversified portfolio of income-producing commercial properties, which supplies it with a steady stream of cash flow.
The REIT stands out for its ability to routinely increase its monthly dividend. It recently declared its 126th dividend increase since going public in 1994, during which time it has grown its payout at a 4.3% annual rate.
Realty Income should be able to continue increasing its dividend. It expects to grow its cash flow per share by 4% to 5% annually, driven by rent growth and additional property acquisitions. It has been expanding its opportunity set in recent years by adding new property types (e.g., gaming and data centers) and regions (additional European countries) to enhance its ability to continue growing its dividend.
A healthy dividend
Pfizer (PFE 0.74%) currently offers a dividend yield above 6%. The pharmaceutical giant has paid 342 consecutive quarterly dividends. It delivered its 15th straight year of increasing its dividend late last year.
NYSE: PFE
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The company is also investing heavily in growing its business. It bought Seagen in a $43 billion blockbuster deal late last year to enhance its ability to develop new cancer treatments. It's also investing heavily in research and development. Pfizer wants to double the number of cancer patients it treats by 2030 by launching several more blockbuster medicines.
Those investments should grow its earnings and cash flow so that it can continue increasing its dividend.
A free cash flow machine
Verizon's (VZ 0.37%) dividend yield is over 6.5%. The telecom giant generates lots of cash flow, which it uses to reinvest in its business, pay dividends, and strengthen its balance sheet.
Last year, Verizon generated $18.7 billion in free cash flow after funding capital expenses. That easily covered its $11 billion in dividend payments. It used its excess free cash flow to continue pushing its already solid leverage ratio lower (from 2.7 times to 2.6x over the past year).
The telecom giant has a great record of increasing its dividend. It delivered its 17th consecutive annual dividend increase late last year, the longest current streak in the U.S. telecom sector. That upward trend should continue. Verizon's investments in 5G are growing its revenue. Meanwhile, cost reductions and debt repayment should boost its free cash flow.
Excellent income stocks
Dividend stocks can be an excellent source of passive income. Dominion, Enbridge, Realty Income, Pfizer, and Verizon stand out for their above-average income streams. Their payouts are all on rock-solid ground and should head higher in the future, making them great options for those seeking sustainable income streams.
