A new set of U.S. import taxes has riled global markets and led to a steep sell-off on Wall Street. Investors are, understandably, running for cover. Now is the time to look for stocks that offer a reliable dividend so they can focus on something other than stock prices. Three solid choices today are Realty Income (O +0.87%), Enterprise Products Partners (EPD 0.45%), and, for the more risk tolerant, British American Tobacco (BTI 0.05%).
1. Realty Income is a dividend machine
Realty Income has a 5.8% dividend yield. The dividend has been increased annually for 30 consecutive years. It is the largest net lease real estate investment trust (REIT) with over 15,600 properties. Adding Realty Income's monthly pay dividend to your portfolio will let you switch your focus from the negative mood of the market to the positive mood you'll get from collecting a regular dividend check.
NYSE: O
Key Data Points
The biggest knock against Realty Income today is likely to be the fact that about 75% of its rents come from retail properties. That's a fair concern, since higher tariffs could impact some retailers. However, a good store location is a good store location, and retailers won't easily close strongly performing stores. If a retailer does get into trouble, it is likely that a good location will draw a new tenant fairly quickly. Add in an investment grade-rated balance sheet and market turmoil could actually turn into an investment opportunity for Realty Income if retailers want to sell the REIT properties to fortify their own balance sheets.
2. Enterprise Products Partners is in the most reliable energy niche
Enterprise Products Partners has a 6.9% distribution yield. It has increased its distribution annually for 26 consecutive years. Enterprise is one of the largest midstream businesses in North America. It operates over 50,000 miles of pipelines, owns 300 million barrels (MMbbls) of liquid storage capacity, 20 deepwater docks, 42 natural gas processing trains, and 26 fractionators, among other energy infrastructure assets.
NYSE: EPD
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While energy prices are rather volatile, midstream businesses generally charge fees for the use of their assets. That provides reliable cash flows even when energy prices are shifting around. In fact, the energy sector couldn't operate without the types of assets Enterprise Products Partners owns, so even during deep oil downturns, demand for its services tends to remain fairly robust. And Enterprise has an investment grade-rated balance sheet that should allow it to take a few knocks before the lofty distribution would be at risk.
3. British American Tobacco is an aggressive choice
British American Tobacco has a 7.5% dividend yield. The company's dividend has been increased annually since 2018 when it shifted to a quarterly payment from the semi-annual cadence that's common in Europe. It is one of the largest tobacco companies on Earth. Most of its revenues come from selling cigarettes, which is both a benefit and a curse right now. On the negative side, cigarette volumes have been in decline for years. However, the company has been able to offset those declines with price increases.
NYSE: BTI
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The positive side of selling cigarettes is twofold. First, smokers are fairly loyal customers given the nature of nicotine and have, overall, been willing to shoulder higher prices. That's not likely to change in the next three years. Second, when times get uncertain, smokers often smoke more, with U.S. demand for British American Tobacco's cigarettes increasing slightly during the COVID-19 pandemic and associated recession. This cigarette maker's global portfolio is also attractive, as it adds a material level of customer diversification to the story.
British American Tobacco is a high-risk investment given the long-term decline taking place in its most important business. However, if you are looking for dividend income to ride out the market storm, it could be a good place to turn for more aggressive investors over the short term.
Don't look at the market if you can avoid it
The very long-term history of the market is for an upward trend, but that trend has always been marked by periods of sudden weakness. That's what this sell-off is likely to be. If you need something to help you stick it out through this rough patch, dividend stocks like Realty Income, Enterprise, and British American Tobacco (for more risk-tolerant investors) are all likely to be solid choices over the next three years.
