Watching as stock prices plummet one day and soar the next is hard, particularly when the overall trend appears to be downward. While geopolitical and economic issues make the volatility on Wall Street easy to understand, that fact doesn't make the volatility any easier to handle. Your best emotional defense is to shift your framework from watching stock prices to watching dividend checks roll in. If you have $500 or $5,000, here are three stocks that will help you do just that.
1. TD Bank is already in its own bear market
Shares of Toronto-Dominion Bank (TD +1.26%), which is normally just called TD Bank, are nearly 30% below their 2022 highs. This bank stock is in its own personal bear market, which has pushed its yield up to around 5%. This yield level is historically high for TD Bank. Note, however, that TD Bank's dividend was sustained through the Great Recession, when large U.S. peers cut their dividends, and the Canadian banking giant just raised its dividend by 3%.
NYSE: TD
Key Data Points
TD Bank is still fully capable of rewarding dividend investors with a reliable and growing dividend. The reason it is out of favor is that the bank's U.S. business was used to launder money. Regulators were not pleased, and TD Bank is under an asset cap in the U.S. market until it appeased regulator concerns. This will likely lead to a period of slow growth for the Bank, but it is important to note that its core Canadian business is unaffected by the asset cap. In other words, TD Bank's foundation remains strong. This is a low-risk turnaround story, and even conservative investors can be confident in a positive outcome. While TD Bank works toward that outcome, you can collect a well above market dividend each quarter.
2. Vici Properties is high yield, but no gamble
Vici Properties (VICI +2.15%) is a net lease real estate investment trust (REIT). Its primary property investment is casinos. That may sound like a risky thing to own when the market is worried about a potential recession, but this is not a casino operator. The casinos Vici owns may not do as well in an economically weak patch. The casino operator, however, is still going to pay the rent it owes Vici. If it doesn't, it will lose access to what ends up being the most important part of its business, the casino. Notably, Vici increased its dividend during the coronavirus pandemic, a period in which casinos were literally shut down by the government.
NYSE: VICI
Key Data Points
Although Vici is a relatively young REIT, it has increased its dividend annually since its IPO. Given the business model, the dividend is likely to be maintained even in the face of adversity. Vici has a remaining lease term of more than 40 years, with a large portion of those leases containing inflation-based rent hikes. Add in a 5.3% dividend yield, and this casino landlord could be the best game in town.
3. Enbridge is shifting with the world
Enbridge (ENB +0.19%) is a North American midstream giant. The midstream helps energy companies move oil and natural gas around the world, largely collecting fees for the transportation services provided. Thus, Enbridge tends to have very reliable cash flows over time. This is how it has managed to increase its dividend annually for 30 consecutive years (in Canadian dollars). That, plus a 5.7% dividend yield, makes it an interesting dividend stock today.
NYSE: ENB
Key Data Points
What makes this an interesting stock to hold for the long term is its overarching goal of providing the world with the energy it needs. Right now, around 50% of the business is dedicated to oil pipelines, while another 25% is focused on natural gas pipelines. These will remain important energy assets for years to come. However, the remaining 25% of the business is built around regulated natural gas utilities and clean energy. These are reliable cash flow generators, too, but they are moving the company in a cleaner direction. So you can buy Enbridge for the lofty dividend yield today and hold it for the long term, confident that it is working to change with the world around it.
One thing you don't want to do
While TD Bank, Vici Properties, and Enbridge are all reliable dividend stocks, one thing you want to avoid in the search for income is overreaching. For example, AGNC Investment (AGNC +3.31%) has a massive 17% dividend yield. That may sound enticing, but unlike TD Bank, Vici Properties, and Enbridge, AGNC Investment has a long history of cutting its dividend. In fact, dividend cuts are fairly common in the mortgage REIT sector in which AGNC Investment operates (and where you'll find lots more ultra-high yield stocks).
That said, AGNC Investment's dividend cuts have not occurred in a vacuum. The stock price has tracked the dividend lower over time. So, if history is any guide, chasing an ultra-high yield stock like AGNC Investment could leave you with less income and less capital. Basically, chasing yield without considering the business behind the yield could lead to what would be close to the worst possible outcome for a dividend-focused investor. You'll be better off with lower yields from more reliable dividend payers like TD Bank, Vici Properties, and Enbridge.
