The S&P 500 currently has a paltry dividend yield of 1.2%. That's near its record low. As a result, it's getting harder to find stocks offering attractive yields.
However, higher dividend yields are still available. Energy Transfer (ET 1.24%), Healthpeak Properties (DOC 0.10%), and Verizon (VZ +0.28%) each offer yields between 6.8% and 8%, with the trio's average yield at 7.2%. Here's why these three stand out as top choices for income-seeking investors in October.
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Energy Transfer
Energy Transfer has the highest yield of this trio at 8%. The master limited partnership (MLP) backs that big-time payout with very stable cash flows. About 90% of the energy midstream company's earnings come from fee-based sources, such as government-regulated rate structures and long-term, fixed-rate contracts. The company produced nearly $4.3 billion of distributable cash flow during the first half of this year, easily covering the roughly $2.3 billion it distributed to investors. That allowed the MLP to retain $2 billion to reinvest in expansion projects.
The MLP expects to fund $5 billion of growth capital projects this year. It can easily bridge the gap between its surplus cash and capital needs with its strong investment-grade balance sheet. Energy Transfer ended the second quarter with its leverage ratio in the lower half of its 4.0-4.5 times target, putting it in its best financial shape in history.
NYSE: ET
Key Data Points
The company's growth capital projects will add to its cash flows over the next few years. Energy Transfer also has the financial flexibility to make acquisitions as opportunities arise. Growth investments support the company's plan to increase its high-yielding payout by 3% to 5% each year.
Healthpeak Properties
Next is Healthpeak Properties, which currently boasts a 6.8% yield. This real estate investment trust (REIT) pays its dividend monthly, making it ideal for those seeking a recurring passive income stream.
NYSE: DOC
Key Data Points
The REIT owns a diversified portfolio of healthcare properties, including medical office buildings, lab space, and senior housing communities. It leases these properties to high-quality healthcare companies under long-term contracts, most of which feature annual rental escalation clauses. These leases provide the REIT with a stable and steadily rising income stream.
Healthpeak pays out 75% of its stable income in dividends. It retains the rest to invest in additional income-producing healthcare properties. For example, the REIT recently agreed to invest $148 million to support the construction of two outpatient medical facilities in Atlanta. Healthpeak also has a very healthy balance sheet, giving it additional financial flexibility to make new income-generating healthcare real estate investments. Rent growth and new investments should support future dividend increases for the REIT.
Verizon
Verizon also has a 6.8% dividend yield. The telecom giant recently raised its dividend payment, extending its streak to a sector-leading 19 consecutive years.
NYSE: VZ
Key Data Points
The telecom company generates lots of cash flow as customers pay their wireless and internet bills. It's on track to produce between $19.5 billion and $20 billion of free cash flow this year after investing $17.5 billion-$18.5 billion into capital expenditures. That will easily cover its dividend outlay, which should be around $11.5 billion. The company's excess free cash flow will help strengthen its already rock-solid balance sheet.
Verizon has been utilizing its balance sheet capacity to make strategic acquisitions, thereby enhancing its long-term growth profile. It agreed to buy Frontier Communications for $20 billion last year to bolster its fiber network. Meanwhile, it recently agreed to acquire Starry to accelerate the expansion of its fixed wireless broadband business. Those acquisitions, along with growth capital spending to expand its 5G and fiber networks, position Verizon to continue growing its cash flow and dividend in the future.
High-quality, high-yielding dividend stocks
Energy Transfer, Healthpeak Properties, and Verizon stand out by offering high-yielding dividends in a market where yields are generally low. With stable cash flows and strong balance sheets, these companies have lower risk profiles. For investors seeking reliable income this October, these stocks offer attractive opportunities due to their unique combination of high yields and financial strength.
