The stock market's volatility may make some investors nervous. The price movements can make your head spin. But long-term investors can turn to dividend-paying stocks to reduce long-term volatility. It's comforting because these companies have made payouts for a long time, through all kinds of turbulent economic times.
Of course, you'll want to choose companies that have placed a priority on dividends and have the ability to sustain payments. Realty Income (O +0.49%) and Oneok (OKE 0.89%) have proven track records of paying dividends. Dividends are clearly important to them, but they also have the resources to support payments.
Here's why I'd enthusiastically suggest buying each one.
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1. Realty Income
Realty Income is a real estate investment trust (REIT). REITs, which own or finance properties, attract dividend-seeking investors since they must pay out at least 90% of their taxable income as dividends.
Realty Income primarily rents to retailers like Dollar General (DG 6.61%) and Walgreens. It receives about 80% of its rent from retail companies. Although the retail industry continues to be competitive, Realty Income has navigated it successfully throughout the years.
In the third quarter, it had an almost 99% occupancy rate, and it received a 3.5% rental rate increase on expiring leases.
NYSE: O
Key Data Points
Realty Income, which pays dividends monthly, has historically raised the payout multiple times a year. The board of directors increased December's monthly payment from $0.2695 to $0.27. That made it 113 straight quarters in which it boosted dividends.
Realty Income can afford these higher payments. It paid out about 75% of its third-quarter adjusted funds from operations (AFFO), a key metric for REITs since it measures cash flow available for distribution. Realty Income's shares have a 5.1% dividend yield, more than four times the S&P 500 index's 1.2%.
2. Oneok
Oneok is a midstream energy company. What does that mean? It has a huge pipeline network that transports natural gas and oil. It also helps gather, process, and store the commodities.
Fortunately, Oneok derives most of its revenue from fees. That's positive since it's contractual and provides a steadier stream of cash flow, as opposed to depending on volatile commodity prices. The company has been expanding, including via internal investments and acquisitions. These have helped profitability, with third-quarter operating income growing 38.1% to $1.6 billion.
NYSE: OKE
Key Data Points
That's good news for investors since a company's profit funds dividends. In Oneok's case, it has more than enough profit to pay dividends. It has a payout ratio of 75%. The company raised February's quarterly dividend by about 4% to $1.07. At the new rate, Oneok's stock has an attractive 5.3% dividend yield.
