I've been extremely thankful to own a wide variety of dividend stocks during last year's market volatility. Not only have these stocks provided my portfolio with much-needed stability as stock prices plummeted, but as the market recovers, many of these solid dividends stocks have increased their payouts -- growing my passive income.
The outlook for a recession in 2023 was high prior to the recent banking crisis. But the fall of Silicon Valley Bank and its parent company, SVB Financial, has left the markets even more vulnerable to continued volatility.
If you're looking for solid dividends stocks to count on this year, these Fool.com contributors will outline why you should consider investing in American Tower (AMT -2.18%), Cousins Properties (CUZ -0.77%), and Realty Income (O -0.58%).
O Dividend Yield data by YCharts
This REIT is a tower of power among passive-income players
Marc Rapport (American Tower): American Tower went public as the first pure-play cellphone tower owner on the market in 1998, and even with all that growth, there's still plenty of room to run and reason to consider buying some shares of this real estate investment trust (REIT) now.
American Tower currently has about 225,000 data communications sites -- mobile towers, distributed antenna systems, and most recently, data centers -- with about 43,000 of them in the United States and the rest strategically placed around the world.
The big REIT also is now heavily investing in 5G network rollouts that extend high-speed data access in and around buildings and communities as the industry pushes out the reach of mobile towers themselves.
And as for those towers, according to Counterpoint Research, 5G smartphone sales surpassed 4G sales last year for the first time while the GSMA global mobile ecosystem trade group expects 5G connections to double to about 2 billion in the next two years.
This chart demonstrates what a $1,000 investment in AMT stock at that IPO a quarter-century ago would be worth now, and how it more than doubled the total return of the S&P 500.
AMT Total Return Level data by YCharts
Along with providing a steadily growing dividend, American Tower is currently good for a yield of about 3.2% at a share price of about $198, well below the consensus target price of $260.31 that analysts now give this heavily followed stock.
That's not the highest yield around, but American Tower's economic moat in a global specialty with a high barrier to entry and steady demand for its essential real estate from all the major mobile carriers and thousands of other tenants makes this a good choice for investors interested in a steady flow of passive income for years to come.
Cousins Properties is an office REIT you can rely on
Kristi Waterworth (Cousins Properties): I think by now, my theory on buying solid stocks is pretty clear: I like stocks with an increasing dividend (showing they're making more money year after year), that don't carry a lot of liabilities, and that, frankly, don't get into a lot of drama. The companies that mind their own and stick to their business plan are companies I feel like I can count on, no matter what happens.
One such REIT is Cousins Properties. This class-A office REIT isn't super exciting. It doesn't have a rockstar CEO, but what it does have is a history of solid tenants and a leadership team that has been working to create more consistency for its investors. The internal promotions of leaders like Colin Connolly to CEO in 2019 and Kennedy Hicks to Chief Investment Officer in 2022 is helping Cousins to set the stage for a strong future despite the struggles office REITs are facing right now.
Since the pandemic, Cousins' dividends have increased from $1.20 per share per year in 2020 to $1.28 per share per year in 2022. As of March 21, 2023, that's producing a 6.45% dividend yield per share.
This is in part because the company is well managed. With over $7.5 billion in assets and only $2.9 billion in liabilities, Cousins will have no problem meeting its obligations, even if the office were to take another downturn.
But the truth of the matter is that the interest in office space hasn't completely disappeared. In fact, it's slowly been climbing. According to Kastle Systems' Back to Work Barometer, which measures key card swipes across major markets, office occupancy has been sitting just over 50% for weeks, with a dip this week to 47.3% as spring break begins across the country.
Drilling down into that data, it's clear that Austin, Texas, Cousins' second-largest market, is the biggest market for Kastle swipes, with 65.7% swiping the week of March 8, and 55.5% swiping the week of March 15, 2023. This coincides with data from the D.C. Policy Center, which shows average office occupancy in Austin as the second-highest it tracks, growing from just 34% in January 2021 to 63% in January 2023.
Although Atlanta isn't part of the Kastle Barometer, it is the fifth-most office-occupied city in the D.C. Policy Center report. It has seen growth from just 23% office occupancy in January 2021 to 49% in January 2023. This growing office presence also happens to be in Cousins' top market.
Although it's easy to believe that office is dead, there will always be a need for office space, even with remote work growing. Companies need space for conferences, desks for workers who are on hybrid schedules, and places to meet with clients.
Cousins offers a great product for its tenants, many of which are investment-grade companies. This is evident in the company's 91% occupancy rate, even in these days of hybrid and remote work.
With the stock down nearly 50% from its March 2022 high, Cousins Properties is a solid dividend stock that is also a great value for investors looking for a long-term investment.
Realty Income is one of the safest dividend stocks
Liz Brumer-Smith (Realty Income): Net lease REIT Realty Income is one of the most solid dividend stocks in the market today. Aside from its absolutely massive portfolio of single-tenant commercial properties, the REIT has a long history of maintaining and raising its dividend payouts.
Since its IPO in 1994, the REIT has grown its dividend at an annual compounded rate of 4.4% while making 120 consecutive increases to the payout over the last 29 years. This fantastic track record is undoubtedly thanks to the reliability of the net lease industry.
Realty Income owns and leases over 12,200 single-tenant properties to a wide variety of tenants like restaurants, grocery stores, convenience stores, and countless other industries. These long-term leases pass most responsibilities onto the tenants with built-in rent increases, ultimately creating stable income for the company with very little overhead.
Even when times have been tough for retail operators during past recessionary periods, the REIT's occupancy has never dipped below 96%. The company has also only had two years of declining adjusted funds from operation (AFFO), a metric that works similarly to earnings per share, in its nearly 30-year history.
Realty Income has been expanding like crazy over the past few years, and it seems its shopping spree isn't over. The REIT is currently under contract to acquire 415 single-tenant retail properties in the United States, and it recently completed the sale-leaseback agreement for a casino, which will help boost its earnings in 2023.
Its latest earnings for the full year 2022 were incredibly strong, yet the stock still sits down 10% since last year. Given its portfolio diversification, strong balance sheet, and attractive 4.5% yield, Realty Income is a no-brainer income stock to own for income reliability.
