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Ask a Fool: Are There Any Safe Stocks With Dividends Over 5%?

By Matthew Frankel, CFP® – May 19, 2017 at 1:00PM

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There are some stocks that pay high dividends without excessive risk or volatility.

Q: Are there any dividend stocks that pay more than 5% that aren't too risky?

Many high-dividend stocks aren't great investments. For example, mortgage real estate investment trusts (REITs) routinely pay more than 10%, but are far too volatile for most investors.

Having said that, there are some stocks that pay over 5% per year that aren't terribly risky.

One excellent place to look for high dividends is the real estate sector, specifically equity REITs, which are real estate investment trusts that own properties. These companies are not taxed at the corporate level as long as they pay at least 90% of their income to shareholders, so naturally, there are some pretty high dividends to be found.

Tanger Outlets (SKT 4.69%) is one excellent example. The outlet mall REIT pays a 5.4% dividend yield and has a fantastic track record of increasing its payout. Plus, outlet shopping is a business that operates well in any economy, which is why the company's properties have never fallen below 95% occupancy, even during the Great Recession.

Records-storage company Iron Mountain (IRM 2.16%) is another high-dividend REIT worth a look. The company pays a 6.2% dividend yield and enjoys the low expenses of self-storage facilities without the month-to-month lease terms.

Outside of the real estate sector, telecom giants AT&T (T 0.89%) and Verizon (VZ 0.59%) are also good options for income-seeking investors, with dividend yields of 5.2% and 5.1%, respectively. These companies produce reliable cash flow as defensive utilities, so they pay out higher-than-average dividends.

The bottom line is that safe, high-dividend stocks do exist, as long as the company's earnings justify the payouts, which is certainly the case with the four stocks discussed here.

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Matthew Frankel owns shares of AT&T; and Iron Mountain. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool recommends Tanger Factory Outlet Centers. The Motley Fool has a disclosure policy.

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