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High Dividend Stocks

High dividend stocks appeal to many investors living off dividends in retirement because their high yields provide generous income.

Many of the highest paying dividend stocks offer a high yield in excess of 4%, and some even yield 10% or more.

However, not all high yield dividend stocks are safe. Let’s review what high dividend stocks are, where stocks with high dividends can be found in the market, and how to identify which high dividends are risky.

At the end of the article, we will take a look at 23 of the best high dividend stocks, providing analysis on each company. Almost all of these high yield stocks offer a dividend yield greater than 4%, have increased their dividends for at least five consecutive years, and maintain healthy Dividend Safety Scores.

The market’s strength has reduced the number of safe dividend stocks with high yields, but there are still several dozen worth reviewing.

By the way, many of the people interested in high dividend stocks are retirees looking to generate safe income from dividend-paying stocks. If that sounds like you, you might like to try our online product, which lets you track your portfolio’s income, dividend safety, and more.

You can learn more about our suite of portfolio tools and research for retirees by clicking here.

What are High Dividend Stocks?

I generally classify any stock with a dividend yield in excess of 4% as being a “high dividend stock.”

Why 4%? Well, the chart below shows the U.S. stock market’s dividend yield since 1871.

You can see that the stock market’s dividend yield has remained well below 4% for most of the last 25 years.

In today’s era of record-low interest rates, a 4% dividend yield is relatively high. In fact, it is about twice as high as the market’s dividend yield today.
Source: Simply Safe Dividends, Multpl.com
A 4% dividend yield is also a sensible cutoff to use for investors who are funding their retirements primarily with dividend stocks rather than the traditional 4% withdrawal rule. 

Regardless, why do some dividend-paying stocks offer much higher yields than others?

As you might have guessed, there are many different possible answers.

In some cases, a high yield reflects a company’s mature status. Since the business has relatively few profitable growth investments it can pursue, it returns most of its cash flow to shareholders in the form of dividends.

Utilities and telecom companies would be good examples.

Other high dividend stocks have unique business structures that require them to distribute most of their cash flow to investors for tax purposes.

Some stocks with high dividends are able to offer generous payouts because they use financial leverage to magnify their profits.

And then there are high yield stocks that have landed on hard times. Unfavorable business conditions have reduced their cash flow to the point where investors no longer believe their dividends are sustainable.

In these instances, the high yield is a mirage.

Let’s take a closer look at where yield-hungry investors can hunt for high dividend stocks. 

Where to Find High Yield Stocks

Many different types of high dividend stocks exist in the market, and each type possesses unique benefits and risks.

Here are some of the most popular places to find higher-yielding dividend stocks:

Real Estate Investment Trusts (REITs): REITs were created in the 1960s as a tax-efficient way to help America fund the growth of its real estate. Like MLPs, REITs are pass-through entities that pay no federal income tax as long as they pay out at least 90% of their taxable income as dividends.

There are over a dozen different types of REITs (e.g. apartments, offices, hotels, nursing homes, storage, etc.), and they make money by leasing out their properties to tenants. Their high payout ratios and generally stable rent cash flow make them a very popular group of higher dividend stocks.

Master Limited Partnerships (MLPs): MLPs were created by the government in the 1980s to encourage investment in certain capital-intensive industries. Most MLPs operate in the energy sector and own expensive, long-lived assets such as pipelines, terminals, and storage tanks. Many of these assets help move different types of energy and fuel from one location to another for oil & gas companies.

MLPs can pay high dividends because they do not pay any income taxes (you pay taxes on your share of the MLP’s income instead), pay out almost all of their cash flow in the form of cash distributions (the MLP equivalent of corporate dividends), and generate fairly predictable earnings in many cases.

Business Development Companies (BDCs): BDCs were created in 1980 and are regulated investment companies. They are basically closed-end investment funds that are structured similarly to a REIT, meaning they avoid paying corporate taxes if they distribute at least 90% of their taxable income in the form of dividends.

There are many different types of BDCs, but they ultimately exist to raise funds from investors and provide loans to middle market companies, which are smaller businesses with generally non-investment grade credit. Roughly 200,000 of these businesses exist, and large banks are less likely to lend them growth capital, which is why BDCs are needed.

Closed-end Funds (CEFs): closed-end funds are a rather complex type of mutual fund whose shares are traded on a stock exchange. Its assets are actively managed by the fund’s portfolio managers and may be invested in stocks, bonds, and other securities. The majority of CEFs use leverage to increase the amount of income they generate, and CEFs often trade at premiums or discounts to their net asset value, depending largely on investor sentiment.

YieldCos: a relatively new class of high dividend stocks, YieldCos are pass-through entitles that purchase and operate completed renewable power plants (e.g. wind, solar, hydroelectric power), selling the clean energy they generate to utility companies under long-term, fixed-fee power purchase agreements.

Utilities & Telecom Sectors:
utility and telecom companies are generally mature businesses with low growth rates. As a result, many of them return the majority of their cash flow to shareholders in the form of dividends, resulting in attractive yields.

The Highest Dividend Stocks Can Be Risky

After reading through the different lists above, you might have noticed that most high dividend stocks are not your basic blue chip corporations like Coca-Cola (KO) and Johnson & Johnson (JNJ).

Instead, many of them have unique business structures and risks to consider.

Take REITs and MLPs, for example. Since these high yield stocks distribute almost all of their cash flow to investors to maintain their favorable tax treatments, they must constantly raise external capital (i.e. debt and equity) to grow.

Realty Income (O), one of the best monthly dividend stocks, has nearly tripled its shares outstanding since 2008, for example.
Source: Simply Safe Dividends
On the other hand, a business like Johnson & Johnson can use the free cash flow it generates to pay dividends while still retaining plenty of funds to reinvest in new projects, growing earnings and dividends along the way (without needing to issue equity or new debt).

Since REITs and MLPs need to issue debt and sell additional shares to raise the money they need to keep growing their capital-intensive businesses (buying real estate and constructing pipelines isn’t cheap), they face additional risks compared to basic corporations.

If access to capital markets becomes restricted or more expensive (e.g. rising interest rates; a slumping share price), such as what happened during the financial crisis, these types of high dividend stocks can suddenly be very vulnerable.

Kinder Morgan (KMI), the largest pipeline operator in the country, is perhaps the most notorious example in recent years.

The company slashed its dividend by 75% in late 2015 as outside financing became too costly, forcing the company to pick between investing for growth and maintaining its dividend.

Ferrellgas Partners (FGP), a major retail distributor of propane, is another example of the risks certain high dividend stocks can pose.

While the MLP had been in business for more than 75 years and paid uninterrupted dividends since 1994, it stunned investors by slashing its distribution by more than 80%.

Ferrellgas Partners took on too much debt to diversify its business in recent years, and mild winter temperatures drove down propane sales, causing a cash crunch.

Simply put, high payout ratios and high financial leverage elevate the risk profile of many high dividend stocks.

A seemingly stable company can become dangerous in a hurry if unexpected hiccups surface.

In addition to their dependence on healthy capital markets, certain high dividend stocks such as REITs and MLPs also face regulatory risks.

For example, if Congress decided to change the tax treatment for MLPs, those businesses might not be able to avoid double taxation.

BDCs and CEFs contain their own unique risks, too. By employing meaningful amounts of financial leverage to boost income, any mistakes made by these high dividend stocks will be magnified, potentially jeopardizing their payouts.

If something appears too good to be true, it often is (eventually). Not surprisingly, many of the highest paying dividend stocks can also be value traps.

GameStop (GME) is one example. The company has been in business since 1994 and operates thousands of retail stores that primarily sell new and used video game hardware and accessories.

GameStop is a basic corporation, not a REIT or MLP, but its stock yielded well over 10% earlier in 2019. However, the company proved to be a value trap rather than a high yield bargain.

GameStop’s sales have struggled in recent years as customers have increasingly favored digital game downloads, and the company’s profitability is steadily deteriorating.

Management has taken on increasing amounts of debt in an effort to diversify the company into more attractive markets, but the clock is ticking on its turnaround.

With results remaining weak, management suspended GameStop's dividend in June 2019. GameStock's stock price is also down more than 75% from its 2017 high.

At the end of the day, high yield investors need to do their homework and make sure they understand the unique risks of each high dividend stock they are considering – especially the financial leverage element.

Maintaining a well-diversified dividend portfolio is an essential risk management practice. Before piling into REITs, for example, consider that the Real Estate sector only accounts for roughly 3% of the S&P 500’s total value.

There are some very good REITs out there, but most things are better in moderation. You just never know what could happen, especially as we potentially begin exiting this period of record-low interest rates. 

Safe High Dividend Stocks: What to Look For

While the risks of owning certain high yield dividend stocks are hopefully clear, there are a number of steps investors can take to pick out the safest ones.

First, it goes without saying that you should never buy any investment that you don’t understand.

Warren Buffett refers to this concept as staying within one’s circle of competence.

Many high yield stocks are unfortunately just too complicated for me to own them in my dividend portfolio.

Once you have identified a stock that you understand fairly well, you need to evaluate its riskiness.

Some of the biggest risk factors to be aware of for a stock are: (1) the industry it operates in; (2) the amount of operating leverage in its business model; (3) the amount of financial leverage on the balance sheet; (4) the size of the company; and (5) the current valuation multiple.

Collecting the information needed to gauge how risky a high yield dividend stock is can be a time-consuming process.

That’s one reason why we created Dividend Safety Scores, which scrub through a company’s financial statements to evaluate the safety of its dividend payment.

Dividend Safety Scores can serve as a good starting to point in the research process to steer clear of high yield traps. 

Scores range from 0 to 100, and conservative dividend investors should stick with firms that score at least 60. Since tracking the data, companies cutting their dividends had an average Dividend Safety Score below 20 at the time of their dividend reduction announcements.
Investors can learn more about how Dividend Safety Scores work and view their real-time track record here.

We used our Dividend Safety Scores to help identify the high dividend stocks that are reviewed in detail below. 

Top High Dividend Stocks Analyzed

In this list, we analyzed 22 of the highest paying dividend stocks in the market.

All of these companies offer a high dividend yield of 4% or higher, have increased their dividends for at least five consecutive years, and score average or better for Dividend Safety. Our analysis is updated monthly.

Here are 23 of the most interesting high dividend stocks as of 10/4/19: 

23) ExxonMobil (XOM)

Sector: Energy   Industry: Integrated Oil
Dividend Yield:
5.1%   Forward P/E Ratio: 18.5  (as of 10/4/19)
Dividend Safety Score: 87   Dividend Growth Streak: 36 years

ExxonMobil was founded in 1870 and is one of the world’s oldest and largest oil companies. The firm operates in three business segments: upstream oil & gas production, downstream refining, and specialty chemicals.

ExxonMobil’s greatest strengths are its scale, diversification, and conservative management team. The firm's size is impressive. Exxon's current total liquids production of nearly 4 million barrels per day (bpd) exceeds all but seven countries' daily oil production rates, for example.

Such scale helps Exxon achieve lower costs, which is essential in a commodity market. The company’s integrated business model also provides some cash flow diversification, helping it ride out energy cycles with somewhat less volatility than most of its rivals.

Exxon’s management team has a long track record of excellent capital allocation, which has helped the company enjoy higher returns on capital than all of its major peers.

Exxon has paid an uninterrupted quarterly dividend since 1882 and has increased its payout for more than 30 consecutive years. While Exxon’s dividend grew nearly 9% annually over the past decade, payout growth has slowed in recent years thanks to the crash in oil prices.

The company is still able to implement low to mid-single-digit dividend increases for now, including a 6.1% boost announced in April 2019, and cash flow from operations and asset sales now exceeds the company’s dividend, providing some more breathing room. If energy prices remain depressed, Exxon will arguably be the last company still standing and paying dividends.

Read More: ExxonMobil High Dividend Stock Analysis
Source: Simply Safe Dividends

22) Wells Fargo (WFC)

Sector: Financials   Industry: Diversified Banks
Dividend Yield:
4.2%   Forward P/E Ratio: 11.1  (as of 10/4/19)
Dividend Safety Score: 79   Dividend Growth Streak: 9 years

Wells Fargo is one of the largest banks in the country. The company generates over $80 billion in annual sales and is well diversified with 90 different business lines covering banking, insurance, investment, mortgage, and consumer and commercial finance services.

Unlike many of its peers, Wells Fargo has little exposure to investment banking and trading operations and remains focused on simple lending businesses and fee income.

The company also conservatively manages its loan book, derives advantages from its low-cost deposit base (which has steadily grown through the years), and is diversified across a number of banking services to help provide earnings stability. As one of the largest and most efficient banks in the country, Wells Fargo enjoys earn higher returns on its assets than most of its peers.

Turning to the dividend, Wells Fargo last raised its payout by 13% in July after the Federal Reserve did not object to the bank's 2019 capital plan. While Wells Fargo did cut its dividend during the financial crisis, banks are under much stricter capital requirements today. Simply put, banks are much safer, better capitalized, and more streamlined than they were before the financial crisis.

Wells Fargo continues working through scandal-related issues that have challenged the bank's image and relationship with regulators and customers. Fortunately, the worst of the effects could be behind the company as its loans and deposits are slightly growing today.

The bank also named a new CEO in September 2019, improving its long-term turnaround prospects. You can read our analysis of the hire here.

Read More: Wells Fargo High Dividend Stock Analysis

21) Leggett & Platt (LEG)

Sector: Consumer Discretionary   Industry: Home Furnishings
Dividend Yield:
4.1%   Forward P/E Ratio: 15.4  (as of 10/4/19)
Dividend Safety Score: 61   Dividend Growth Streak: 47 years

Despite operating in a cyclical industry, Leggett & Platt has paid higher dividends each year for more than four consecutive decades. Founded in 1883, the company is a diversified manufacturer of components such as innersprings, recliner mechanisms, and seat frames that are used in bedding, furniture, cars, planes, carpet, and other products around the globe (the U.S. accounts for less than 65% of total revenue).

Most of the firm's products are sold into markets characterized by a slow pace of change. For example, mattresses and most types of furniture solve timeless problems, and the majority of bedding and furniture purchases are made to replace existing products.

Therefore, Leggett & Platt does not need to pour a lot of money into R&D each year to redesign its products in order to remain competitive. The firm's long operating history has helped it build up over 1,000 patents, deep customer relationships, global distribution, and impressive manufacturing scale (Leggett & Platt even has its own steel mill) that keep its costs relatively low compared to its smaller rivals.

Management runs the business conservatively as well, which has helped Leggett & Platt maintain a solid BBB credit rating. Combined with a target payout ratio of 50%, the company should be able to continue rewarding dividend growth investors with safe and growing payouts for the foreseeable future.

That's true despite the $1.25 billion acquisition of Elite Comfort Systems that management announced in November 2018. This large deal will temporarily stretch Leggett & Platt's balance sheet. We analyzed its impact on the firm's dividend safety and long-term outlook here.

Read More: Leggett & Platt High Dividend Stock Analysis
Source: Simply Safe Dividends

20) Verizon Communications (VZ)

Sector: Communications   Industry: Integrated Telecommunication Services
Dividend Yield:
4.1%   Forward P/E Ratio: 12.4  (as of 10/4/19)
Dividend Safety Score: 87   Dividend Growth Streak: 13 years

Verizon is the largest wireless services provider in the country and provides 4G LTE coverage to over 98% of the country’s population.

Verizon has more than 118 million wireless retail connections, 6.0 million Fios internet subscribers, and 4.5 million Fios video subscribers. In 2018, Verizon was the most profitable company in the telecommunications industry worldwide.

Verizon’s business can be broadly classified into two categories – wireless operations (88% of EBITDA) and wireline operations (12%). The company is also expanding into fast-growing areas such as the Internet of Things and digital media, which account for less than 10% of sales.

Verizon’s moat is in the form of a large subscriber base and valuable telecom spectrum. The company’s leading investments in its network have helped it consistently score the highest in wireless reliability, speed, and network performance compared to its peers AT&T, Sprint, and T-Mobile.

While the industry is intensely competitive, Verizon’s advanced network technologies and leading network coverage help it maintain its huge subscriber base. Verizon’s revenue stream is also regular and reliable since it is engaged in providing a non-discretionary service.

There is also little room for new entrants because the telecom industry is very mature. Spectrum licenses are extremely expensive and infrequently available, and there are only so many wireless subscribers in the market to fund these costs. Moreover, huge spending is required to develop new technologies. Verizon has been at forefront of developing 5G wireless technology.

Verizon has also made acquisitions to strengthen its wireless offering (bought Vodafone’s remaining 45% stake in Verizon Wireless in 2014) and branch into mobile advertising solutions (acquired AOL in 2015 and Yahoo! in 2017), although its media investments have not worked out.

While growth is a challenge, the company’s high dividend remains in good shape. Verizon and its predecessors have paid uninterrupted dividends for more than 30 years while increasing dividends for 13 consecutive years. In 2018 management also announced a $10 billion cost savings plan which it believes will fund the company’s dividend through cash savings in 2022.

Verizon’s dividend has grown by 4.5% per year over the last decade, but annual dividend growth has decelerated to closer to 2% more recently. Going forward, Verizon’s dividend will likely continue growing by 2% to 3% per year.

Read More: Verizon High Dividend Stock Analysis
Source: Simply Safe Dividends

19) Healthcare Trust of America (HTA)

Sector: Real Estate   Industry: Health Care REITs
Dividend Yield:
4.3%   Forward P/AFFO Ratio: 20.8  (as of 10/4/19)
Dividend Safety Score: 62   Dividend Growth Streak: 6 years

Healthcare Trust of America was founded in 2006 and is one of the leading owners and operators of medical office buildings in America. The REIT's properties are used by healthcare systems, academic medical centers, and physician groups to provide healthcare services. 

HTA's strategy is to build critical mass in 20 to 25 leading markets that generally possess the best university and medical institutions. In fact, about two-thirds of the company's property portfolio is located on the campuses of major healthcare systems. 

This helps create steady demand from medical practices for its properties, and these tenants often have superior credit profiles compared to many other areas of healthcare. Over 60% of the firm's annual base rent is generated from credit-rated tenants (mostly health systems), and most of the remaining rent comes from physician groups that are credit-worthy based on HTA’s internal underwriting. 
 
While healthcare REITs are known for their defensive qualities (patients need care regardless of how the economy is doing), long-term growth is also an important part of the company's thesis. Specifically, thanks largely to an aging population, U.S. healthcare spending is expected to grow 6% annually through 2026, according to the U.S. Centers for Medicare & Medicaid Services. 
  
Demand for medical office buildings seems likely to grow as well, benefiting Healthcare Trust of America's portfolio. Management runs the business conservatively to ensure it has access to financing to capitalize on growth opportunities in this fragmented industry. 

Healthcare Trust of America maintains an investment grade credit rating and is also nicely diversified by tenant. No tenant accounts for more than 5% of rent, and its largest city is less than 15% of the firm's total square footage. 
 
All of these factors have helped Healthcare Trust of America achieve impressive growth and raise its dividend each year since going public in 2012. The REIT's dividend has only grown around 1% annually as management has opted to direct most capital towards acquisitions while maintaining a safe balance sheet and sustainable payout ratio.

Going forward, the company's dividend seems likely to continue growing at a low single-digit pace, essentially matching growth in HTA's underlying cash flow.
Source: Simply Safe Dividends

18) Duke Energy (DUK)

Sector: Utilities   Industry: Electric Power
Dividend Yield:
4.0%   Forward P/E Ratio: 19.5  (as of 10/4/19)
Dividend Safety Score: 80   Dividend Growth Streak: 13 years

Founded in the early 1900s, Duke Energy has become the largest electric utility in the country. The company’s operations span across the Southeast and Midwest to serve approximately 7.6 million electric customers and 1.6 million gas customers.

Regulated electric utilities account for 89% of Duke Energy’s earnings, but the company also has a fast-growing gas infrastructure and utilities business (8%) and a commercial portfolio of renewables (3%).

Management sold Duke Energy’s international energy business (which was 5% of earnings) in 2016 to reduce its earnings volatility and focus the company completely on its core domestic operations.

Many utility companies are basically government regulated monopolies in the regions they operate in. Almost all of Duke’s utilities operate as sole suppliers within their service territories, for example.

The extremely high cost of building and maintaining power plants, transmission lines, and distribution networks makes it uneconomical to have more than one utility supplier in most regions.

However, the price regulated utilities can charge to customers is controlled by state commissions.

Fortunately, Duke Energy operates in geographic areas with generally favorable demographics and constructive regulatory frameworks.

The company’s customer base has consistently expanded by close to 1% per year, and Duke Energy has earned a stable and healthy return on equity between 9% and 11% in each of its regions.

With nearly all of its profits generated from core regulated operations, Duke Energy’s business is very safe and predictable with high entry barriers. The company’s recent acquisition of Piedmont Natural Gas will also help it continue shifting towards cleaner forms of electricity generation while also providing more opportunities for growth in natural gas infrastructure.

Duke Energy has paid quarterly dividends for more than 90 years and has increased its dividend each year since 2005, including a 4.2% raise in July 2018.

The company has increased its dividend by about 2% per year over the last decade, but management recently doubled the dividend’s growth rate to 4% per year to reflect Duke Energy’s lower risk business mix and core earnings growth rate of 4-6% per year.

Assuming Duke Energy’s growth projects go as expected, investors should be safe to assume about 4% annual dividend growth the next few years.

Read More: Duke Energy High Dividend Stock Analysis
Source: Simply Safe Dividends

17) TELUS (TU)

Sector: Communications   Industry: Integrated Telecommunication Services
Dividend Yield:
4.8%   Forward P/E Ratio: 15.7  (as of 10/4/19)
Dividend Safety Score: 72   Dividend Growth Streak: 15 years

TELUS is a Canadian telecommunications company that was formed in 1990 by the government of Alberta. The company is one of the largest telecom companies in Canada and provides a wide range of services, including voice, entertainment, satellite, IPTV, and healthcare IT.

Wireless services account for roughly 65% of total EBITDA, with wireline (residential network access lines, internet subscribers, TV subscribers) accounting for the remaining 35% (wireline voice, a declining market, is about 10% of total revenue). Both segments are moderately growing overall.

The Canadian telecommunication sector is an oligopoly dominated by three big players – TELUS, Rogers Communication, and Bell. These three companies have strong pricing power and use their scale (i.e. massive subscriber bases and costly network infrastructure) to prevent new entrants coming into the market.

The capital-intensive telecom industry also has barriers to entry in the form of a costly, scarce resource – telecom spectrum. Additionally, telecom services are largely recession-resistant and enjoy sticky recurring revenue, providing very reliable cash flow (and dividends) every year.

TELUS has increased its dividend consecutively every year since 2004, growing its dividend by 11.9% annually over the past 10 years. Annual dividend growth has averaged about 10% over the last five years as well.

The company has a target to increase dividends by 7% to 10% annually through 2022 while maintaining a payout ratio between 65% and 75%, so solid dividend growth is expected to continue for shareholders.

Read More: Telus High Dividend Stock Analysis 
Source: Simply Safe Dividends

16) Dominion Energy (D)

Sector: Utilities   Industry: Electric Power
Dividend Yield:
4.6%   Forward P/E Ratio: 18.4  (as of 10/4/19)
Dividend Safety Score: 75   Dividend Growth Streak: 16 years
 
Dominion was founded in 1909 and is one of the biggest producers and transporters of energy. The company provides electricity and natural gas to more than 5 million customers located primarily in the eastern United States.

In 2016 Dominion's $6 billion acquisition of Questar, a Rockies-based integrated natural gas distribution company, gave Dominion better balance between its electric and gas operations while also improving the company’s scale and diversification by geography and regulatory jurisdiction.

In 2019 Dominion acquired its midstream partnership and closed its $14.6 billion acquisition of distressed utility SCANA, which ran into trouble following major cost overruns and delays with its nuclear reactor project. SCANA grew Dominion's base of regulated electric and gas customers by 27% and 40%, respectively.

Today approximately 90% of Dominion’s operations are regulated, allowing it to generate stable earnings and predictable returns on its invested capital. Utility companies can also make for nice high yield retirement investments because they sell non-discretionary services and tend to fare relatively well during recessions (Dominion’s stock outperformed the S&P 500 by 15% in 2008).

Thanks to these qualities, Dominion's dividend growth has been impressive and dependable. The company has raised its dividend every year since 2004, recording 7% annual dividend growth over the last decade.

However, management expects a more moderate, low-single digit pace of dividend growth over the next few years. Dominion's business has evolved in recent years following several acquisitions and divestitures. A slower pace of dividend growth allows Dominion to improve its payout ratio and balance sheet.

Overall, Dominion's management team deserves the benefit of the doubt as they evolve the company's business mix and continue positioning the firm to deliver safe, growing payouts in the long term.

Read More: Dominion Energy High Dividend Stock Analysis 
Source: Simply Safe Dividends

15) Brookfield Infrastructure Partners LP (BIP)

Sector: Utilities   Industry: Electric Power – MLP
Dividend Yield:
4.2%   Forward P/E Ratio: 16.3  (as of 10/4/19)
Dividend Safety Score: 65   Dividend Growth Streak: 11 years

Brookfield Infrastructure Partners is one of the fastest-growing and most diverse utility companies in the world.

The limited partnership (a corporate structure similar to that of a MLP) owns over 30 infrastructure assets, including electrical transmission lines, railroads, ports, natural gas pipelines, toll roads, telecom towers, and natural gas and electricity connections.

Most recently, the firm agreed to acquire Enercare, a furnace and water heater provider based in Canada, for about $4 billion, including debt. While Enercare is different from many other businesses in Brookfield Infrastructure's portfolio, the company generates stable, long-term cash flows through equipment rentals to a large and well-established customer base.   

Brookfield Infrastructure Partners’ healthy diversification by business segment (no business unit is more than 20% of cash flow) and geography helps to ensure very predictable cash flows to secure the safety and growth of its distribution (a tax-deferred form of dividend).

That’s especially true since around 90% of the company’s cash flow is secured by either long-term, fixed rate contracts (with annual inflation adjustments) or is derived in regulated industries.

The firm has successfully paid distributions since its inception in 2008 and has increased its distribution by 9% per year over the last five years.

Brookfield Infrastructure Partners intends to pay out 60% to 70% of its funds from operations (FFO) and targets annual distribution increases of 5% to 9% per year.

Given the strong growth runway ahead of BIP in the coming years as infrastructure investment continues around the world, income investors could likely even expect long-term distribution growth at the higher end of management’s target range.

Read More: Brookfield Infrastructure Partners High Dividend Stock Analysis
Source: Simply Safe Dividends

14) Ventas (VTR)

Sector: Real Estate   Industry: Healthcare
Dividend Yield:
4.3%   Forward P/AFFO Ratio: 21.8  (as of 10/4/19)
Dividend Safety Score: 68   Dividend Growth Streak: 9 years

Ventas is a healthcare real estate investment trust. It invests in properties located in the United States, Canada, and the United Kingdom and is one of the largest healthcare REITs in America. Ventas earns approximately half of its revenue from triple-net leases, which are long-term in nature and have annual price escalators to help protect profits.

After spinning off its skilled nursing facility properties into a separate REIT (Care Capital Properties) in 2015, Ventas owns a quality portfolio of nearly 1,200 properties, including seniors housing (55% of net operating income), medical offices (19%), specialty hospitals (6%), life science (7%), and acute care hospitals (7%).

With an aging population, the demand for healthcare and senior living services will continue to be robust. The company’s properties should benefit as healthcare spending is expected to grow 5.8% annually through 2024.

Ventas also has strong potential for growth in U.S. because less than 15% of U.S. medical assets are owned by medical REITs today. Compared to other industries, healthcare REITs control a relatively small percentage of real estate assets in this $1.5 trillion market and should have opportunities for continued consolidation.

With a diversified portfolio of healthcare properties, one of the strongest balance sheets of any REIT, and favorable demographic trends behind it, Ventas is well-positioned to continue growing through acquisitions while paying safe, steadily increasing dividends.

Ventas has paid uninterrupted dividends since going public in 1999 and increased its dividend by 8% per year since 2001.

While the company’s most recent dividend increase was small as a result of its Care Capital Properties spinoff, which reduced cash flow per share, and high payout ratio, long-term investors can likely expect 5% to 6% annual dividend growth over the coming years when the senior housing market sees more of its supply get absorbed.

Read More: Ventas High Dividend Stock Analysis
Source: Simply Safe Dividends

13) National Health Investors (NHI)

Sector: Real Estate   Industry: Healthcare REIT
Dividend Yield:
5.1%   Forward P/AFFO Ratio: 15.9  (as of 10/4/19)
Dividend Safety Score: 61   Dividend Growth Streak: 10 years

National Health Investors is a self-managed real estate investment trust that was incorporated in 1991. It is engaged in the ownership and financing of healthcare properties such as assisted living facilities, senior living campuses, skilled nursing facilities, specialty hospitals, entrance-fee communities and medical office buildings

The REIT owns a diversified portfolio of over 200 properties, of which approximately 60% are senior housing properties while the rest primarily consist of skilled nursing facilities. National Health rents these properties to around 30 healthcare operators under long-term leases with annual escalators that make the cash flow more secure and predictable.

National Health Investors has a business model which is almost immune to the vagaries of the economic cycle, given that its operators provide essential healthcare services. The rapidly-growing aging population provides a lot of fuel for long-term growth, too. In fact, the 75+ year-old population is expected to double over the next 20 years.

The REIT has increased its dividend for nine consecutive years and has delivered 6.5% annual dividend growth over the past decade. Income investors can likely expect mid-single-digit dividend growth to continue.

Read More: National Health Investors High Dividend Stock Analysis
Source: Simply Safe Dividends

12) Southern Company (SO)

Sector: Utilities   Industry: Electric Power
Dividend Yield:
4.1%   Forward P/E Ratio: 20.0  (as of 10/4/19)
Dividend Safety Score: 65   Dividend Growth Streak: 17 years

Southern Company is one of the largest producers of electricity in the U.S. and has been in business for more than 100 years. The Atlanta-based company provides service to more than 9 million customers, split about equally between electric and gas.

Southern Company owns electric utilities in the southeastern U.S. and has natural gas distribution utilities in seven states. Since about 90% of Southern Company’s earnings come from regulated subsidiaries, its cash flows are safe, regular, and reliable.

Regulated utility businesses also require huge amount of investment in the construction of power plants, transmission lines and distribution networks. This creates high barriers to entry and low business risks because people will continue buying electricity even during a recession.

Additionally, Southern Company enjoys a favorable regulatory framework in the Southeast region and operates in four of the top eight friendly states in the U.S. This helps ensure that the company will earn a fair return on its large investments.

The company’s $8 billion acquisition of AGL Resources in 2016 further diversified Southern Company’s operating assets (natural gas capacity), areas of operations (Midwest region), and regulatory risk. The combined entity has a more balanced electric and gas customer mix and bigger geographical footprint, which further reduces its risk profile while providing new growth opportunities.

With that said, income investors need to be aware that Southern Company has faced a number of challenges with several multibillion-dollar projects in recent years, although the worst seems to be behind the utility.

Most notably, the company’s Vogtle nuclear plant in Georgia was challenged by additional costs and delays after a major supplier (Toshiba’s Westinghouse) declared bankruptcy in 2017.

Fortunately, state commissions gave their blessing for the project to continue under Southern’s revised budget and timeline. The latest cost overrun on the project, announced in August 2018, also reached a resolution, reducing the utility's short-term risk that shareholders would be left holding the bag for a costly, scrapped project.

Investors favor utility stocks because of their safe and regular dividend payouts. Southern Company has paid uninterrupted quarterly dividends for more than 65 consecutive years and grown its dividend at a 3% annual rate over the past 20 years.

Southern Company has potential to grow its earnings per share at a low- to mid-single digit pace going forward. This implies that the utility should be able to keep increasing its dividend by 3-4% annually, which is exactly what management did in April 2019 when the team announced a 3.3% payout raise. The company’s dividend growth streak will likely continue for years to come.

Read More: Southern Company High Dividend Stock Analysis
Source: Simply Safe Dividends

11) Philip Morris International (PM)

Sector: Consumer Staples   Industry: Tobacco
Dividend Yield:
6.1%   Forward P/E Ratio: 14.4  (as of 10/4/19)
Dividend Safety Score: 64   Dividend Growth Streak: 10 years

Philip Morris International is one of the largest tobacco companies in the world, selling cigarettes in over 180 countries. The company was born in 2008 after Altria (MO) spun off its international operations to create this new entity.

Philip Morris sells cigarettes to more than 150 million consumers worldwide and owns six of the world’s top 15 international brands. Marlboro is both the company’s and the world’s number one brand.

The company’s competitive moat is derived from its ownership of the international rights of globally renowned cigarette brands such as Virginia Slims, Red & White, and Marlboro.

This has allowed the company to capture a nearly 30% share of the global market and enjoy significant pricing power. In fact, Philip Morris’ annual average pricing gain has been 6% since 2008.

Philip Morris has excellent geographic diversification as well, with Asia, the European Union, and EMEA each contributing between 25-35% of its total sales. This insulates the company from the imposition of strong anti-smoking laws in any single region.

The company’s sole focus on markets outside of the U.S. has also helped it in recent years following the U.S. FDA's increasingly hostility toward the industry. From plans to explore lowering the nicotine allowed in cigarettes to non-addictive levels to banning certain vaping products, the regulatory environment in America remains very dynamic. 

However, in April 2018 Philip Morris slumped nearly 20% after reporting slowing sales growth for its IQOS heat sticks, which don’t burn tobacco and are expected to ultimately be the replacement of choice for many smokers around the world. The company’s long-term growth outlook is certainly murkier if this trend continues, especially as smoking volumes decline, but Philip Morris’ fundamentals remain strong and supportive of its dividend.

Philip Morris has grown dividends every year since 2008, averaging 7.9% annual income growth over the last five years. However, dividend growth has slowed more recently to a low single-digit rate, including a 2.6% raise in 2019. 

Sales volumes are falling as the cigarette industry is in a secular decline, but earnings per share still has potential to grow at a mid-single-digit annual rate thanks to a mix of higher prices, lower costs, and an increasing focus on smoke-free products, which account for nearly 20% of PM's net revenues today and have potential to exceed 40% by 2025, according to management.

Considering some of the growth headwinds facing the business and Philip Morris’ relatively high payout ratio, income investors should realistically expect annual dividend growth closer to 2-4% going forward.

Read More: Philip Morris International High Dividend Stock Analysis
Source: Simply Safe Dividends

10) ONEOK (OKE)

Sector: Energy   Industry: Oil and Gas Storage and Transportation
Dividend Yield:
5.0%   Forward P/DCF Ratio: 13.7  (as of 10/4/19)
Dividend Safety Score: 54   Dividend Growth Streak: 16 years

ONEOK is one of the largest energy midstream service providers in America. The firm’s natural gas pipelines and storage facilities connect to over 140 gas processing facilities across the country, making it a valuable partner for its natural gas liquids (NGL) customers.

Pipelines are very costly and time consuming to construct, must comply with strict regulations, have few substitutes given their cost efficiency, and enjoy relatively stable demand since many of the products that require refined oil and gas are non-discretionary in nature. In other words, this can be an industry where the most disciplined and skilled operators generate very stable and growing cash flow (and dividends) over time.

ONEOK is no exception. Management has increasingly focused the business on long-term contracts, which typically run seven to 10 years and are fixed-rate, inflation-adjusted deals to ensure steady cash flow. Less than 10% of the company’s cash flow is subject to commodity prices or volumes on its systems today, down from more than 30% in 2013.

The company is very conservative with its balance sheet as well. Thanks to deleveraging efforts in recent years, ONEOK earns a stable BBB investment grade credit rating from Standard & Poor’s. The firm’s distribution coverage ratio also stands near 1.3, which is strong for the midstream industry and helps support management’s target of delivering 9% to 11% annual dividend growth through the end of 2021.

As North American energy production continues to rise and ONEOK executes on its growth backlog, the firm appears to be well-positioned to continue rewarding shareholders with generous dividends. And unlike many other players in this space, ONEOK is a C corporation that pays dividends (not distributions) and issues a simple 1099 instead of a K-1 form each year.

Read More: ONEOK High Dividend Stock Analysis
Source: Simply Safe Dividends

9) Altria (MO)

Sector: Consumer Staples   Industry: Tobacco
Dividend Yield:
8.2%   Forward P/E Ratio: 10.1  (as of 10/4/19)
Dividend Safety Score: 55   Dividend Growth Streak: 50 years (adjusted for spin-offs)

Altria was founded in 1919 and is the largest tobacco company in America.

Smokeable products accounted for close to 90% of Altria’s operating income last year, with cigarettes under the Marlboro and Middleton brands representing the company’s largest product offerings.

Altria’s yield first shot higher in July 2017 when its stock price collapsed nearly 20% following the U.S. FDA's announcement that it plans to regulate nicotine levels in cigarettes so that they are no longer addictive. This could accelerate the decline in smoking and crimp Altria’s profitability.

Later, in November 2018, the FDA proposed to ban menthol cigarettes, which account for roughly a third of all cigarettes sold in America. Altria's stock came under even more pressure on this news.

Most recently, U.S. regulators announced plans to crack down on or even ban the vaping industry following health concerns and widespread teen use. In December 2018 Altria had invested $12.8 billion for a 35% stake in vaping leader Juul Labs, so the FDA's news suggests this investment is no longer worth anywhere near the price Altria paid.

Combined with faster cigarette volume declines in the U.S., many investors are worried about Altria's long-term future given both consumer and regulatory headwinds facing the business. 

For now, Altria continues to hold its ground thanks to its strong brands, pricing power, cost cutting, and large scale, which have helped the company maintain earnings growth and pay higher dividends. 

However, tobacco stocks will likely remain more volatile than in the past as investors assess actions taken by regulators and the growth potential of cigarette alternatives (e-cigarettes, heat-not-burn devices, etc.) which are increasingly important as smoking rates decline around the world.

Altria had discussed merging with Philip Morris to combat some of these challenges together, but in late September 2019 the talks ended with no deal.

Read More: Altria High Dividend Stock Analysis 
Source: Simply Safe Dividends

8) W.P. Carey (WPC)

Sector: Real Estate   Industry: Diversified REIT
Dividend Yield:
4.5%   Forward P/AFFO Ratio: 18.1  (as of 10/4/19)
Dividend Safety Score: 73   Dividend Growth Streak: 20 years

W.P. Carey is a leading internally-managed net lease REIT that was founded in 1973 and converted to a REIT structure in 2012. It is one of the oldest REITs in the world and is regarded as the pioneer in the leaseback model of triple net REITs, which is generally viewed as a lower-risk business model.

W.P. Carey has nearly 900 properties leased to more than 200 customers in the U.S. (65% of assets) and Europe (35%). The company’s owns a mix of properties, including office (25%), industrial (30%), warehouse (14%), retail (16%), and self-storage (5%) space. These properties are leased out to a wide variety of sectors such as retail (18%), consumer services (11%), automotive (8%), and sovereign and public finance (6%).

Unlike most of its REIT peers, W.P. Carey operates as a hybrid of a traditional equity REIT as well as a private equity fund, which results in lumpy growth in revenue, cash flow, and dividends. Management sells properties when they become overvalued and reinvests the proceeds into more attractively priced assets. The company also operates a fast-growing investment management division, although this segment is less than 10% of total cash flow and is in the process of being wound down.

W.P. Carey has a solid business model with the portfolio nicely diversified by geography, property type, and industry. As a result, the company is protected from unfavorable developments in any single industry, tenant, property type, or region.

Like National Retail Properties, W.P. Carey also enters into triple net leases with customers for long periods (generally 20-25 years), leading to stable and predictable cash flows. The tenant is responsible for maintenance, taxes, and insurance in triple net lease contracts, thus saving the REIT from operating expenses.

With an occupancy rate of 99.8%, an average lease term of 9.5 years, and about 60% of its leases contracted until at least 2024, W.P. Carey enjoys a very predictable stream of cash flow to support its high dividend.

W.P. Carey has increased its dividend every year since the company went public in 1998. The company’s dividend has increased by 5% per year over the last two decades, but dividend growth has decreased to a low single-digit pace more recently.

The deceleration is likely due to the REIT anticipating an eventual increase in interest rates, so most of the marginal cash flow is going to strengthen the balance sheet so that management can continue to grow the business into the future in an era of more costly debt.

While shareholders may have to accept relatively slow dividend growth in the next few years, that doesn’t necessarily mean that W.P. Carey isn’t a good long-term high-yield, dividend growth investment.

As the company has a history of purchasing the assets it manages but does not own, W.P. Carey can likely continue growing its dividend at a rate of 4% to 5% per year over the next decade.

In fact, in June 2018 W.P. Carey announced an agreement to acquire Corporate Property Associates 17 (CPA-17), a real estate company managed by W.P. Carey, in a $6 billion deal with a cap rate around 7%.

While W.P Carey loses the management fees it was collecting from managing CPA-17, the deal is expected to improve earnings quality, simplify the business (reducing its investment management arm), improve W.P. Carey’s portfolio metrics (average lease term, diversification), and increase the company’s scale while preserving its credit rating. Management deserves the benefit of the doubt with this transaction.

Read More: W.P. Carey High Dividend Stock Analysis
Source: Simply Safe Dividends

7) Main Street Capital (MAIN)

Sector: Finance   Industry: SBIC & Commercial – BDC
Dividend Yield:
6.0%   Forward P/E Ratio: 16.4  (as of 10/4/19)
Dividend Safety Score: 62   Dividend Growth Streak: 7 years

Founded in Texas during the mid-1990s, Main Street Capital is an investment firm that provides long-term debt and equity to lower middle market companies (businesses with annual EBITDA between $3 million and $20 million) and debt to middle market companies.

The company provides financial services to support management buyouts, recapitalizations, growth financing, and acquisitions.

Main Street Capital has over $4 billion of capital under management and its portfolio consists of approximately 200 companies, with an average investment size of $10 million. The company’s investment portfolio comprises of lower middle market companies (45%), middle market (32%), private loan (17%) and other investments (6%).

Its investments are relatively safe with more than 90% of its debt investments secured through a first priority lien. The overall investment portfolio is diversified across geographies, industries, end markets, transaction type, etc., helping insulate Main Street Capital from distress in any single company or industry sector.

The firm’s other key competitive advantage is its low cost of borrowing. The company maintains an investment grade rating from S&P, and its internally-managed operating structure further reduces its costs.

Main Street Capital is also not required to return its investors’ capital by a specific date, thus allowing more flexibility and potential for higher investment returns.

Since its October 2007 IPO, Main Street has consistently paid monthly dividends to its investors. Impressively, Main Street has never cut its dividend or paid a return of capital distribution.

The company has increased dividend at 4% annual rate over the last five years and most recently increased its monthly dividend by 2.6% in February 2019.

The company’s regular dividend will likely continue growing at a low single-digit pace. Management historically issued supplementary semi-annual dividends to further boost income growth. However, the firm intends to fully absorb semi-annual supplemental dividends into its regular monthly dividends in the years ahead.

Read More: Main Street High Dividend Stock Analysis
Source: Simply Safe Dividends

6) Enbridge (ENB)

Sector: Energy   Industry: Oil and Gas Storage and Transportation
Dividend Yield:
6.5%   Forward P/DCF Ratio: 10.8  (as of 10/4/19)
Dividend Safety Score: 57   Dividend Growth Streak: 23 years

Enbridge was founded in 1949 and is the largest midstream energy company in North America today. The business is involved in gathering, storing, processing, and transporting oil and gas across some of the continent’s most vital energy-producing regions.

Enbridge is structured as a conglomerate, composed of numerous subsidiary MLPs and energy funds. However, the company is more than a midstream energy business. After acquiring Spectra Energy (including Union Gas) in 2016 for $22 billion, for example, Enbridge became one of the largest natural gas utilities in Canada.

The company’s primary businesses enjoy defensive characteristics that have helped Enbridge reliably pay uninterrupted dividends for more than two decades.

The pipeline business is extremely capital intensive, must comply with complex regulations (limiting new entrants), and benefits from long-term, take or pay contracts that have limited volume risk and almost no direct exposure to volatile commodity prices.

On the utility side, Enbridge enjoys predictable regulated returns on its investments. This is a recession-resistant industry that essentially operates as a government-sanctioned monopoly. Enbridge has solid relationships with regulators and enjoys a return on its investments near 10%, which is one of the highest rates in the sector.

Enbridge has increased its dividend for 23 consecutive years, recording 11% annualized payout growth over that time. Dividend growth remained strong in recent years, but the firm's plans to increase its dividend by 10% annually through 2020 with 5% to 7% annual growth thereafter could be at risk due to continued challenges at Enbridge's largest growth project.

Investors can learn more about our take on this latest development here. The main takeaway is that the magnitude of Enbridge's dividend increases in 2020 and 2021 will likely below below management's previous guidance, though the long-term outlook for mid-single digit growth is probably unchanged.

Additionally, with a targeted adjusted cash flow from operations payout ratio of 65% or less, the company’s dividend remains on solid ground and should provide plenty of financial flexibility as Enbridge pours capital into its development projects.

Overall, Enbridge appears to remain one of the best firms in the pipeline industry and has presumably become even stronger thanks to rolling up its MLPs, which simplified its corporate structure, provides opportunity for cost savings, and results in greater scale. You can read our analysis of Enbridge's buyout of its MLPs here.

Read More: Enbridge High Dividend Stock Analysis
Source: Simply Safe Dividends

5) AT&T (T)

Sector: Telecommunication   Industry: Diversified Communications
Dividend Yield:
5.5%   Forward P/E Ratio: 10.3  (as of 10/4/19)
Dividend Safety Score: 55   Dividend Growth Streak: 35 years

AT&T is the world’s largest telecom company with $160 billion revenue last year. The multinational communications and digital entertainment conglomerate is headquartered in Texas and was founded in 1875. AT&T provides mobile and fixed telephone services, data and internet services, and also pay-TV services through DirecTV.

The company operates through four divisions – Communications (79% of operating income), WarnerMedia (20%), Latin America (-2%), and Xandr (-3%). 

AT&T has a strong competitive advantage being the second largest wireless solution provider in the U.S. The wireless industry is mature and has significant entry barriers owing to costly infrastructure and spectrum requirements.

Moreover, large companies like AT&T and Verizon enjoy strong brand recognition and have huge subscriber bases they can leverage to keep prices low enough to further discourage new entrants. The company is expected to roll out 5G wireless services this year to further strengthen its market position.

Unlike Verizon, AT&T has aggressively expanded its business outside of wireless services in recent years (wireless operations previously accounted for about 75% of the company’s income). AT&T acquired DirecTV for $49 billion in 2015 to become the largest pay-TV provider in the world and is focused on cost synergies and bundling its services to drive earnings higher.

In 2018 AT&T also won its legal battle to acquire media giant Time Warner for $85 billion. Time Warner accounts for about 15% of AT&T’s total revenues and adds a new business for AT&T – content.

Over 100 million customers subscribe to AT&T’s TV, mobile, and broadband services, so AT&T’s bundled subscription packages and streaming services could be further differentiated with the increased content flexibility provided by Time Warner. AT&T could also enhance its advertising business with Time Warner’s assets.

AT&T is the only telecom company that is also a dividend aristocrat. The telecom giant has not only been paying dividends for 35 consecutive years but has also increased payments during this period.

AT&T’s dividend has grown by 2% per year over the last five years and will likely grow by 2-3% per year going forward as the company digests its large deals and restores the health of its balance sheet.

AT&T’s stock price has experienced some volatility as investors worried more about the firm's financial leverage and the cord-cutting trend. However, pay-TV and voice services, two areas in secular decline, represent less than 15% of company-wide profits.

While AT&T carries a very high debt load, the company's deleveraging plans are on track. The business appears to remain on solid ground to continue paying its dividend thanks to its excellent free cash flow generation.

Read More: AT&T High Dividend Stock Analysis
Source: Simply Safe Dividends

4) Magellan Midstream Partners, L.P. (MMP)

Sector: Energy   Industry: Oil & Gas Production MLP
Dividend Yield:
6.2%   Forward P/DCF Ratio: 12.2  (as of 10/4/19)
Dividend Safety Score: 61   Dividend Growth Streak: 16 years

Magellan Midstream Partners engages in the transportation, storage, and distribution of crude oil and refined petroleum products. Unlike most MLPs, the partnership enjoys an investment-grade credit rating and has no incentive distribution rights, retaining all of its cash flow.

The company’s refined products business accounts for 60% of total operating profits, with crude oil (31%) and marine storage (9%) making up the remainder. Magellan enjoys primarily fee-based revenue that comes from an attractive portfolio of energy infrastructure assets.

Magellan’s cash flow is largely recurring in nature and offers a cushion to the partnership from oil and gas price weakness because profits are primarily driven by throughput volume and tariffs.

Magellan Midstream Partners also owns the longest refined petroleum products pipeline system in the U.S. and has access to roughly half of the country’s refining capacity, providing numerous growth opportunities.

The partnership also has 100 million barrels of storage capacity for petroleum products. Magellan’s strategic advantage lies in the massive transportation and storage infrastructure, which has been built over the years in strategic locations and prevents most new competition from challenging it.

Magellan Midstream Partners has a strong track record of distribution growth, too. The partnership successfully increased its cash distributions even during periods characterized by unfavorable commodity prices, proving its resilience even in tough times.

The partnership has grown its dividend consistently for more than 15 years in a row following its IPO. Magellan’s dividend increased by 11% per year over the last decade, and management targets 8% annual distribution growth over the next few years

Magellan Midstream Partners is a good choice for long-term investors who are risk averse but want some of the high income provided by MLPs. The partnership focuses on expansion opportunities in a disciplined manner, which seems likely to continue fueling upper single-digits dividend growth.

Read More: Magellan Midstream Partners High Dividend Stock Analysis
Source: Simply Safe Dividends

3) Enterprise Products Partners L.P. (EPD)

Sector: Energy   Industry: Oil & Gas Production MLP
Dividend Yield:
6.3%   Forward P/E Ratio: 9.5  (as of 10/4/19)
Dividend Safety Score: 89   Dividend Growth Streak: 20 years

Enterprise Products Partners is one of the largest integrated midstream energy companies in North American. It owns 50,000 miles of pipelines, 27 natural gas processing plants, 22 NGL and propylene fractionators, 14 billion cubic feet of natural gas storage capacity, and 260 million barrels of other storage capacity. The partnership also has a marine transportation business.

Natural gas liquids (NGLs) transportation and processing provides the bulk of Enterprise Products Partners’ gross profit. The partnership is doubling down in this area because the shale gas boom has resulted in such an abundance of NGLs (which are used to make plastics) that there is a large, growing export market for refined NGL products in Asia and Europe.

Crude oil pipelines & services (17%) and petrochemical & refined products and services (13%) are other important business units.

Overall, the company has a strong business model with long-term transportation contracts and a base of blue chip customers. The partnership has business relations with major oil, natural gas, and petrochemical companies such as BP, Chevron, ConocoPhillips, Dow Chemical, ExxonMobil, and Shell.

Over half of the firm’s customers have an investment grade credit rating, which makes them better able to continue honoring their contracts even during periods of depressed energy prices.

The partnership also has a large, integrated network of diversified assets in strategic locations. It takes substantial amounts of time and capital to build a grid of pipelines, which results in high barriers to entry.

Enterprise Products Partners’ cash flows are also fee based and long term in nature, thus making them less vulnerable to energy price volatility. With no incentive distribution rights, a solid BBB+ credit rating, and average distribution coverage of 1.2 times, Enterprise Products Partners is one of the most conservative MLPs in the sector.

The company has raised its dividend every year since going public in 1998 and has increased its dividend by 5.9% per year over the last decade. Going forward, income investors can likely expect annual dividend growth of approximately 5%.

Read More: Enterprise Products Partners High Dividend Stock Analysis
Source: Simply Safe Dividends

2) Brookfield Renewable Partners LP (BEP)

Sector: Utilities   Industry: Renewables
Dividend Yield:
4.9%   Forward P/DCF Ratio: 21.2  (as of 10/4/19)
Dividend Safety Score: 50   Dividend Growth Streak: 7 years

Brookfield Renewable Partners LP is the renewable energy arm of Brookfield Asset Management (60% ownership), which is a major global infrastructure company operating in the Americas and Europe. Brookfield Renewable Partners business model is based on owning and operating renewable energy power plants.

Brookfield Renewable Partners has over 100 years of experience in power generation. Its global footprint extends to North America (60% of generation capacity), Brazil (20%), Colombia (15%), and Europe (5%).

The company's substantial renewable energy capacity focuses on hydroelectricity (82%), wind energy (16%), solar (2%) and biomass energy.

Over 90% of the firm’s cash flows are contracted with credit-worthy counterparties, such as utilities, primarily under long-term power purchase agreements. Brookfield Renewable’s revenue is primarily correlated to the amount of electricity the company generates rather than wholesale electricity prices, providing solid cash flow visibility.

Brookfield Renewable Partners’ competitive edge is its large portfolio of assets located across growing countries. About 90% of the company’s cash flow is contracted for the next 15+ years, making for generally safe and predictable business results.

With growing interest in cleaner, more sustainable forms of power, many countries are increasing their use of renewable energy. The potential for growth in the renewable energy space is exponential, with 80% of all U.S. power expected to come from green sources by 2050.

Brookfield Renewable Partners could also potentially double its total generating capacity with the acquisition of TerraForm Power and TerraForm Global – two of SunEdison’s YieldCos.

YieldCos can offer strong income growth potential, and Brookfield Renewable Partners is no exception. The partnership expects to distribute 70% of its funds from operations and has an investment objective to deliver long-term total returns of 12-15% annually, including distribution growth of 5-9% per year.

Read More: Brookfield Renewable Partners High Dividend Stock Analysis
Source: Simply Safe Dividends

1) Iron Mountain Incorporated (IRM)

Sector: Real Estate   Industry: Business Services REIT
Dividend Yield:
7.6%   Forward P/AFFO Ratio: 10.3  (as of 10/4/19)
Dividend Safety Score: 47   Dividend Growth Streak: 8 years

Founded in 1951, Iron Mountain is a real estate investment trust that stores and protects all sorts of information for more than 220,000 customers. From business documents and electronic files to medical data and fine art, Iron Mountain’s services cover a very wide range sensitive items.

Records Management accounts for 62% of revenue, followed by Data Protection services (12%), Shredding (10%), and Data Centers (5%). Storage rentals account for just over 80% of the company’s gross profits, with services generating the remainder.

The company has a real estate network of more than 90 million square feet spanning across more than 1,400 facilities (leased and owned) in over 40 countries. Developed markets represent about 75% of its total revenues with the balance from emerging markets.

A diversified customer base (95% are Fortune 1000 companies) and non-cyclical, recurring revenue are the company’s key competitive advantages. Iron Mountain also enjoys long-term customer relationships with typical lifespans averaging almost 50 years.

Operating storage facilities for businesses requires little maintenance capex and generally results in high customer retention rates. In fact, roughly 50% of boxes that were stored 15 years ago still remain in storage. These factors have helped Iron Mountain consistently generate positive free cash flow over the last decade.

For growth, the company is expanding in emerging markets in Europe, Asia, and Africa. It is in an advantageous position to invest in these markets because most of these countries have just started outsourcing records management and are early in the growth cycle.

Iron Mountain is also investing in new businesses such as data centers (protect digital information) and ancillary services (e.g. entertainment and fine art storage).

Management hopes emerging markets and adjacent businesses (primarily data centers) can account for 30% of total sales by 2020, up from just 10% of revenue prior to 2013.

However, dividend investors need to make sure that management executes well, especially in continuing to generate steady cash flow from the firm's core storage business while balancing growth investments with deleveraging. Until Iron Mountain improves its financial flexibility, its margin for error remains lower than many other higher-quality REITs.

Turning to the dividend, Iron Mountain has grown its payout by 16.4% per year over the last five years. In October 2018 the company raised its dividend by 4% and plans for a similar pace of annual dividend growth going forward.

While Iron Mountain is not for everyone given its junk bond credit rating and evolving business model, it does appear to be one of the more interesting true high-yielding stocks for investors who are comfortable with its risk profile.

Read More: Iron Mountain High Dividend Stock Analysis
Source: Simply Safe Dividends

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