These venerable businesses can put more cash in your pocket.
If you’d like to receive more dividend income from your investment portfolio, read on. Here are two high-yield stocks that are set to reward their shareholders with rising cash payouts for many years to come.
The REIT
Investing in real estate is a proven path to wealth creation. But you can do so without taking on the hassles that come with being a landlord. Real estate investment trusts (REITs) provide an easier path to ownership — and Realty Income (O 0.26%) is the best in the business.
Realty Income owns more than 15,000 commercial real estate properties. It likes to buy freestanding, single-unit properties and lease them to service-based businesses or merchants that sell non-discretionary or low-priced goods. Major customers include Walmart, Dollar General, Walgreens, and FedEx.
By catering to leading companies in defensive industries, Realty Income is insulated from the threats posed by e-commerce. This prudent strategy also makes Realty Income recession-resistant. Evidence of this can be seen in the REIT’s impressive occupancy rates, which have remained above 96% for more than three decades.
To further reduce the risks for investors, the REIT employs long-term, net lease agreements. Tenants cover expenses such as maintenance, taxes, and insurance. These agreements also include annual rent escalations of over 2% per year, which help to offset inflation.
As a REIT, Realty Income must pass at least 90% of its profits on to its shareowners to avoid tax penalties. It does so via a steadily growing dividend that it pays out on a convenient monthly schedule. Realty Income has paid 647 consecutive monthly dividends, and increased its cash payout to investors for 107 straight quarters. Its shares currently yield a hefty 5.9%.
The energy titan
If you’d like another great source of passive income, consider Enbridge (ENB -0.14%). The energy infrastructure giant offers a 7.7% dividend yield, as well as 29 straight years of payout increases.
Image source: Enbridge.
Enbridge’s pipelines transport approximately 30% of the crude oil produced in the U.S. and 20% of the natural gas consumed in the country. Enbridge earns the lion’s share of its revenue from volume-based fees secured by long-term cost-of-service agreements. This helps this dividend stalwart generate dependable profits in nearly all economic environments.
Enbridge has plenty of room for expansion. In September, it struck a deal to acquire three natural gas utilities from Dominion Energy for $14 billion. Management expects the acquisition to boost Enbridge’s distributable cash flow in the first full year post-closing — and for these utilities to grow their earnings by roughly 8% annually in the subsequent years.
Rising demand for liquified natural gas is another notable growth driver. Enbridge’s transmission network helps to supply key export facilities on the West and Gulf coasts.
Renewable energy should also fuel Enbridge’s growth. The company is investing in an array of lower-carbon projects, such as wind farms, solar power sites, and renewable natural gas facilities.
These intriguing growth avenues should enable Enbridge to reward its investors with even larger cash dividends in the coming years.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Enbridge, FedEx, Realty Income, and Walmart. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.