7 High Dividend Stocks to Buy Now
By: Jonathan Wolfgram,
Income investors tend to seek high dividend stocks but such holdings can also make sense for other people to boost their total return beyond share price appreciation.
Income investors typically try to identify high dividend stocks to increase their payouts. To this end, they are often willing to trade off the capital appreciation gains typically sought by others in exchange for enhanced dividend yields. However, it is important to confirm that the high dividend yields are driven by strong cash flows that can be sustained. Otherwise, the payouts could be short-lived.
While most dividend distributions are subject to taxation at ordinary income rates, Qualified Dividends eliminate that disadvantage, since they are taxed at the same rates as capital gains.
The seven equities below, selected with a Dividend Screener tool available at DividendInvestor.com, do not have the highest yields on the market. However, all picks are high dividend stocks with a market capitalization of at least $1 billion that delivered positive total returns in the trailing 12 months prior to the COVID-19 market crash. Some of them, amid all of the economic confusion, have even thrived.
7 High Dividend Stocks to Buy Now: #7
BHP Group Ltd. (NYSE:BHP)
Dividend Yield: 11.1%
Based in Melbourne, Australia, and founded in 1885, BHP Group Ltd. is an Anglo-Australian multinational mining, metals and petroleum public company. It also is one of the world’s largest mining companies by its market capitalization of $184 billion.
The company has paid dividends since 1990. Through 2020, its dividend distribution ranged from $1.10 to $1.30 biannually. In 2021, however, BHP Group has significantly increased its payout — in March of 2021, the company paid investors $2.20 per share, and in September 2021, it paid $4.00. These sharp increase in distribution has left BHP with an annual payout of $6.02 and a dividend yield of 11.1%.
However, this high dividend yield is partially inflated by a dropping share price in the last few months. In the trailing 1-year period, BHP has returned 8.6%, but the company has dropped nearly 40% in the last 2 months. Investors can make their own decisions regarding whether this is an ill omen for the company or an ideal buying opportunity.
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7 High Dividend Stocks to Buy Now: #6
Sixth Street Specialty Lending, Inc. (NYSE:TSLX)
Dividend Yield: 7.5%
Sixth Street Specialty Lending Inc. is a business development company that provides senior secured loans, mezzanine debt, non-control structured equity and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations and refinancing.
The company’s current $0.41 quarterly dividend would produce a $1.64 annualized payout, but the company paid four special dividends of varying amounts throughout the year, bringing the annual payout for 2021 to $2.61. This marks a pattern for Sixth Street Specialty Lending, which has distributed three to four special dividends in all of 2018, 2019 and 2020.
The share price of TSLX has made a strong recovery from the COVID-19 pandemic, sitting 49.8% higher than its price 12 months ago. The company’s 3-year returns are a similar 51.5% and its 5-year returns are 110.6%.
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7 High Dividend Stocks to Buy Now: #5
Omega Healthcare Investors, Inc. (NYSE:OHI)
Dividend Yield: 8.5%
Omega Healthcare Investors is a real estate investment trust (REIT) that finances the sale, leaseback, construction and renovation of long-term health care facilities in the United States and the United Kingdom.
After resuming its dividend payout in 2003, this REIT has increased its dividend an average of 5.3% per year. These gradual increases have led OHI to its current dividend distribution of a quarterly $0.67 — this payout annualizes to $2.68 per share and has stayed level since the end of 2019.
Omega Healthcare Investors had maintained a regular growth pattern in line with the S&P 500 until only recently, when in late July 2021 the stock began to decline. Its 1-year returns are still a positive 9.2%, and even though the stock is not at the same 30% growth it was earlier in 2021, this may mark a similar opportunity to the one listed in our first entry. Investors are encouraged to do their due diligence before purchasing any high-dividend stocks, but the recent share-price pullback could mean a chance to purchase OHI at a meaningful discount.
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7 High Dividend Stocks to Buy Now: #4
Iron Mountain, Inc. (NYSE:IRM)
Dividend Yield: 5.6%
Headquartered in Boston, Massachusetts, and founded in 1951, Iron Mountain, Inc. is an enterprise information management company that focuses primarily on storage, data recovery and information management services.
IRM pays a quarterly dividend of $0.62, an amount it has kept level since the end of 2019. This distribution annualizes to a payment of $2.47 per share and a dividend yield of 5.6%.
Investors need not worry much about the company’s high payout ratio of 117.8%. Although we ideally want payout ratios between 35 and 65%, IRM is a real estate investment trust, or REIT. REITs characteristically have much higher payout ratios than typical equities. For an explanation as to why, read our article Why Do REITs Have High Payout Ratios?
The company’s share price has largely recovered from its drop in April 2020 due to lingering fallout from the COVID-19 crisis. In the trailing 12 months, the share price has grown an impressive 67.4%, 57.6% of which has occurred year to date.
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7 High Dividend Stocks to Buy Now: #3
AllianceBernstein Holding L.P. (NYSE:AB)
Dividend Yield: 6.9%
AllianceBernstein Holding L.P. is a global asset management firm that operates in investment management and research services through three distribution channels — institutions, private clients and retail.
The current $0.91 quarterly distribution amount would distribute a $3.38 annualized dividend and a 6.9% forward dividend yield. While the company displays a high dividend yield, it does not maintain consistent dividend increases year over year, rather opting to increase and decrease its dividend relative to quarterly success.
The company’s share price has sharply increased in the trailing 12-month period, having grown an impressive 93.5%. While part of the recovery is due to the company’s effective response to the COVID-19 pandemic, this high growth has been largely consistent over the last several years. AllianceBernstein has increased its share price by 243.2% in the last 5 years.
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7 High Dividend Stocks to Buy Now: #2
Arbor Realty Trust, Inc. (NYSE:ABR)
Dividend Yield: 7.8%
Arbor Realty Trust is a specialized real estate finance company operating as a REIT. It invests in a diversified portfolio of commercial real estate assets, preferred and direct equity mortgages and structured finance assets.
The company pays its shareholders a consistently growing quarterly dividend distribution. ABR’s current dividend payout is $0.35, annualizing to $1.40 paid out per share. However, the company tends to increase its dividend distribution by a small amount — typically around $0.01 — every quarter. Although this income gain is not guaranteed, it fits with management’s behavior that ABR will continue to increase its dividend on a regular basis.
In addition to a steady dividend income, ABR has rewarded its shareholders with robust asset appreciation. In light of the COVID-19 pandemic, the company still grew its stock price 59.9%. Long-term investors has been more rewarded still, as those holding ABR for the last three years have doubled their money with a 106.9% return, and those holding for the last five have more than tripled it — 283%.
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7 High Dividend Stocks to Buy Now: #1
Invesco Mortgage Capital, Inc. (NYSE:IVR)
Dividend Yield: 11.6%
Headquartered in Atlanta, Georgia and incorporated in 2008, Invesco Mortgage Capital, Inc. is a holding company and a real estate investment trust (REIT) that invests in residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), residential and commercial mortgage loans, as well as other real estate-related financing arrangements.
The company’s current dividend payout is low, at least when compared with the historical rates of the company. Its payment of $0.09 per quarter is a sharp change from Invesco Mortgage Capital’s regular dividend which usually hovers around $0.50, and this is directly caused by a critical share price plummet in March of 2020, when the price dropped nearly 79%. IVR’s share price has largely recovered, having increased 18.5% in the last year, but it is likely the company is waiting to further stabilize before sharply increasing its dividend payout again.
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Related Articles:
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The 10 High Dividend Stocks Owned by Warren Buffet
20 High Dividend Stocks Under $20
5 High Dividend Blue Chip Stocks to Buy Now
Jonathan Wolfgram is an editorial staffer who writes website content at Eagle Financial Publications. He graduated from the University of Minnesota with Bachelor’s degrees in Finance and Philosophy. Jonathan writes for www.DividendInvestor.com and www.StockInvestor.com.
