Growth stocks are still driving the market higher. Each bullish step, however, pushes them closer to their eventual peak. And if it’s macroeconomic weakness that trips them up, what starts out as a small stumble could turn into something far, far worse in a hurry. It wouldn’t be wrong to think like a contrarian here, and start stepping into some defensive names that most people aren’t thinking about buying right now.
To this end, if you’ve got some idle cash waiting to be put to work in your portfolio, here’s a closer look at three high-yield dividend stocks to consider buying this month.
Realty Income
In theory, higher interest rates work against real estate investment trusts — or REITs — like Realty Income (O 0.32%). Not only do they raise the cost of buying, developing, and improving properties, but higher interest rates raise REITs’ dividend yields to (risk-adjusted) market-based levels by lowering the price of the underlying ticker. That’s why this stock has performed so poorly since early March; market-based interest rates on bonds and mortgages have been inching higher since then.
Today’s Change
(-0.32%) $-0.19
Current Price
$59.72
Key Data Points
Market Cap
$56B
Day’s Range
$59.72 – $60.66
52wk Range
$55.57 – $67.94
Volume
5.7M
Avg Vol
5.8M
Gross Margin
50.46%
Dividend Yield
5.42%
The stock’s 11% pullback over the past three months, however, arguably overstates the headwind that Realty Income is likely to face for the foreseeable future. The fact of the matter is, this REIT’s business is reliable and well-protected against almost any conceivable economic situation.
See, this REIT’s focus is on retail tenants. At first blush, that might make it seem even riskier than other kinds of REITs, given the ongoing deterioration of the in-person shopping business. However, when you take a closer look at Realty Income’s tenant list, you’ll find reasons to feel reassured.
Its top renters include Dollar General, Walgreens, FedEx, Tractor Supply, and Home Depot. These aren’t the consumer-facing companies that are struggling. These are the strongest of the survivors. That’s why this company’s occupancy rate hasn’t been below 98% in over a decade, with the exception of 2020, when the pandemic dragged its occupancy down to still-impressive 97.9%.
Even more impressive is that Realty Income has now raised its monthly (yes, monthly) dividend payments every quarter for the past 28 years. This stock’s weakness since early March has also pumped its forward dividend yield up to a sizable 5.3%.
MPLX
Most investors understand that energy stocks have performed so well of late because the military conflict with Iran has crimped global oil and natural gas supplies. Veteran investors also understand, however, that the sector-specific bullishness that’s tethered to this geopolitical tension could fade just as quickly as it materialized if and when the conflict winds down.
MPLX (MPLX 0.75%) is in the energy business, but it’s largely immune to this volatility. See, this company only transports and stores crude oil, natural gas, and other hydrocarbons for the industry’s drillers, refiners, and other players. Moreover, it charges based on the amount of product pushed through its pipelines, or the amount of time that natural gas or oil is stored at one of its facilities. It wouldn’t be wrong to think of MPLX as a tollbooth for the energy industry, which, of course, is an ideally suited business model for a dividend-paying company.
Image source: Getty Images.
Here’s the thing: We’re not using any less oil or natural gas within the United States, where this company’s operational assets are located. We’re simply paying higher prices for it. The industry still needs to deliver as much of it from point A to point B as ever. This seems unlikely to change for the foreseeable future.
You’ll probably never achieve massive capital gains with this stock; that’s just not the way it’s built. It’s built amazingly well to generate reliable income, though, and reliable dividend growth. The current quarterly payment of just under $1.08 per share is more than 50% higher than it was just five years ago. Newcomers will be plugging into this name while its forward-looking yield stands at a beefy 7.8%.
Just know that MPLX is technically categorized as a partnership. Owning shares of such companies comes with some tricky tax rules that may make it less suitable for some investors.
Brookfield Asset Management
Finally, consider buying a stake in Brookfield Asset Management (BAM 5.24%) while its forward dividend yield is 4.1%. That’s not huge, but this company has been growing its dividend payments quickly. They are up by more than 50% in just the past three years, with the hikes beginning shortly after it was spun out as a stand-alone business.
Brookfield Asset Management
Today’s Change
(-5.24%) $-2.50
Current Price
$45.25
Key Data Points
Market Cap
$72B
Day’s Range
$45.15 – $47.04
52wk Range
$42.20 – $64.10
Volume
4.5M
Avg Vol
3.7M
Gross Margin
95.07%
Dividend Yield
4.15%
As the name suggests, Brookfield is in the fee-based asset management business. You may even hold shares of some of the publicly traded entities it manages, such as Brookfield Infrastructure Partners, Brookfield Renewable Partners, and Brookfield Business Corp. Each of these units has its own managers, and Brookfield Asset Management is the manager of those management teams. All of these businesses and structures collect recurring management fees, though, and pass along a fair amount of this fee-based cash flow to their respective shareholders, including Brookfield Asset Management’s.
On the surface, it may seem like just another investment management firm among many. And in many regards, that’s exactly what it is. Yet, it’s different than most others in one important way: Its focus. It’s not messing with the crowded index fund market. It’s strictly locked in on some of the market’s most promising opportunities right now, like power transmission, data storage, wind energy, solar power, and real estate management, to name a few.
Even by dividend stock standards, it’s not exactly the most exciting of investment prospects. You don’t need your investments to provide entertainment, though. You need them to help meet your financial goals. If income is one of those near-term and long-term goals, this often-overlooked option is a great one to consider.
Just don’t get Brookfield Asset Management mixed up with its parent, Brookfield Corporation, which is meant to produce capital growth rather than regular dividends.
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