3 Stocks to Buy With Dividends Yielding More Than 5%
Money markets don't pay you much on your investment. Bonds don't pay out nearly as much as they did years ago. For income-seeking investors, high-yield stocks of well-run companies represesent some of the best places to park your money.
Three stocks that you can buy right now with dividends yielding more than 5% are AT&T (NYSE: T), Iron Mountain (NYSE: IRM), and Welltower (NYSE: WELL). These companies not only pay out great dividends, they're in businesses that should be positioned well for the long term. Read on to find out what you need to know about these high-yield winners.
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AT&T
AT&T currently pays out a dividend yielding 5.6%. The telecommunications giant is a member of the elite group of Dividend Aristocrats and has increased its dividend for 34 consecutive years. AT&T's dividend looks to be relatively safe, with the company using only 65% of its free cash flow over the last 12 months to fund the dividend program.
To be sure, AT&T has its challenges. Customers moving to streaming television services threatens sales for the company's DirecTV subsidiary. Simply staying abreast of changes in the telecom industry requires huge amounts of capital investments. AT&T's planned acquisition of Time Warner (NYSE: TWX) faces opposition from the U.S. Department of Justice.
On the other hand, AT&T's wide array of products and services allows it to offer bundling deals that attract customers and hold down subscriber losses for DirecTV. The changes in telecom are costly, but they also present the company with one of its greatest opportunities. 5G networks could be a huge source of long-term growth for AT&T, with potentially large markets in providing wireless services for connected cars, virtual reality, and smart cities. And I wouldn't dismiss the company's chances of ultimately securing approval to buy Time Warner.
AT&T's shares currently trade at a little over 10 times expected earnings. With the potential for growth, especially if the Time Warner deal goes through, the stock looks like a pretty good bargain at its current price.
Iron Mountain
Iron Mountain's dividend yield stands just below 7%. As a real estate investment trust (REIT), the company must return at least 90% of its taxable income to shareholders as dividends.
For investors looking for companies with a stable business model, Iron Mountain is a great fit. The company is the world's largest provider of records and data storage, with over 1,400 facilities comprising 87.5 million square feet of storage space. Iron Mountain claims more than 225,000 customers in 53 countries, including 95% of the Fortune 1000.
The good news for Iron Mountain is that demand for records and data storage continues to grow. Organizations generate more records and data every day that, for legal and operational reasons, they must retain. The majority of these records and data are stored in-house by organizations, presenting a significant opportunity for Iron Mountain.
Iron Mountain stock hasn't performed very well in recent months. However, the primary reason why is that the company issued new shares and took on additional debt to finance its purchase of the U.S. operations of IO Data Centers. Over the long run, the company's expansion into data centers should drive even more growth.
Welltower
Welltower claims a dividend yield of nearly 6.4%. The healthcare-focused REIT has increased its dividend every year since 2010.
Some investors might be skeptical about Welltower. Its stock price has fallen more than 20% over the last 12 months. Welltower missed expectations in its most recent earnings update. However, the underlying reasons behind this poor performance are all shortterm in nature.
Welltower has made significant efforts to reduce its debt. The company is also diversifying its tenant base instead of relying as heavily on one tenant -- Genesis Healthcare -- as it has in the past. In addition, like most other REITs, Welltower's expenses increased somewhat thanks to rising interest rates.
But the long term for Welltower looks bright. Demand for senior housing is projected to increase significantly as baby boomers age. That's great for Welltower, with over 80% of the company's property portfolio in senior housing or long-term/post-acute-care facilities. Welltower remains one of the best-positioned players in the senior housing industry to meet growing demand.
My favorite
I think all three of these high-yield stocks should be winners for income-seeking investors. My personal favorite, though, is Iron Mountain.
I especially like Iron Mountain's moat. The company's status as the go-to provider for records and data storage doesn't appear to be in any jeopardy. Iron Mountain is also making a smart move, in my view, with its expansion into the lucrative data-center business. With its tremendous dividend and these solid growth prospects, I think Iron Mountain ranks as one of the best dividend stocks on the market right now.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Time Warner and Welltower. The Motley Fool has a disclosure policy.
