If you’re looking to increase your passive income stream, there are a handful of high-yield dividend stocks that deserve your attention. AbVie (NYSE: ABBV), Ares Capital (NASDAQ: ARCC)And Real estate income (NYSE:O) have what it takes to deliver huge dividend payments to your portfolio for years to come.
Whether you’re interested in high upfront returns, fast payout growth, or a little of both, these dividend payers have what it takes to make a ton of money over the long term. Best of all, you don’t have to lift a finger after tapping the buy button.
1. AbbVie
In terms of revenue, AbbVie is the fourth largest drug manufacturer in the world. It has increased its dividend payout by a healthy 45% over the past five years, despite going through the biggest patent cliff in the history of its sector.
Humira, an injection used to treat arthritis, psoriasis and inflammatory bowel disease, was the world’s best-selling drug, with US sales reaching $18.6 billion in 2022.
AbbVie’s share price is under pressure after the company lost patent-protected exclusivity for Humira in the US last year. The pharmaceutical stock offers a dividend yield of 3.6% at recent prices. and despite Humira-related losses, the payout could continue to rise rapidly over the next five years.
Global sales of Humira fell 36% year-on-year in the first quarter, but total sales rose 0.7% thanks to strong growth from Skyrizi, a new treatment for psoriasis, and Rinvoq, a new treatment for arthritis.
Skyrizi and Rinvoq launched in 2019, but they’ve been so successful that AbbVie thinks they will contribute more than $27 billion in combined annual revenue by 2027.
2. Ares Capital
Ares Capital is a business development company (BDC) that offers a huge dividend yield of 9.3% at recent prices. It has only increased its dividend payout by 14.3% over the past five years. However, with such a high upfront return, simply maintaining the current payout is enough to earn a return that will satisfy most investors.
Ares Capital and its BDC peers are essentially lenders to disfigure companies that are too big for small business lending but too small for a traditional U.S. bank. About 82% of loans made go to companies that earn more than $25 million annually, excluding interest, taxes, depreciation, and amortization (EBITDA).
With many companies hungry for capital, Ares Capital’s underwriting team can select highly reliable borrowers. At the end of March, only 1.7% of the portfolio had ‘non-accrual’ status at cost. That is less than half the average non-accruals rate in the BDC sector. With a highly experienced underwriting team and an already large list of existing borrowers, this BDC could continue to maintain and increase its payouts for many years to come.
3. Real estate income
Realty Income is the largest publicly traded net-lease real estate investment trust (REIT). It is also one of the most reliable dividend growers in history. The REIT pays a monthly dividend that it has raised 126 times since it became publicly traded in 1994.
At recent prices, Realty Income shares offer a dividend yield of 5.9%. The company has increased its dividend payout by 16.1% over the past five years, and many years of steady dividend payout increases seem likely.
Realty Income benefits from a diverse portfolio. The three largest customers — Dollar generalWalgreens, and Money tree – be responsible for less than 10% of the annual contract rent. It has retail customers, but many are supermarket and hardware store operators insulated from changing consumer behavior.
Decades of rising cash flows earned Realty Income an A3 credit rating Moodys. That means it can borrow at a lower interest rate than almost all of its peers. This may not be the fastest growing dividend payout in your portfolio, but it is the most reliable. Adding some stocks now seems like a smart move for most investors.
Should You Invest $1,000 in AbbVie Now?
Consider the following before buying shares in AbbVie:
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Cory Renauer has positions in Ares Capital. The Motley Fool holds positions in and recommends Moody’s and Realty Income. The Motley Fool has a disclosure policy.
3 High-Yield Dividend Stocks to Buy Now for a Lifetime of Passive Income was originally published by The Motley Fool
