If you have money in the bank that you can afford to invest in the stock market today, focusing on dividend stocks now could be a good move. Many investors have put money into bonds and high-yield assets, which are less risky than stocks. But with interest rates potentially falling later this year, that could push the pendulum back the other way; Dividend stocks could soon be hot buys again.
Not only can they have undervalued upside, but because some of them trade at discounted valuations, you can also generate a lot of recurring dividend income from them. There are three stocks with a high dividend yield of more than 5% that can make good investments today Real estate income (NYSE:O), TC Energy (NYSE:TRP)And Western Union (NYSE: WU). If you invest $30,000 in these three stocks, together they can generate about $2,000 in annual dividends.
1. Real estate income
Realty Income is a real estate investment trust (REIT) that offers investors a great mix of stability and dividends. Unfortunately, the stock has struggled as risk-averse investors aren’t bullish on REITs in a high interest rate environment: Year to date, shares of Realty Income are down 4%.
But the company itself remains solid. Realty Income has a diverse mix of clients in its portfolio, spread across many different sectors. And as of March 31, the REIT’s occupancy rate was high at 98.6%. Same-store rental income also grew by a modest 0.8%. Realty Income also continued to increase its dividend. In March, it increased its monthly dividend for the 124th time since 1994.
On a quarterly basis, the company pays out $0.77 in dividends, which is well below the funds from operations (FFO) per share it generated last quarter of $0.94.
Investing $10,000 in Realty Income could produce $560 in dividends over the course of a full year.
2. TC energy
Canadian-based pipeline company TC Energy is a major player in the North American oil and gas industry. But while the company generates revenue from multiple countries, its U.S. natural gas pipeline business is by far its largest segment. Through the first three months of the year, TC Energy’s segment revenue was 2.3 billion Canadian dollars ($1.7 billion). Of that total, the U.S. natural pipeline business generated just over CA$1 billion ($0.7 billion).
The company plans to spin off its smaller liquid pipeline operations into South Bow Corporation. Investors who purchase the shares today will receive shares of South Bow when the spin-off takes place, which will likely be later this year. And management says investors will “remain whole” in terms of dividends after the spinoff. Splitting into two separate entities allows the company to better focus its growth initiatives, which can make for a safer investment in the long term.
Today, TC Energy pays an incredibly high dividend, with a yield of around 7.3%. If you put $10,000 into the stock, your annual dividend income from this investment could be $730.
3. Western Union
Western Union’s financial shares trade at a deep discount of less than eight times previous earnings. That’s a pretty low multiple for what is still a solid company. Over the years, Western Union has proven itself as a secure way to transfer money around the world.
While it may not be a top growth stock given the increasing competition in the payments industry, it’s clear that demand remains relatively strong. For the period ended March 31, Western Union’s revenues totaled more than $1 billion, and sales increased a modest 1%. Rising costs negatively impacted profits, which fell 6% to $142.7 million. But earnings per share (EPS) of $0.41 for the quarter was unchanged from the prior year. And that’s still well above the company’s quarterly dividend of $0.235.
The stock’s dividend yields 7.1%, meaning a $10,000 investment here would yield about $710 in annual dividends. This would bring your total dividend income across the three stocks on this list to about $2,000.
Should you invest €1,000 in real estate income now?
Consider the following before purchasing shares in Realty Income:
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David Jagielski has no position in the stocks mentioned. The Motley Fool holds positions in and recommends Realty Income. The Motley Fool recommends Tc Energy. The Motley Fool has a disclosure policy.
Want $2,000 in annual dividends? Invest $30,000 in these 3 stocks, originally published by The Motley Fool
