This year's volatile swings on Wall Street are disconcerting, but the truth is, they aren't actually all that unusual. Corrections, downturns, and even bear markets are normal parts of investing, no matter how upsetting they are. But you won't have to spend as much time worrying about market moves if you refocus your investment strategy on something that's more stable --dividends. And on that front, Enbridge (NYSE: ENB), Realty Income (NYSE: O), and PepsiCo (NASDAQ: PEP) are all attractive high-yield dividend stocks to own right now.
1. Enbridge is a boring energy stock
Technically, Enbridge is an energy company. But don't let that dissuade you from buying it, because it operates in the midstream, which is the most stable part of the energy sector. Essentially, it owns major pipelines and other assets that move energy around the world and store it. It charges fees for the use of its assets, making it a simple toll-taker business. That's the big picture story that has supported Enbridge's 30 consecutive years of annual dividend increases (in Canadian dollars).
That streak is nice, but even nicer is Enbridge's huge 5.8% dividend yield at its current share price. Compare that to the S&P 500's miserly yield of 1.3% or the average energy stock's yield of around 3%. And Enbridge's long-term strategy actually involves changing to adjust to the global energy market's shifting demands. Around 25% of its earnings before interest, taxes, depreciation, and amortization (EBITDA) are already derived from regulated natural gas utilities and clean energy sources. That makes it the type of high-yield energy stock you can buy and hold for the long term even as the world moves increasingly toward cleaner energy alternatives.
2. Realty Income pays you monthly
Realty Income is the largest net lease real estate investment trust (REIT). It owns single-tenant properties, which it leases out under agreements that make the tenant responsible for most property-level operating expenses. Although there's always a risk that the tenant of any single property may not pay their rent, Realty Income owns over 15,600 properties, so the overall risk to its income stream is very low. Even the fact that it generates around 75% of its rents from retail properties isn't that big a deal, given that its occupancy didn't fall below 96% during the Great Recession.
The REIT has increased its dividend annually for three decades, and its yield at the current share price is a very pleasing 5.6% --well above the average REIT's 4%.
In volatile economic times like these, investors are likely to find one other nuance about the stock appealing: Realty Income pays its dividends monthly. But wait, there's more -- within its three-decade payout-hiking streak is another one. Realty Income has also increased its dividend every quarter for 110 straight quarters. If that doesn't help distract you from Wall Street's gyrations, nothing will.
3. PepsiCo has muddled through many, many rough periods
With a dividend yield of just 3.8%, PepsiCo's payout may seem modest compared to Enbridge and Realty Income. But it's still well above both the market average and the 2.5% average for the consumer staples sector. PepsiCo's yield also happens to be near the highest level in its history. Basically, PepsiCo stock looks like it's on sale right now.
There are good reasons for the historically high yield, including the company's slowdown in growth, headwinds for its snack business, and a trend toward healthier eating habits that appears to be taking shape. Don't let these issues get you down, though: PepsiCo has survived through difficult periods many times before while continuing to reward its shareholders. That's highlighted by its status as a Dividend King. A company needs to have a good business model and execute well on its strategies in both good times and bad to be able to increase its dividend for 50 consecutive years or more. If history is any guide, PepsiCo's current high yield makes it a buying opportunity for long-term income investors.
Opportunities to sidestep your market worries
The stock market is particularly volatile right now -- there's no way around that. But you don't have to focus on the volatility if you change your frame of mind as an investor. High-yield stocks such as Enbridge, Realty Income, and PepsiCo can help you do that, allowing you to track reliable dividends instead of stomach-churning market swings.
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Reuben Gregg Brewer has positions in Enbridge, PepsiCo, and Realty Income. The Motley Fool has positions in and recommends Enbridge and Realty Income. The Motley Fool has a disclosure policy.
