3 High-Yield Dividend Stocks for September
These High-Yield Dividend Stocks Pay up to 18.4%
If you’re like me, then you have probably noticed it has gotten harder to find safe, high-yield dividend stocks.
In a bid to combat the COVID-19 pandemic, the Federal Reserve has slashed interest rates to rock bottom levels. So, in the search for yield, investors have bid up the price for anything that pays a respectable dividend.
This has troubling implications for savers.
According to Wells Fargo analyst Mike Mayo, the Federal Reserve’s low-rate policies have cost American savers between $500.0 billion and $600.0 billion in lost interest payments over the past decade. And this figure will likely grow given the central bank’s plans to keep rates lower for longer. (Source: “With interest rates near zero, preserving retirement income gets risky,” CNBC, March 11, 2020.)
But even today, you can still find safe, high-yield dividend stocks. You just need to dig a little deeper.
To help readers out, I’ve highlighted three of my favorite high-yield dividend stocks for September. All of the companies below generate respectable income and offer a tidy distribution to boot. And, while you shouldn’t consider the list below as a series of buy recommendations, it represents a great starting point for further research.
Let’s get started.
Energy Transfer LP
I often describe pipeline companies like Energy Transfer LP (NYSE:ET) as the “toll roads” of the energy patch. Rather than drilling for oil and gas themselves, these companies earn steady fees moving commodities across the country. This allows them to generate reliable profits whether oil trades for $20.00 or $200.00 a barrel.
But the best part: these businesses often have a monopoly over the markets they serve. Constructing a parallel route costs billions of dollars, keeping out all but the most deep-pocketed of competitors. And any new line would only split the existing business between the two rivals, often resulting in an unprofitable situation for everyone involved. As a result, it usually only makes economic sense to have one business serving a marketplace, allowing that firm to earn a respectable profit year after year.
For Energy Transfer LP unitholders, this has created one of the best high-yield dividend stocks around. Since going public in 2006, the partnership has paid a distribution to investors every quarter. And today, units come with an upfront yield of 18.4%.
Iron Mountain Inc
If you visit my home office, you will find stacks of paperwork piled up in the closet: insurance documents, mortgage information, expense receipts, etc.
Now imagine the mountains of physical records generated by a business like a legal practice or a dentist’s office. All of that paperwork needs to be stored somewhere. And that has created a lucrative business for Iron Mountain Inc (NYSE:IRM).
Iron Mountain represents the largest data and records storage company in the world. The company owns thousands of warehouses worldwide, which generate steady, monthly revenue. Management supplements this income stream with service fees, such as document shredding fees. And more recently, the company has expanded into digital record storage by purchasing dozens of data centers.
This collection of different businesses generates piles of cash flow, far more than management can productively invest. So, rather than hoarding their capital and building up a big cash pile, executives pay out the bulk of their profits to investors.
Since 2010, Iron Mountain’s payout has grown almost 10-fold in size. Today, the company pays a quarterly distribution of $0.62 per unit. That comes out to an annual yield of 8.2%.
Long-time subscribers know I’m a big fan of investing in big, secular trends. And in the world of investments, you can’t find many trends bigger than health care right now. Each day, 10,000 baby boomers turn 65. That means a growing demand for everything from doctor visits and medical offices to drugs and hospitals. (Source: “Baby Boomers Retire,” The Pew Research Center, December 29, 2010.)
One of my favorite ways to invest in this bonanza: Welltower Inc (NYSE:WELL). The company owns hundreds of nursing homes, retirement communities, and long-term care communities across North America. And, thanks to an aging population, analysts expect this industry will continue to post booming profits.
What sets Welltower apart from its competitors is its portfolio. Management has focused most of their acquisitions in dense, urban centers. Because it’s difficult to flood the market with new supply, Welltower has the freedom to raise rents on a consistent basis year after year. And that has resulted in above-average profits for shareholders.
Admittedly, Welltower’s yield won’t knock your socks off. Based on the current price, units come with an upfront yield of only 4.4%.
But that payout will likely grow over time. Management continues to pad their income stream through acquisitions, rent hikes, and cost cuts. Over the next five years, Wall Street expects the business to grow cash flow at a mid-single-digit annual clip.
And given the company’s conservative payout ratio and balance sheet, executives should have no problem growing the distribution in line with profits.