3 of the Best Dividend Stocks for Income Investors

Saturday, March 20, 2021 | Sean Sechler
3 of the Best Dividend Stocks for Income Investors

On paper, income investing sounds like a no-brainer. Building out a portfolio of long-term investments that are specifically structured to generate regular income can help you build wealth over time and take advantage of compounding. With that said, it takes patience and a knack for finding quality investment options to become successful with this strategy. One of the places that income investors often put a large portion of their capital is the stock market, and specifically in dividend stocks.

These types of stocks can help you take advantage of constant returns over the long run while also offering price appreciation upside. All dividend stocks are not created equal, and it’s important to be very selective when it comes to choosing the best options for your income-generating portfolio. Let’s take a look at 3 of the best dividend stocks for income investors below.

NextEra Energy (NYSE:NEE)

This member of the S&P 500 has a little bit of everything to offer income investors. Consistent dividend growth, defensive characteristics, and room for upside given the company’s exposure to renewable energy make NextEra Energy a top dividend stock to consider buying. NextEra Energy joined the elite group of dividend growers known as the dividend aristocrats after reporting 25 consecutive years of dividend increases back in January. The stock currently offers income investors a 2.17% dividend yield and has declined over 11% in the past month, offering an intriguing entry point for long-term buyers.

NextEra Energy is one of the largest electric power companies in North America and provides electricity to millions of customers, which is a tried-and-true business model that holds up well regardless of what’s going on with the economy. Since this company generates steady cash flows from its Florida Power & Light business and also provides exposure to renewable energy via its NextEra Energy Resources subsidiary, income investors can expect a nice balance of dividend growth and earnings upside.

Realty Income Corporation (NYSE:O)

Real Estate Investment Trusts, also known as REITs, can be a great place for income investors to look because they provide diversification along with steady dividend-income. One of the most popular REITs is Realty Income Corporation, especially thanks to the company’s reputation as being “The Monthly Dividend Company”. As a leading owner of single-tenant retail properties, Realty Income has properties that are leased to over 600 different commercial tenants including convenience stores, drug stores, dollar stores, grocery stores, gyms, and movie theaters. The company typically uses triple net leases, which means that the tenant is responsible for paying for real estate taxes, insurance, and maintenance costs.

You might be thinking that retail is a risky investment at this time, but with Realty Income Corporation you can count on resiliency given that most of its tenants are non-discretionary or service-oriented. While it’s true that the company’s movie theater tenants are presenting an issue, they are a small part of the company’s overall tenant base. Realty Income Corporation also just hiked its dividend payment and has done this 110 times since it became a publicly-traded company back in 1994. With a 4.46% dividend yield, ample liquidity, and a strong operating history, Realty Income Corporation is one of the best stocks for income investors to check out at this time.

Waste Management (NYSE:WM)

If you are an income investor interested in getting filthy rich over the long run, take a look at this leading trash collector. Waste Management is the largest waste disposal company in North America and serves municipal, commercial, industrial, and residential customers. Most importantly, it’s a company that has increased its dividend for 18 consecutive years and is focused on returning cash to shareholders over the long run. When it comes to dividend investing, you want companies that have a wide economic moat and can generate steady free cash flows with a reliable business model. That’s exactly the case with this stock.

With its leading market share and a huge network of landfills, it’s difficult to imagine another company dethroning Waste Management from its market-leading position. This is particularly true because there are plenty of regulatory hurdles that other businesses would need to overcome. Another positive here is that the company’s revenue is driven by price and volume, which means that the stock could benefit in the near-term from an uptick in industrial activity. Waste Management reported Q4 revenue of $4.07 billion, up 5.7% year-over-year. The company’s management expects revenue growth of 10.75%-11.25% in 2021, which is yet another strong reason to consider this income-generating stock.



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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
NextEra Energy (NEE)2.5$80.87-0.9%1.90%50.70Buy$81.35
Realty Income (O)2.4$67.25-0.6%4.21%67.93Buy$77.14
Waste Management (WM)2.6$151.96-0.5%1.51%40.31Hold$136.25
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