3 Dividend Stocks to Buy for Income Investors in a Rising Rate Environment

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Muslim Farooque

Sat, Sep 30, 2023, 7:00 AM 3 min read

In the bustling world of investing, dividend stocks to buy for income stand out for those searching for dependable returns. It’s no secret that dividend aristocrats, those esteemed stocks with a rich legacy of payouts spanning over 25 years, are lauded as the epitome of financial reliability. These stalwarts have weathered stormy economic climates, delivering dividends even when the clouds of uncertainty loom large. Moreover, the dance of dividend stocks with interest rates is intricate, soaring when rates plummet and retreating when they ascend. Yet, several dividend-centric stocks have shown admirable resilience in today’s volatile interest rate landscape. Thus, if you’re scouting for robust, yield-rich additions to your portfolio, these dividend champions will be your prime contenders. Let’s look at three top dividend stocks to buy for income to add to your portfolios, offering stability and healthy upside ahead.

Dividend Stocks to Buy for Income: Canadian Natural Resources (CNQ)

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Canadian Natural Resources (NYSE:CNQ), anchored in Alberta’s robust energy landscape, is a giant in the oil sands arena. Its unique sedimentary structure, where oil is niftily trapped in sandstone, promises a steady production stream, stretching its viability deep into the 2030s and beyond. In an era where new oil projects often face uphill battles, the longevity of CNQ’s assets shines incredibly bright. Moreover, once past the initial infrastructure costs, the low operating expenses of these oil sands thrust Canadian Natural into an enviable position of massive profit margins, especially with the resurgence in oil prices.

Beyond its operations, CNQ is making waves in the dividend domain, boasting a hefty 4% yield and a commendable 21% growth over five years. Topping it off, its year-to-date (YTD) performance showcases a 27% return, further cementing its standing as a beacon for investors.

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CTO Realty Growth (CTO)

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This year has been challenging for many real-estate-investment-trusts, and CTO Realty Growth (NYSE:CTO) hasn’t been spared, with its shares slipping over 12% since January. Specializing in retail properties in burgeoning metro zones, this dip positions CTO as an intriguing prospect for income stock enthusiasts. It boasts an impressive forward average-funds-from-operations growth of 7.6%, which trumps the sector median by over 85%. Moreover, its revenue growth over a five-year period stands at an impressive 9.65%, roughly 54% higher than the sector median.

Regarding dividends, it is currently yielding north of 9.36%, with 10 years of consecutive payout growth. Moreover, five-year dividend growth stands at a tremendous 80.2%. Despite overarching macro concerns, it projects an uptick in CTO’s funds from operations in 2024, hinting at potential dividend enhancements.

Realty Income (O)

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Realty Income (NYSE:O) stands out as one of the top players in the REIT universe, being one of the most popular monthly dividend businesses. This leading triple-net trust adopts a model where the tenants, not the landlords, bear the burden of primary expenses, including taxes, insurance and maintenance. Such a strategy is particularly advantageous in inflationary periods, offering landlords a cushion against unexpected cost surges.

However, even with this distinct edge, O stock has been unable to escape the broader REIT industry downturn. Rising interest rates have alarmed investors, translating to increased interest expenses for REITs. Consequently, O stock has dipped a remarkable 22% YTD.

But there’s a silver lining for eagle-eyed investors. The current slump could potentially present an attractive entry point. With its shares now boasting a forward dividend yield of around 6% and trading at a forward price-to-AFFO per share ratio slightly below the sector’s median, O stock is an excellent income stock to wager on.

On the date of publication, Muslim Farooque did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.