When the market starts to tumble, more aggressive investors often start looking for bargains in the list of previous top performers. For example, American Express has fallen nearly 30% from its early-year highs. But its yield is only around 1.4% even after that stiff drop. At the other extreme, investors sometimes reach for yield with a company like AGNC Investment, which is down nearly 20% from its peak and yields a huge 16%. But AGNC's dividend history includes repeated dividend cuts.
It would be better for income investors to stick with their core approach. Buying popular stocks that have sold off, but not enough to give them an attractive yield (like American Express), or ultra-high-yield stocks with unreliable dividend histories (like AGNC) could be a setup for disappointment. It is far better to stick with reliable high-yield stocks that are likely to keep rewarding investors even in a market downturn or recession -- like this trio, with yields up to 6%.
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1. UDR's core business is a basic necessity
UDR(NYSE: UDR) is a real estate investment trust (REIT), just like AGNC Investment. Only AGNC Investment is a mortgage REIT, a fairly complex type of REIT, while UDR is a property-owning REIT that focuses on apartments. UDR's dividend yield is an attractive 4.2% and the dividend has been increased for 16 consecutive years. That's in stark contrast to AGNC's dividend, which has been in a downtrend over that entire span.
What's interesting about UDR's business is that housing is a necessity. Bear markets and recessions don't change the need for having a roof over one's head. On top of that, this apartment landlord has one of the most diversified portfolios in the apartment REIT sector, with operations in coastal markets and in the sunbelt, in urban and suburban locations, and with both A and B quality assets. With a downtrend in construction of new apartments in UDR's markets expected to last until late 2026, this high-yield landlord appears well positioned to weather the current market and economic turbulence.
2. Toronto-Dominion Bank is out of favor, but still financially strong
Next up is Toronto-Dominion Bank(NYSE: TD), which is usually just called TD Bank. The bank was in its own personal bear market before the S&P 500 started to waver, in stark contrast to fellow financial giant American Express, which was trading near its all-time highs. That's worth noting because American Express has fallen nearly 30% from its 2025 highs while TD Bank is only down around 10%. That difference is largely because so much bad news is already priced into TD Bank's stock.
The bad news is that TD Bank's U.S. operations were used to launder money. It had to pay a large fine, is upgrading its internal controls, and is living under an asset cap in the U.S. market. The asset cap basically limits TD Bank's ability to grow its U.S. operations, which were expected to be the bank's growth engine. This is a black eye for TD Bank, but it isn't a knockout punch. In fact, the Canadian bank increased its dividend 3% after it announced the resolution with U.S. regulators. And once the asset cap is lifted, which could take a few years, U.S. growth will likely resume.
Meanwhile, TD Bank's Canadian operations are unaffected and the bank remains one of the largest and best-positioned financial institutions in that country. Given the downturn in the company's shares that has already happened, this bank giant is a low-risk turnaround that most income investors will probably find appealing. Note, too, that TD Bank didn't cut its dividend during the Great Recession, as did many of its U.S. bank peers, suggesting it's a resilient business even during the worst of times. Its yield is 5.1%.
3. W.P. Carey is a nuanced selection
Net lease REIT W.P. Carey(NYSE: WPC) cut its dividend in 2024 after deciding to exit the office property sector. Investors didn't like that move even though it has made this globally diversified REIT a better company. Notably, the dividend went right back to its quarterly increase cadence following the cut. That's a sign that W.P. Carey is operating from a position of strength and that the office exit was a business reset, not a sign that the REIT was struggling. And the cut clearly wasn't the start of a trend, like the long downturn in AGNC's dividend. W.P. Carey's dividend yield is a lofty 6% or so.
What's interesting here is that Wall Street has been in a show-me state of mind with W.P. Carey since the cut. And now, as 2025 has moved along, the mood among investors has become broadly negative. And yet the cash from the office exit allowed W.P. Carey to invest in new assets, a large portion of which were bought in late 2024. The financial benefits from those assets are going to start showing up this year. Since most investors aren't likely to be looking for W.P. Carey's return to growth in a bear market, the high-yield REIT remains an attractive bargain.
Don't change your approach in a downturn
Market sell-offs create powerful emotions that investors have to control or they risk making less-than-ideal investment decisions. This is the time to stick to your core investment approach, which is likely to mean buying attractive companies with attractive yields, not reaching for yield and potentially jumping in to buy a falling knife. UDR, TD Bank, and W.P. Carey all have strong stories and strong businesses... and the types of dividends and yields that should help you sleep well at night when Wall Street has become a little messy.
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American Express is an advertising partner of Motley Fool Money. Reuben Gregg Brewer has positions in Toronto-Dominion Bank and W.P. Carey. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
