With thousands of publicly traded companies and exchange-traded funds (ETFs) to choose from, Wall Street offers countless ways for investors to grow their wealth. Though there's no one-size-fits-all blueprint to make bank, buying and holding high-quality dividend stocks has a favorable track record of delivering for investors.
Companies that provide investors with a regular dividend tend to be profitable on a recurring basis, and in many instances can offer transparent long-term growth outlooks. Perhaps most importantly, income stocks have almost always demonstrated to Wall Street their ability to navigate economic downturns. In other words, it's no surprise that dividend stocks thrive over the long run.
What might come as a shock is just how decisively dividend stocks have outperformed non-payers over the last half-century. In The Power of Dividends: Past, Present, and Future, the researchers at Hartford Funds, in collaboration with Ned Davis Research, noted that dividend stocks returned an annual average of 9.17% from 1973 to 2023, and did so while being 6% less volatile than the S&P 500. By comparison, the non-payers produced a modest annualized return of 4.27% and were 18% more volatile than the benchmark index.
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However, no two dividend stocks are alike. Though there are hundreds upon hundreds of public companies that pay a regular dividend, only a select few provide a rock-solid payout and offer a yield that's at least two times the current yield of the S&P 500 (1.24%) -- i.e., "high yield."
What follows are five of the safest high-yield dividend stocks -- sporting an average yield of 4.26% -- you can confidently buy for 2025.
Enterprise Products Partners: 6.28% yield
Within the ultra-high-yield category (i.e., yields that are four or more times greater than the average yield of the S&P 500), energy company Enterprise Products Partners(NYSE: EPD) is tough to beat in terms of income safety. It's yielding nearly 6.3% and has increased its base annual distribution for 26 consecutive years.
Whereas most oil and gas stocks vacillate wildly with the ebbs-and-flows of the spot price of energy commodities, Enterprise has the luxury of being a midstream operator. It's effectively an energy middleman that oversees more than 50,000 miles of transmission pipelines and can store north of 300 million barrels of liquids, including refined product.
Enterprise Products Partners' operating model is all about securing long-term contracts with upstream drilling companies. What's most important about these contracts is that they're predominantly fixed fee. This fixed-fee aspect minimizes the effects of inflation and spot price volatility in underlying energy commodities, leading to highly predictable operating cash flow year after year.
Being able to accurately forecast cash flow a year or more in advance is what gives Enterprise's management team the confidence to make distribution-accretive bolt-on acquisitions, as well as invest aggressively in new energy infrastructure. Enterprise Products Partners is spending $6.9 billion on a dozen major capital projects, many of which are focused on expanding its natural gas liquids exposure.
Coca-Cola: 3.11% yield
Another stock that can deliver an exceptionally safe payout over the long run is consumer staples colossus Coca-Cola(NYSE: KO). In February, Coca-Cola's board is expected to increase its base annual payout for a 63rd consecutive year.
The obvious factor working in Coca-Cola's favor is that it sells a basic needs good: beverages. No matter how well or poorly the U.S. and global economy are performing, consumers are still going to purchase its vast portfolio of beverage products, over two dozen of which generate more than $1 billion in annual sales.
Coca-Cola also benefits from its geographic diversity. It's currently selling its products in every country, save for North Korea, Cuba, and Russia, the latter of which has to do with its invasion of Ukraine in February 2022. This means it generates highly predictable profits and cash flow from developed markets, while emerging markets are responsible for moving the revenue needle.
The Coca-Cola story isn't complete without mentioning its top-tier marketing department, which is leveraging artificial intelligence (AI) and well-known brand ambassadors to connect with multiple generations of consumers. The annual "Brand Footprint" report from Kantar notes that Coca-Cola's products have been the most-chosen from retail shelves for 12 consecutive years.
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Realty Income: 5.74% yield
A third high-yield dividend stock with a seemingly immaculate track record of delivering for its shareholders is retail real estate investment trust (REIT) Realty Income(NYSE: O). This is a company that pays its dividend on a monthly basis and has increased its payout for 30 consecutive years, including 109 straight quarters.
What makes Realty Income so special is the company's focus on stand-alone retailers. It closed out September with 15,457 commercial real estate (CRE) assets in its portfolio, approximately 90% of which were "resilient to economic downturns and/or isolated from e-commerce pressures," per the company. By leasing to companies that draw foot traffic in any economic climate, such as grocery stores, drug stores, and dollar stores, Realty Income ensures that its funds from operations remains stable and predictable.
The consistency of Realty Income's operating model can also be seen in its occupancy levels. Since this century began, the median occupancy rate for S&P 500 REITs is a respectable 94.2%. Realty Income's long initial lease terms and careful vetting process have produced a median occupancy rate of 98.2% spanning 24 years.
Inorganic growth opportunities are expanding Realty Income's horizons, as well. It entered the gaming industry with two leasing two deals over the last two years and acquired Spirit Realty Capital for $9.3 billion in January 2024 to complement its existing CRE portfolio and move into new verticals.
York Water: 2.8% yield
Safe high-yield dividend stocks that can be purchased with confidence also exist beyond the realm of large-cap stocks. Water utility York Water(NASDAQ: YORW), which sports a market cap of only $452 million, has been paying a consecutive dividend to its shareholders for more than 208 years, which is 60 years longer than any other public company.
As is the case with most utilities, York's operating performance is highly predictable. Demand for water and wastewater service isn't going to differ much from one year to the next, which leads to predictable profits and operating cash flow. It also doesn't hurt that utilities operate as monopolies or duopolies in the areas they service, which means they don't have to worry about losing customers.
Being a regulated utility adds another level of safety to York's revenue and profit potential. On one hand, being regulated keeps York from raising its rates without the permission of the Pennsylvania Public Utility Commission. On the other hand, it ensures the company avoids unpredictable wholesale pricing.
Lastly, York Water uses bolt-on acquisitions to its advantage. Since laying new infrastructure can be time-consuming and cost-prohibitive, the transparency and predictability of the company's operating cash flow allows its management team to make calculated acquisitions that can increase its customer base and long-term profit potential.
Johnson & Johnson: 3.35% yield
The fifth safe high-yield dividend stock you can confidently buy for 2025 is none other than healthcare conglomerate Johnson & Johnson(NYSE: JNJ), which is commonly referred to as "J&J." J&J has matched Coca-Cola with 62 straight years of base annual dividend increases and is expected to mark its 63rd year of hikes in April.
Keeping with the theme, healthcare stocks tend to be highly defensive. Since we have no control over when we become ill or what ailment(s) we develop, there's always going to be a need for prescription drugs and medical devices, which are both categories where Johnson & Johnson is a key player.
Prior to the COVID-19 pandemic, Johnson & Johnson had delivered 35 consecutive years of adjusted operating earnings growth. This is a reflection of the strong pricing power associated with brand-name pharmaceuticals, as well as the company's shift more than a decade ago to focus on higher-margin drug development.
Have I mentioned that consistency is the name of the game with J&J? Since its founding in 1886, the company has had just 10 CEOs, including current chief Joaquin Duato. Little change in key leadership positions leads to continuity when executing growth initiatives.
Finally, Johnson & Johnson is one of only two publicly traded companies that sports the highest credit rating possible (AAA) from Standard & Poor's. Having a more trustworthy credit rating than the U.S. government (AA) should give investors confidence that J&J can service its debts and deliver on the dividend front for a long time to come.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Enterprise Products Partners and Johnson & Johnson. The Motley Fool has a disclosure policy.
