Investing in dividend stocks can be a great way to collect dividend income. Several high-quality companies currently offer higher-yielding dividends. That enables you to generate more passive income from every dollar you invest.
Here are five top dividend stocks currently yielding over 5%, well above the S&P 500's sub-1.5% dividend yield. At that rate, every $100 you invest will produce over $5 of passive dividend income each year.
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Alexandria Real Estate Equities
Alexandria Real Estate Equities(NYSE: ARE) is a real estate investment trust (REIT) focused on owning life science properties. It owns, operates, and develops collaborative megacampuses in life science innovation clusters, including Greater Boston, the San Francisco Bay area, San Diego, Seattle, Maryland, the Research Triangle, and New York City. It leases space in its purpose-built lab and office buildings to biopharmaceutical companies, medical technology companies, and biomedical institutions. It uses a portion of the rent collected from these companies, accounting for 57% of its funds from operations, to pay a lucrative dividend that currently yields over 7%. It retains the rest to invest in developing, redeveloping, and acquiring additional lab properties. These investments have enabled Alexandria to grow its dividend at a 4.5% annual rate since the end of 2020.
Clearway Energy
Clearway Energy(NYSE: CWEN)(NYSE: CWEN.A) is a leading owner of clean energy generation assets, including wind, solar, battery storage, and natural gas. The company sells the electricity that those assets produce under long-term, fixed-rate power purchase agreements with utilities and large corporate power buyers. Clearway targets to pay out 70% to 80% of its stable cash flow in dividends. It currently has a dividend yield of nearly 6%.
The company uses the cash it retains and its solid balance sheet to invest in additional income-generating clean energy assets. It has investments lined up to grow its cash available for distribution from $2.08 per share this year to over $2.60 per share by 2027. That should give Clearway plenty of power to continue increasing its high-yielding dividend.
Enbridge
Enbridge(NYSE: ENB) is a leading North American pipeline and utility company. Those businesses generate very stable cash flow. The company pays out 60% to 70% of its steady cash flow in dividends, with a 6% current yield.
The energy infrastructure company's post-dividend free cash flow and strong balance sheet give it billions of dollars in annual investment capacity. It uses that financial flexibility to invest in organic expansion projects and make accretive bolt-on acquisitions. Enbridge currently has expansion projects under construction that will come online through the end of the decade. That gives it a lot of visibility into its ability to continue growing its earnings and dividend, with plans for 3% to 5% annual growth in the coming years. Enbridge has grown its dividend for 30 consecutive years.
NNN REIT
NNN REIT(NYSE: NNN) is a REIT focused on owning income-generating freestanding net lease retail properties, such as convenience stores, auto service locations, and restaurants. Net leases produce very stable rental income because tenants cover all of a property's operating expenses, including routine maintenance, real estate taxes, and building insurance. NNN REIT uses that steady rental income to pay its dividend, which currently yields around 5.5%.
The REIT expects to generate enough cash to pay its dividend with about $200 million to spare this year. It also has a conservative balance sheet. Those features give it the financial flexibility to buy additional income-generating retail properties. NNN REIT's steadily growing portfolio has enabled it to routinely increase its dividend. Last year was the 35th straight year that it had raised its payment.
Verizon
Verizon(NYSE: VZ) is one of the country's largest mobile and broadband companies. It generates lots of recurring revenue as customers pay their cellphone and internet bills. Last year, Verizon generated $19.8 billion in free cash flow after funding $17.1 billion in capital expenditures to maintain and expand its mobile and broadband networks. That easily covered its $11.2 billion dividend outlay, enabling the company to retain cash to strengthen its already rock-solid balance sheet. That puts the telecom giant's 6%-plus-yielding dividend payment on a rock-solid foundation.
The company invests heavily in growing its business. It plans to continue spending billions of dollars on capital expenditures each year. Verizon also agreed to buy Frontier Communications in a $20 billion deal to enhance its fiber capabilities. These growth-focused investments should enable Verizon to continue increasing its high-yielding dividend, which it has raised for a sector-leading 18 straight years.
Lots of passive income now and even more in the future
These dividend stocks all share a few common features. They generate lots of stable cash flow, which they use to pay high-yielding dividends while investing in growing their businesses. That growth enables them to routinely raise their dividend payments. Investors, in turn, get to collect a lucrative passive income stream that should steadily grow in the future.
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Matt DiLallo has positions in Clearway Energy, Enbridge, and Verizon Communications. The Motley Fool has positions in and recommends Alexandria Real Estate Equities and Enbridge. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
