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Buying the Dip: 3 Super Safe High-Yield Dividend Stocks I Added to My Retirement Account During the Stock Market Sell-Off.
The stock market recently took a big dip, driven down by concerns about how much tariffs will affect the economy. One of the benefits of falling stock prices is that dividend yields move in the opposite direction. That allows investors to lock in even higher yields on some high-quality dividend stocks.
I recently capitalized on the dip in the market to deploy some cash in my retirement account to add to my position in several top-notch dividend stocks, including VICI Properties(NYSE: VICI), Verizon(NYSE: VZ), and Genuine Parts Company(NYSE: GPC). Here's whyI think they are low-risk stocks to buy amid the current market turmoil.
A low-risk wager on a steadily growing income stream
Amid the market downturn, VICI Properties' stock has dipped more than 10% from its recent peak. That has driven up the dividend yield of the real estate investment trust (REIT) to 5.7%, well above the S&P 500's 1.5% yield.
The REIT's high-yielding payout is on a very safe footing. It produces very stable cash flow from itsportfolio of high-quality experiential real estate, like casinos and sports and entertainment complexes.
It leases these properties to operating tenants under very long-term triple net leases (NNNs), which currently have an average remaining term of 41 years. An increasing percentage of its leases index rents to inflation (42% this year, rising to 90% by 2035). Because of that, it generates very stable and growing rental income.
VICI Properties has a very strong financial profile that gives it the flexibility to continue investing in income-producing experiential real estate. Its growing portfolio enables the REIT to increase its dividend. It has raised it for seven straight years (every year since its formation), at a 7% compound annual rate, well above the 2% average annual rate of its net lease peers.
A cash flow machine
Verizon's shares have slumped more than 7% from their recent peak. That has pushed the telecom giant's dividend yield up to 6.3%. That high-yielding dividend is super safe.
Verizon produces lots of durable cash flow as businesses and consumers pay their wireless and broadband bills. The company earned $36.9 billion in cash flow from operations last year and $19.8 billion in free cash flow (FCF) after funding capital expenditures, which was more than enough to cover its dividend outlay of $11.2 billion. Verizon used the remaining excess FCF to strengthen its already rock-solid balance sheet.
The company is using some of its financial flexibility to acquire Frontier Communications in a $20 billion all-cash deal to bolster its broadband network. That deal and the continued capital investments to organically grow its fiber and 5G networks put Verizon in position to grow its revenue and cash flow in the future.
That should enable the company to continue increasing its dividend, which it has done for a sector-leading 18 years in a row.
Decades of dividend growth prove its resiliency
Genuine Parts Company has sold off sharply during the recent market downdraft, falling over 30%. That slump pushed the automotive and industrial parts distributor's dividend yield up to 3.7%.
There are some concerns that tariffs could have a meaningful impact on the automotive sector, given the volume of parts imported into the country. While this headwind could affect Genuine Parts' business, it has weathered adverse conditions before, demonstrating its resilience by increasing its dividend for 69 years in a row.
The company has a strong financial profile to support its high-yielding dividend amid the current market uncertainty. Last year, Genuine Parts produced $1.3 billion in cash flow from operations and $684 million in FCF. That was more than enough to cover the $555 million it paid in dividends.
It has a strong balance sheet with lots of liquidity ($2 billion, including $480 million of cash and equivalents). That gives it a lot of financial flexibility to continue investing in growing its business and making acquisitions, including buying independent NAPA Auto Parts stores in the top markets.
These investments should help grow its revenue and cash flow over the long term, supporting the continued rise in its dividend.
High-quality, high-yielding dividend stocks
Shares of VICI Properties, Verizon, and Genuine Parts Company have dipped during the recent stock market sell-off, which has pushed their dividend yields even higher. Given the durability of their cash flows and the strength of their financial profiles, those payouts are very safe. That's why I've capitalized on the recent sell-off to buy even more shares for my retirement account to increase the amount of their super-safe income that I will collect in the years to come.
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Matt DiLallo has positions in Genuine Parts, Verizon Communications, and Vici Properties. The Motley Fool recommends Genuine Parts, Verizon Communications, and Vici Properties. The Motley Fool has a disclosure policy.
