Investors have primarily favored dividend investments as a source of passive income. However, the recent rise in interest rates, geopolitical uncertainties after the change in the U.S. presidency, and fears of a potential economic slowdown have set the stage for a debate between stocks and rental income. Though real estate has traditionally been a reliable income source, Global Property Guide stated that the national average rental yield in the U.S. staggers around 6.1%. Rising property maintenance costs and mortgage rates owing to economic shifts affect the stability of the rental income, leaving investors unable to make their portfolio decisions. On the other hand, yields from several dividend stocks exceed this threshold, despite the unfavorable U.S. stock market.
The U.S. stock market has experienced heightened volatility in recent months, influenced by Federal Reserve policy shifts. Meanwhile, corporate layoffs have increased, contributing to a slowdown in consumer spending. The rise in borrowing costs has added pressure to equity markets. Trade conflicts between the U.S. and China, as well as with neighboring countries like Canada and Mexico, have further contributed to uncertainty for international businesses. Even amid these headwinds, some dividend-paying stocks have remained resilient, acting as a source of stable income for investors, in a turbulent market.
Meanwhile, the real estate market is facing its challenges. Rising mortgage rates and the declining demand for properties in multiple U.S. regions have slightly reduced the attractiveness of rental investments. Landlords in various areas are experiencing a squeeze in their profit margins because of maintenance expenses, insurance costs, and property taxes. As a result, while real estate remains an option, dividend stocks provide an alternative for investors to generate passive income without burdening themselves with property management complications.
Liquidity and diversification enhance the appeal of dividend stocks. Unlike real estate investments, dividend stocks typically require less capital and can be sold more quickly. In this regard, dividend stocks offer flexibility for investors to adjust their portfolios in an evolving market condition. At times, such as now, when economic uncertainty along with Federal Reserve policies affect both equities and real estate markets, dividend-paying stocks interest investors seeking a balance between income generation and stability. Many companies continue to prioritize shareholder returns and offer dividend yield exceeding both inflation and the national average rental yield, providing an opportunity for investors to capitalize on consistent income streams without being tied to the challenges of property ownership.
Our article presents 10 dividend stocks that offer yields higher than the U.S. average rental yield, allowing investors to benefit from regular payouts and potential price appreciation – the advantages that rental properties do not always guarantee. Whether you are a retiree looking for steady income, an investor seeking to diversify away from real estate, or simply someone looking to sail through the volatile market of today with a reliable investment approach, these stocks could help in adjusting your portfolio.
Our Methodology
Our list has been compiled based on a few criteria. Primarily, we considered only those stocks that offer a dividend yield of more than 6.1%. This represented the U.S. average rental yield. Stocks with a Buy recommendation from analysts were included in our list to ensure the companies featured have solid fundamentals. The final list is ranked according to dividend yield, as of March 22. We additionally considered the number of hedge funds tracked by Insider Monkey as of Q4 2024 backing the stocks, to estimate the institutional interests for the stocks as well.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Saul Centers, Inc. (BFS): Top Dividend Stock that Pay More than the US Average Rental Yield
A wide angle shot of a mixed-use property with office buildings, retail stores, and restaurants, capturing the diverse leasable area of the company.
Headquartered in Bethesda, Maryland, Saul Centers, Inc. (NYSE:BFS) is a real estate investment trust. The company specializes in retail and mixed-use properties primarily in the Washington, D.C. metropolitan area. Additionally, the company focuses on high-density urban markets where tenant demands are stable. It has a total of 61 properties in its real estate portfolio, including four land and development properties.
With a dividend yield of 6.59%, Saul Centers, Inc. (NYSE:BFS) remains a notable choice for investors seeking stable income. Based on the Q4 results, the company’s revenue has increased to $67.9 million but fell behind the estimated $68.94 million. The earnings per share, standing at $0.22 also have missed the estimated $0.30 per share. However, the leasing activity with respect to the commercial portfolio saw an increase from 94.1% the previous year to 95.2%, suggesting potential rises in FFO in future quarters. With such a positive outlook, the company stands committed to creating and delivering shareholder value.
Institutional interest is moderate, with 12 hedge funds from the Insider Monkey Q4 2024 database currently holding ownership in Saul Centers, Inc. (NYSE:BFS). Analysts maintain a Buy rating, projecting a 1-year median price target of $47, which, when compared to the current price, offers a potential gain of 31.28%. Investors who purchase the stock before April 15, 2025, will benefit from the next dividend payout.
Overall, BFS ranks 7thon our list of top 10 stocks for dividend capture strategy in March 2025. While we acknowledge the potential for BFS as an investment, our conviction lies in the belief that some AI stocks hold more significant promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BFS but that trades at less than 5 times its earnings check out our report about the cheapest AI stock.
