Investors who don't own dividend stocks are rethinking their investing approach. When the stock markets sell off, portfolios dip, and volatility rises, a steady stream of income from dividend stocks can be really handy.
To top that, good dividend stocks are typically less volatile than growth stocks, making them no-brainer additions to your portfolio, especially during uncertain times like these. Here are some dividend stocks and an ETF that are really smart buys now.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
A compelling monthly dividend growth stock
As a real estate investment trust (REIT), Realty Income(NYSE: O) is required to pay out at least 90% of its taxable income in dividends every year. While that ensures regular dividends for shareholders, Realty Income stands out for two reasons.
First, it pays a dividend every month, and has increased its dividend for the past 110 consecutive quarters now. To top that incredible dividend streak, Realty Income stock also yields a solid 5.6%. And, there's a really good reason why Realty Income is one of the best dividend stocks to buy amid the market turmoil: its business model.
Realty Income acquires and develops real estate properties and leases them to single tenants under triple net leases. That means that although Realty Income owns the properties, its tenants bear most of the property-related expenses such as operating expenses, insurance, and taxes. Realty Income simply pockets rents under long-term leases with no recurring expenses, which is why it generates predictable revenues and sky-high margins.
Here's the real deal: Realty Income has a massively diversified portfolio, with over 15,600 properties leased to clients in almost 89 industries, with convenience, grocery, and dollar stores making up more than 25% of its portfolio. These are mostly recession-resistant businesses, which makes Realty Income a bankable, high-yield dividend growth stock to buy now.
This stock wants to increase dividend by up to 9% each year
If you're worried about tariffs, trade wars, or even a recession, Brookfield Infrastructure (NYSE: BIP)(NYSE: BIPC) is one of the smartest dividend stocks you could buy now.
Brookfield Infrastructure just made a big growth move -- with its institutional partners, it's about to acquire Colonial Enterprises for $9 billion, with Brookfield Infrastructure investing $500 million in the deal.
Colonial is not just any other company. It owns Colonial Pipeline, the largest pipeline transporting refined petroleum products in the U.S. It spans 5,500 miles and transports almost 45% of all fuel consumed on the East Coast.
With Colonial Pipeline, Brookfield Infrastructure should be able to add yet another solid and resilient asset to its portfolio. Most of the company's assets are regulated or contracted, such as pipelines, utilities, rail and toll roads, and data centers. So they earn steady fees for Brookfield Infrastructure under long-term contracts, which is why the company can generate stable cash flows and dole out regular and growing dividends to its shareholders.
Brookfield Infrastructure has increased its dividend for 16 consecutive years and is targeting an annual dividend growth of 5% to 9%, backed by at least 10% growth in its funds from operations (FFO) per unit. The stock, therefore, looks like one of the most compelling dividend stocks out there to buy now. If you buy the corporate shares of the entity, you can enjoy a 4.7% yield while avoiding tax complications such as K-1 federal forms that are required if you own units of the partnership.
Own several rock-solid dividend stocks with one investment
While buying individual dividend stocks is a straightforward way to generate passive income, a dividend exchange-traded fund (ETF) is another incredible tool, as it gives you exposure to a basket of dividend stocks with a single investment. Right now, the Schwab U.S. Dividend Equity ETF(NYSEMKT: SCHD) is one of the smartest dividend ETFs you could buy. It yields 3.7%.
The thing that I like most about the Schwab U.S. Dividend Equity ETF is that it tracks the Dow Jones U.S. Dividend 100, which comprises stocks that not only offer high dividend yields, but also boast a strong dividend track record. Simply put, these stocks are selected based on their fundamental strength and ability to pay steady dividends, which makes this a top-notch dividend ETF to own.
For example, Coca-Cola(NYSE: KO) is the largest holding in the Schwab U.S. Dividend Equity ETF. The beverage giant is a Dividend King and has increased its dividend every year for 63 consecutive years now. Oil major ConocoPhillips, telecom behemoth Verizon, tobacco giant Altria, and home improvement chain Home Depot are some other top holdings in the ETF.
The Schwab U.S. Dividend Equity ETF is also an incredibly low-cost ETF, with an expense ratio of only 0.6%, which eventually means higher returns in the hands of investors. The Schwab U.S. Dividend Equity ETF has been a multibagger since inception in 2011, and with the ETF losing nearly 8% in one month as of this writing, the time is ripe to buy.
Should you invest $1,000 in Realty Income right now?
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot and Realty Income. The Motley Fool recommends Brookfield Infrastructure Partners and Verizon Communications. The Motley Fool has a disclosure policy.
