We’re in a low-rate world. Interest rates everywhere you look are extremely low.
The S&P 500 – the benchmark equity representation of the US economy – is yielding less than 1.5%. Tough to live off of passive income with a yield like that.
However, there are many individual stocks with yields that are much higher. And I’m not talking about low-quality junk stocks, either. I’m talking about high-quality dividend growth stocks.
These stocks represent equity in world-class enterprises that are producing reliable, rising profits. These reliable, rising profits translate to reliable, rising dividends.
You want your passive income to be as reliable as your bills are. But you also want it to be large enough to live off of. That’s what today’s article is all about.
I’m going to tell you about three high-quality dividend growth stocks yielding more than 4% right now. All three of these stocks are, in my opinion, worth buying today. Ready?
Let’s dig in.
High Yield Stock #1: AbbVie (ABBV)
AbbVie is a global pharmaceutical company.
This is one of my favorite dividend growth stocks. It gives you almost everything you’d want. You want quality? Check. You want growth? Check. You want yield? Check.
Speaking of yield, this stock yields a mouth-watering 4.6% right now.
Plus, it’s not just yield. The five-year dividend growth rate is an incredible 18.5%. You also don’t have to sacrifice quality with this name. Whereas stocks with sky-high yields of 10% or so are almost always total junk that’ll give you terrible long-term returns, AbbVie is a world-class enterprise that practically prints money by selling the medicine millions of people demand and require. The company produced more than $16 billion in free cash flow last year. Net margin is routinely well into the double digits.
This stock also gives you some value to go along with that juicy yield.
It’s only trading for a P/CF ratio of 10.6. That’s way lower than the broader market. It’s also lower than the stock’s own five-year average. That 4.6% yield, by the way, is 70 basis points higher than the stock’s own five-year average yield. We put out a video back in November highlighting just how attractive this stock was at $85/share. It remains relatively appealing even after a run up to $113/share.
High Yield Stock #2: Realty Income (O)
Realty Income Corp. is a real estate juggernaut that owns over 6,000 properties.
Want to be a real estate magnate without doing any of the hard work? Realty Income is your Huckleberry. This stock gives you the opportunity to immediately own a slice of thousands of commercial properties rented out to quality tenants without doing any of the associated legwork. Plus, the yield is very attractive.
This stock yields 4.1% – and that dividend is paid monthly. It’s almost like collecting a monthly rent check.
Could you get a higher yield by assembling your own portfolio of properties over many years? Maybe. But who wants do all that work? Not me. I’d rather sit back and collect a big, safe, monthly dividend that rolls in like clockwork. Indeed, Realty Income has never missed a dividend payment since their 1994 IPO. And they’ve increased their dividend for 94 consecutive quarters, with a 10-year dividend growth rate of 4.9%. How’s that for reliability and quality?
This is another high-quality dividend growth stock that is available for a reasonable valuation.
We put out a video back in March analyzing and valuing this stock when it was $63/share. Our valuation estimate came in at almost $66/share. So it’s not super cheap, with the stock trading hands for around $68/share. It’s also not super expensive. Basically right around fair value. And as Warren Buffett would tell you, you could do a lot worse than paying a fair price for a wonderful business. Besides, this is a stock that’s doubled over the last decade. And it could do that yet again over the next decade.
High Yield Stock #3: Verizon (VZ)
Verizon is a telecommunications giant.
People can’t live without their smartphones. And those smartphones don’t work without a network connection – a network like the one Verizon owns and operates. With the oncoming 5G revolution, networks like Verizon’s are set to become even more integral to everyday life. While you wait for that revolution to play out, the stock pays out a big dividend.
The stock yields a very nice 4.4%.
Verizon has increased its dividend for 16 consecutive years. So it’s not just the 4.4% yield… and that’s it. It’s the 4.4% yield and a growth kicker. Their 10-year dividend growth rate is 2.6%. Now, that’s not dropping any jaws. But that’s been enough to keep up with inflation. This is a steady-eddy business that rewards its shareholders with big dividends that slowly grow. And there’s a lot to like about that. If you don’t believe me, how about Warren Buffett?
Buffett has been buying up Verizon stock hand over fist, and now has $9 billion invested in this company.
We just put out a video only days ago discussing Buffett’s aggressive move into Verizon. While you and I don’t have billions of dollars to throw around, even hundreds or thousands of dollars in a name like Verizon can produce some serious passive dividend income. Plus, the stock isn’t unreasonably valued. Buffett is famous for getting great deals on his stocks. Most basic valuation metrics for Verizon stock are slightly below, or in line with, respective recent historical averages. This stock is an inexpensive way to follow in Buffett’s footsteps, get exposure to 5G, and collect big dividends.
— Jason Fieber
P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.