Investors seeking to generate income are turning their attention towards high-yielding dividend stocks as an alternative to bonds. Three companies that have been offering higher income yields than many high-quality fixed-income investments are Kinder Morgan (NYSE:), Verizon (NYSE:), and W.P. Carey. The dividends from these firms not only provide a steady income stream but are also projected to increase in the future.
On Monday, Kinder Morgan, a pipeline giant listed on the NYSE, was highlighted for its 6.6% dividend yield. This surpasses the yield from most high-quality bonds including the 10-year U.S. Treasury bond and the average investment-grade corporate bond. Over the last six years, the company’s dividend has seen an upward trend, with a recent increase of 2% for 2023. After paying dividends, Kinder Morgan retains half of its stable cash flow which is predominantly reinvested in expanding its energy infrastructure operations. The company plans to invest around $2.1 billion this year in various capital projects such as pipeline expansions and renewable production facilities.
Verizon, a telecom giant listed on the NYSE, provides a dividend yield of 7.9%. The company recently marked its 17th consecutive year of dividend growth with an increase of 1.9%. Following a $10 billion spending program to boost its 5G network plans, Verizon expects to free up approximately $1.8 billion in cash flow each quarter. This will be initially used to fortify its robust investment-grade balance sheet. The company’s investments in 5G and cost-saving initiatives are expected to increase revenue and reduce interest expense respectively, leading to a rise in free cash flow.
W.P. Carey, a diversified Real Estate Investment Trust (REIT) listed on the NYSE, offers a dividend yield of 6.7%. The company has increased its dividend payment every year since it was listed on the public market in 1998. It generates steadily rising rental income from its large-scale real estate portfolio through long-term net leases with tenants. These leases often feature an annual rental rate escalation clause tied to the inflation rate or a fixed rate. W.P. Carey’s growth is driven by acquisitions of income-producing real estate in sale-leaseback transactions, build-to-suit development projects, and single-tenant net lease properties.
In a climate where investors are seeking dividends with higher yields than many bonds, these three companies stand out. Their payouts are…