Dividend Darlings: 3 Stocks That’ll Take Your Payouts to the Next Level

Stocks to buy

Investors tend to flock to dividend stocks when uncertain about the market’s outlook. Commonly referred to as “defensive stocks,” these investments appeal to investors seeking consistent payouts over time. Dividends are generally paid quarterly, diverging from day traders’ interests in short-term profits. Thus, these types of stocks often demonstrate stability.

With recent market volatility fueling worries of continued declines, some investors are unsurprisingly reexamining dividend-oriented investments. Beyond potential price stability, shares of these companies enable passive income generation. Long-term holding of dividend stocks allows earnings to accrue even without active management.

Identifying high-quality dividend opportunities requires some preconceptions. While the yields can be attractive, the highest-paying dividend stocks sometimes overcompensate for risk. For reference, the S&P 500 typically yields approximately 1.5%. This means that a $1 investment in the average S&P 500 stock could yield 15 cents annually. Thus, the following dividend stocks present well above average, sustainable yields that merit investigation.

​Enterprise Products Partners (EPD)

Source: shutterstock.com/Wojciech Wrzesien

Enterprise Products Partners (NYSE:EPD) is one of the top dividend stocks warranting examination. As a midstream energy services provider, it has proven to be a consistent and reliable company for dividend payments. EPD transports and stores natural gas and crude petroleum, amongst other products, and its business model is somewhat immune to volatility in commodity prices. Regardless of the price of crude oil, transportation of such products remains necessary, allowing the company to generate commissions.

Markedly, the company has steadily increased its dividend for 25 years consecutively at a compound annual growth rate of approximately 7%. With $7.5 billion in distributable cash in 2023, the company can increase dividends further and return capital to shareholders. Currently, at a low price-to-earnings (P/E) ratio of 11.5x, it provides an attractive dividend yield of 7.1% for shareholders. These metrics alone present solid reasons why EPD deserves consideration for a long-term portfolio.

Realty Income (O)

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Real estate investment trusts (REITs) that concentrate on dividend stocks are often considered when seeking stable growth assets. One such REIT that stands out for its long-term dividend performance is Realty Income (NYSE:O). With a history of raising its dividend 124 times since it went public in 1994, Realty Income has established itself as a leader in consistent dividend growth. The company forecasts that funds from operations will increase by 4%-5% for the current fiscal year, suggesting further dividend growth.

Realty Income’s debt-to-equity (D/E) ratio has been falling over the years, improving the company’s financial leverage and, shareholder equity. The company offers investors seeking the stable income associated with dividend stocks in the REIT sector a dividend yield of 5.8%. With an expanding portfolio in Europe and monthly dividends supported by over 15,000 properties, the company remains well-positioned for those prioritizing defensive holdings focused on real estate and dividends.

Hercules Technology Growth Capital (HTGC)

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Although investing in technology carries the risk of volatility, holding dividend stocks that indirectly support innovative tech companies is safer. Hercules Technology Growth Capital (NYSE:HTGC) is a company that provides venture debt and private equity to rapidly growing businesses. This diversified model has delivered record profits despite economic uncertainty. Additionally, Hercules Capital has raised its dividend consistently since 2005, with a 5-year annual growth rate above 7%.

HTGC trades at a P/E ratio of 8.2x and a forward dividend yield of 10.2%. It has consistently beaten EPS estimates for the past six quarters, with more analysts joining the buy recommendations cohort recently. The company’s $1.87 billion payouts to shareholders since its initial public offering and double-digit supplemental distribution demonstrate its commitment to consistent returns. With a focus on flexible capital for expanding tech firms, HTGC offers a way to benefit from sector growth while mitigating risk through steady income.

On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Stavros Tousios, MBA, is the founder and chief analyst at Markets Untold. With expertise in FX, macros, equity analysis, and investment advisory, Stavros delivers investors strategic guidance and valuable insights.

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