For those investing in dividends, a common mistake is getting too fixated on really high yields. This can lead to overlooking some concerning aspects of the companies involved. That said, a substantial yield doesn’t always signal trouble. This is why stocks like Enbridge (NYSE:ENB), Realty Income (NYSE:O), and PepsiCo (NASDAQ:PEP) deserve attention right now.
Enbridge operates in the energy sector, which is often quite volatile. However, they are positioned in a less thrilling segment of the industry. Essentially, Enbridge manages energy infrastructure, such as pipelines that transport oil and natural gas globally.
This company operates somewhat like a toll road, collecting most of its fees through the use of its assets. It also includes regulated natural gas utilities and a small sector for renewable power, both reliable avenues for generating cash flow.
Thanks to steady cash flow, Enbridge has actually raised its dividend in Canadian dollars consistently for 30 years. Currently, its yield sits at an impressive 5.8%, which far surpasses the market’s average yield of 1.2% and the energy sector’s average of 3.2%. Enbridge might not be the most exciting company, but that, in a way, makes it more appealing if you’re after a low-risk dividend stock.
Another solid choice for peace of mind is Realty Income. This real estate investment trust (REIT) leads the way in the net lease area. In a net lease arrangement, the tenant covers most operational costs, thereby lowering the risk to Realty Income.
The risk is further minimized because Realty Income manages over 15,600 properties throughout the US and Europe. Even though a significant portion of their portfolio focuses on retail (about 75% of rental income), it isn’t a big concern. Single-tenant properties are typically easier to manage and transition as needed.
Realty Income’s dividend track record is impressive. The company has increased dividends every year for 30 years and has done so every month for 111 consecutive quarters. With a current yield of 5.3%, it comfortably outperforms the market and significantly exceeds the average REIT yield of 3.9%.
