4 High-Yield Dividend Stocks to Own for the Next Decade
Key Points
British American Tobacco and Verizon both have high yields and are growing their dividends.
Income Realty pays a nice monthly dividend that it continues to grow.
Energy Transfer is a great combination of growth and a high yield.
While AI stocks grab all the headlines, not every investor is looking to buy growth stocks. In fact, many want stocks that can provide a steady stream of additional income, especially in retirement. As such, stocks with attractive yields that can continue to grow their dividends are attractive options.
Let's look at four dividend stocks investors can hold for the next decade.
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1. British American Tobacco
The tobacco industry is known for high-yield stocks, but the one with the best combination of a juicy yield and some growth is British American Tobacco (NYSE: BTI). The stock currently yields 5.8%, and the company plans to increase its dividend by 2% this year while also buying back stock.
Over the medium term, British American Tobacco is looking to grow its revenue by 3% to 5% annually and its adjusted EPS by 5% to 8% a year. Growth will come from strong pricing power in its legacy combustible business and mid-teens growth in its smokeless categories. Leading the charge will be its Velo nicotine pouches, whose revenue it has projected to continue to surge over the next several years. Meanwhile, it has been forecasted that it will generate a massive £50 billion in free cash flow between 2024 and 2030, helping it deleverage and support its dividend growth.
2. Verizon
Another stock with an attractive yield and some nice potential growth is Verizon (NYSE: VZ). The wireless operator's stock currently has a 5.5% yield and it consistently raises its dividend each year. The dividend is well covered by its free cash flow, and it carries low leverage.
Meanwhile, the company still has a nice growth opportunity ahead of it. With Dan Schulman taking over as CEO last October, the company has embarked on a more customer-centric strategy, which has reduced churn and led to more subscriber additions. Meanwhile, following the close of its deal for Frontier and its large fiber network, Verizon has a big broadband and wireless bundling opportunity ahead. It's also looking to connect AI data centers with its fiber, adding another layer of growth for this solid company.
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3. Realty Income
With a 5.5% yield, Realty Income (NYSE: O) is a great option for dividend investors. The real estate investment trust (REIT) pays a monthly dividend, which it consistently increases.
The REIT owns a portfolio of commercial real estate properties, with a focus on single-tenant retail in recession-resistant industries. More recently, it has expanded into other areas, including the industrial, gaming, and data center spaces, while growing more aggressively in Europe. It uses triple-net leases, where tenants pay the taxes, insurance, and maintenance, so it's not hit with any surprises on the expense side. While interest rates and cap rates can impact the value of its real estate portfolio, this is a steady performer to own.
4. Energy Transfer
Another top stock for income-oriented investors to hold over the next decade is Energy Transfer (NYSE: ET). The midstream master limited partnership (MLP) sports a 6.3% yield and is targeting a 3% to 5% annual payout increase going forward. The company's balance sheet is in the best shape it's been in for years, and it has a robust distribution coverage ratio based on its distributable cash flow (operating cash flow minus maintenance capex).
Energy Transfer has one of the largest midstream footprints in the U.S., and it is using its strong position in the Permian Basin to help take advantage of high demand for cheap natural gas. AI data centers and LNG (liquefied natural gas) exports are driving natural gas demand, and Energy Transfer will spend up to $5.9 billion in growth capex this year on high-return projects as a result.
With both one of the cheapest valuations and best growth in the pipeline space, Energy Transfer is a top dividend stock to own over the next decade.
Geoffrey Seiler has positions in Energy Transfer. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends British American Tobacco P.l.c. and Verizon Communications. The Motley Fool has a disclosure policy.