The average stock on the S&P 500 yields just 1.4%. If you invested $54,000 into stocks averaging that kind of a yield, you'd collect just $756 in annual dividend income. But if you invested that same amount, spread across the three high-yielding stocks listed below, your dividend income could come in at over $3,100 for a full year.
The best part is that you're not taking on significant risk with these investments, either. Realty Income(NYSE: O), Pfizer (NYSE: PFE), and Target (NYSE: TGT) are all blue chip stocks that you can hang on for the long haul. Together, they can diversify your portfolio and give you plenty of recurring income. Here's why they make for great dividend stocks to buy and hold right now.
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1. Realty Income
Investing in a real estate investment trust (REIT) can be an excellent way to gain some recurring income. REITs are known for being great income investments as they generate revenue from their tenants, which enables them to make regular dividend payments to their shareholders. And Realty Income is one of the better REITs you can find as it is diverse with clients in 89 industries.
Last year, the company reported funds from operations (FFO) per share of $4.01, which was a slight decline from the previous year when it posted FFO of $4.07. But that's still far above the rate of its annual dividend, which is around $3.22, giving investors a good buffer. The REIT's value has risen by just 4% over the past 12 months but it makes for a solid and stable income investment to hang on to for the long haul.
With a yield of approximately 5.7%, an $18,000 investment in the stock could generate around $1,026 in dividends over the course of a full year.
2. Pfizer
The highest-yielding payout on this list belongs to Pfizer, which currently pays investors 7.1%. On an $18,000 investment, that would generate around $1,278 in annual dividends.
Pfizer's stock has fallen by 14% in the past 12 months despite its business showing decent stability. Revenue last year totaled $63.6 billion, which was a solid 7% increase from the previous year. However, investors aren't thrilled with its lack of growth this year and multiple patent cliffs on the horizon.
But with Pfizer investing in its growth and having a pipeline that includes more than 100 clinical trials, it would be premature to think the business can't get back to growing its operations in the long term.
Plus, the company is working on cutting costs and says it's on track to hit its goal of $4.5 billion in net cost savings by the end of this year. And its diluted earnings per share of $0.52 for the first three months of the year remains higher than the $0.43 it pays out in dividends each quarter. The payout isn't in any danger right now and buying the stock for its dividend can be a great move.
3. Target
Rounding out this list of high-yielding dividend stocks is big-box retailer Target, which pays 4.6%. If you invest $18,000 into the stock, that would generate around $828 in annual dividends. All combined, that would mean from a total investment of $54,000 in these three stocks, your annual dividend would total around $3,130.
Target has been the worst-performing stock on this list as it has declined by 40% in just 12 months. Not only has the company been struggling to generate growth, but investors have become concerned that discretionary spending could be under pressure in future quarters, which will only exacerbate its current struggles.
Rival Walmart, which has less exposure to discretionary spending and generates more revenue from its grocery business, has been the more attractive retail stock to own of late for investors.
But things haven't been that disastrous for Target. In its most recent fiscal year, which ended on Feb. 1, the company's 12-month sales totaled $106.6 billion and were down less than 1%. And its bottom line experienced a similar decline.
With so much bearishness priced into its valuation -- Target trades at just 11 times its trailing earnings while Walmart is at a multiple of 41 -- it makes for a compelling contrarian buy, especially given its high yield.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer, Realty Income, Target, and Walmart. The Motley Fool has a disclosure policy.
