With interest rates remaining near record lows and many stocks around the world trading near record highs, plenty of conservative income investors who are in need of a return feel stuck between a rock and a hard place.
Fortunately, hundreds of companies in the market still offer dividend yields in excess of 4% as we head into the fourth quarter.
However, many of these high dividend stocks are at risk of cutting their payouts in the future because they have dangerously high payout ratios, too much debt, weak free cash flow generation or less-proven management teams.
With many dividend investors seeking safe income and capital preservation, these risky qualities are unacceptable.
To find the best high-dividend stocks available today, we used our Dividend Safety Scores to identify reliable sources of income for the rest of the year and beyond.
Our Dividend Safety Scores look at a company’s most important financial metrics to help investors identify and avoid stocks that are most at risk of cutting their dividends.
You can learn more about how our Dividend Safety Scores work and view their real-time track record here.
Let’s take a closer look at 10 of the safest dividend stocks to consider for the rest of the year. Several of these high quality stocks are trading near record high dividend yields.
Blue-Chip Dividend Stocks: Duke Energy Corporation (DUK)
Dividend Yield: 4.2%
Duke Energy Corp’s (NYSE:DUK) roots can be traced back to the start of the 20th century, and the company has since grown to become the biggest electric utility company in America.
Today, Duke’s service territories spans across the Southeast and Midwest regions of the country where it serves approximately 7.4 million electric and 1.5 million gas customers.
While regulated electric utility services account for close to 90% of the company’s overall earnings, management has also been investing heavily in fast-growing gas infrastructure and renewables projects.
Regulated utilities are often attractive to income investments because they essentially act as government-regulated monopolies in their operating regions.
Since regulated utilities are typically the sole suppliers within their service territories, their prices are regulated to ensure they don’t gouge consumers while still providing enough incentive to invest in their infrastructure to keep it reliable.
Duke Energy operates in geographic areas that have historically been characterized by favorable demographics and constructive regulatory frameworks. In fact, the company’s customer base has grown by around 1% annually over time, while Duke has earned a healthy and stable return on equity between 9% and 11% in each of its regions.
Simply put, the regulated nature of the bulk of Duke Energy’s profits, in addition to the recession-resistant quality of utility services, makes Duke Energy’s one of the more safe and predictable ones an investor can find.
Duke Energy is arguably pays one of the best blue-chip dividends on Wall Street because it has made quarterly payouts for more than 90 years while raising its dividend each year since 2005.
Even better, management recently doubled the company’s expected dividend growth rate from 2% to 4% per year to reflect Duke Energy’s lower-risk business mix and mid-single-digit core earnings growth rate.
Investors can learn more about Duke Energy’s competitive advantages and dividend profile here.
Blue-Chip Dividend Stocks: Realty Income (O)
Dividend Yield: 4.4%
Realty Income Corp (NYSE:O), commonly referred to as “The Monthly Dividend Company,” is one of the few monthly dividend stocks worth owning.
Founded in 1969, Realty Income is a real estate investment trust with a portfolio of more than 5,000 properties located across 49 states.
The company has around 250 tenants, such as Walgreen Boots Alliance Inc (NYSE:WBA) operating in more than 50 different industries, providing healthy cash flow diversification.
In real estate, especially retail, location is everything. Fortunately, Realty Income’s strategy of buying freestanding, single-tenant properties in key locations has given it a strong competitive advantage.
For example, the firm has consistently enjoyed an occupancy rate of at least 96%.
Most of its customers also belong to the non-discretionary service industry, and around 40% of Realty’s revenue is derived from customers with investment-grade credit ratings, reducing risk.
Realty Income boasts 93 dividend increases since 1994 and has paid consecutive monthly dividends for 48 years.
Going forward, dividend stock investors can likely count on low-to-mid-single-digit annual dividend growth, similar to the company’s cash flow growth trajectory.
Blue-Chip Dividend Stocks: PPL Corporation (PPL)
Dividend Yield: 4.1%
PPL Corp (NYSE:PPL) is a regulated utility company that distributes electricity in Pennsylvania, Kentucky, Virginia, Tennessee and the United Kingdom.
With more than 100 years of operating experience and around 10.5 million utility customers, PPL has been around a long time.
Furthermore, similar to Duke Energy, almost all of the company’s revenues are derived from regulated operations, making its earnings highly secure and predictable.
The company’s geographic diversification also reduces some risk because its revenue is sourced from areas with different regulatory regimes and customer bases.
Since PPL generates more than half of its earnings from the U.K., the company also benefits from a potential “cash repatriation holiday” under the Donald Trump administration.
Turning to the dividend, PPL has increased its payout for 16 consecutive years, raising its dividend by about 3.3% annually over the last decade.
With mid-single-digit growth expected in the company’s rate base over the next few years, management should have no trouble continuing to meet its objective of delivering 4% annual dividend growth going forward.
Blue-Chip Dividend Stocks: ExxonMobil (XOM)
Dividend Yield: 3.8%
Founded in 1870, Exxon Mobil Corporation (NYSE:XOM) is one of the world’s oldest oil companies.
It’s also the world’s largest publicly traded integrated oil conglomerate, with nearly 30,000 oil & gas wells on six continents.
ExxonMobil operates three distinct business segments — upstream oil & gas production, downstream refining, and specialty chemicals — which helps it better manage through the unpredictable ups and downs of different energy markets.
The company’s massive scale, diversification and conservative management team all work together to help the business achieve low costs and ride out energy cycles with somewhat less volatility than most of its peers.
Exxon has paid an uninterrupted quarterly dividend since 1882 and has increased its payout for more than 30 consecutive years.
While Exxon’s dividend grew nearly 9% annually over the past decade, payout growth has slowed in recent years thanks to the crash in oil prices.
The company is still able to implement low-single-digit dividend increases for now, and cash flow from operations and asset sales have exceeded dividends for three consecutive quarters.
Exxon also has a stellar credit rating and capacity to take on more debt until prices recover.
If energy prices remain depressed, Exxon will arguably be the last company still standing and paying dividends.
The stock is trading near its highest dividend yield in more than 20 years as well, perhaps making this a more timely idea to consider.
Blue-Chip Dividend Stocks: General Mills (GIS)
Dividend Yield: 3.7%
General Mills, Inc. (NYSE:GIS) is one of the largest packaged food manufacturers in America. Some of its core brands include Cheerios, Yoplait, Pillsbury, Totino’s, Nature Valley, FiberOne and Annie’s.
The company’s products are diversified across many categories, including cereal, snacks, yogurt, convenient meals, baking mixes and ice cream.
With the company’s roots dating back more than a century, General Mills has built up impressive scale, distribution relationships, entrenched brands, and decades’ worth of marketing spend.
As long as General Mills is able to continue adapting to changing consumer preferences by introducing relevant new products and pursuing appropriate marketing campaigns, the company seems likely to maintain its strong staying power.
General Mills and its predecessors have paid dividends without interruption or reduction for more than 115 years, a remarkable accomplishment.
Management last raised the dividend by 2.1% in June 2017, and the company’s dividend has increased by 10.4% per year over the last decade.
With a payout ratio near 70%, solid cash flow generation, and a recession-resistant business, General Mills should be able to continue serving up mid-single-digit dividend increases over the next few years.
However, the company is facing a number of growth headwinds as the packaged food industry contends with consumers’ growing preferences for fresher and healthier offerings.
Despite the current environment, which could make the next few quarters volatile, General Mills seems able to adapt over the long run with more new product launches, improved advertising, and continued cost-cutting initiatives.
The company’s new CEO is focused on restoring profitable growth, but it will take time.
Until then, General Mills offers investors one of its highest dividend yields ever.
Blue-Chip Dividend Stocks: Verizon (VZ)
Dividend Yield: 4.7%
Verizon Communications Inc (NYSE:VZ) is the biggest provider of wireless services in the country and covers more than 98% of the country’s population with its 4G LTE network.
With more than 114 million wireless retail connections and millions of internet and video subscribers, Verizon’s scale is a force to be reckoned with.
The company’s large subscriber base (and valuable telecom spectrum) provides the cash flow Verizon needs to invest heavily in its network.
As a result, the company has historically scored the highest in wireless reliability, speed and network performance compared to its major peers.
The industry is certainly extremely competitive, but Verizon’s advanced network technologies and robust network coverage have helped it maintain its subscriber base.
T-Mobile US Inc (NASDAQ:TMUS) has shaken up the industry’s rational oligopoly status in recent years, causing Verizon to experience its first quarterly subscriber loss earlier this year, but merger talks between Sprint and T-Mobile have heated up in recent weeks, creating potential for significant consolidation and perhaps more rational pricing once again.
Profitable growth no longer comes easy in this space, but Verizon’s dividend appears to remain on stable ground for now.
The company has paid uninterrupted dividends for more than 30 years while raising its payout each year since 2005 (including a recent boost in September).
Some pundits have raised concerns about Verizon’s free cash flow no longer covering its dividend, but our analysis here suggests this isn’t something to worry too much about today.
Blue-Chip Dividend Stocks: Welltower (HCN)
Dividend Yield: 4.9%
Founded in 1970, Welltower Inc (NYSE:HCN) is a real estate investment trust focused on almost every aspect of patient care, from hospitals and long-term skilled nursing facilities to senior assisted living communities and medical office buildings.
Welltower makes money renting out its portfolio of medical properties under long-term contracts to a diverse group of partners, such as Brookdale Senior Living, Inc. (NYSE:BKD) and Genesis Healthcare Inc. (NYSE:GEN), which are the companies actually caring for patients.
The company’s long-term contracts and the mission-critical services provided by its tenants result in a recession-proof business that generates predictable cash flow.
As the American population continues aging and healthcare spending grows, demand for Welltower’s properties should also rise.
Looking at the dividend, Welltower has made uninterrupted payments since it began distributing dividends in 1971.
The firm’s dividend has increased each year since 2010, growing between 2% and 4% most years over the past two decades.
Going forward, Welltower’s dividend payment will likely continue growing at a low-to-mid-single-digit pace, matching growth in the company’s underlying cash flow.
Blue-Chip Dividend Stocks: National Retail Properties (NNN)
Dividend Yield: 4.5%
National Retail Properties, Inc. (NYSE:NNN) was founded in 1984 and is a retail-focused real estate investment trust.
The company has more than 2,500 properties across the country that are leased out to over 400 tenants across nearly 40 different lines of trade.
Importantly, no single industry accounts for more than 20% of total rent, and most of National Retail’s tenants are in industry with little risk of online disruption.
Convenience stores, restaurants and auto service are three of its largest industries, for example.
Besides its large and diversified customer base, National Retail Properties enjoys a competitive advantage thanks to its well-located properties.
In fact, the company’s occupancy rate has never dipped below 96.4% over the past 13 years.
National Retail Properties’ cash flow is further secured by its long-term leases, which have an average remaining term in excess of 10 years. Over 60% of its leases are also not due for renewal in the next eight years.
National Retail’s dividend is also supported by management’s conservative use of debt. The company has a very conservative amount of financial leverage for a REIT, which has contributed to the firm’s ability to pay higher dividends for the last 28 consecutive years.
National Retail’s dividend seems likely to continue growing by 2% to 4% annually, just like it has in the past.
With many retail-related stocks hit hard this year, the stock could be one of the timelier high yield ideas to review here.
Blue-Chip Dividend Stocks: Coca-Cola (KO)
Dividend Yield: 3.2%
The Coca-Cola Co (NYSE:KO) is a large holding in Warren Buffett’s dividend portfolio and one of the most iconic companies in the world.
As the largest global beverage company, Coca-Cola owns more than 500 sparkling and still brands that cover close to 4,000 different beverages.
Over 20 of its brands generate more than $1 billion in sales annually, and sparkling beverages accounted for 72% of Coca-Cola’s worldwide unit case volume in 2016.
Coke is a very global business with less than 20% of its case volume being sold in North America in 2016.
That’s an especially important piece of the investment case because demand for most sugary beverages is declining in developed markets.
Rising consumption in emerging markets and Coca-Cola’s strong brand, which results in pricing power, are helping it combat these trends.
Overall, Coca-Cola’s famous brands and massive global distribution system have helped the company earn a dominant market share while raising its dividend for more than 50 consecutive years.
Coca-Cola has increased its dividend between 8% and 10% annually over the last 20 years, and mid to upper single-digit growth seems likely going forward if management’s turnaround plan goes as expected.
Blue-Chip Dividend Stocks: Johnson & Johnson (JNJ)
Dividend Yield: 2.6%
Johnson & Johnson (NYSE:JNJ) is perhaps one of the most well-known dividend stocks for retirement.
The healthcare giant reaches its global tentacles into thousands of pharmaceuticals, consumer products, and medical devices, with just over half of its sales coming from international markets.
Despite its vast product portfolio, most of Johnson & Johnson’s profits are from sales of branded pharmaceuticals.
One of the appeals of J&J is its general safety. Healthcare products and services are needed no matter how well the economy is doing, resulting in stable cash flow.
Johnson & Johnson’s management team has positioned the company well in markets it can dominate, too. In fact, over two-thirds of the company’s sales were historically from number one or number two market share positions.
J&J invests more than $8 billion in R&D annually to remain competitive. Developing new drugs is generally a high risk business, but the company has a strong track record, a diversified drug portfolio, and dependable cash flow flowing in from its consumer and medical device businesses to steadily fund its research.
Management’s conservatism also shows up in J&J’s pristine balance sheet, which recently allowed the company to pursue a $30 billion acquisition of Actelion, a leading pulmonary hypertension drug maker.
With 55 straight years of dividend increases, Johnson & Johnson has historically been a very safe investment for income investors.
Going forward, Johnson & Johnson seems likely to continue rewarding investors with 6% to 8% annual dividend growth, just like it has for the past decade.
As of this writing, Brian is long Johnson & Johnson, ExxonMobil, General Mills, National Retail Properties, Verizon and PPL Corporation.
