- With stability becoming a major concern under present volatile conditions, these high-yielding dividend stocks to buy offer much-needed comfort.
- Rio Tinto (RIO): Featuring a yield of nearly 12% and a relevant business, RIO deserves a long look among dividend stocks to buy.
- China Petroleum & Chemical (SNP): While suffering from the pandemic and severe geopolitical headwinds, the core business remains pertinent.
- BHP Group (BHP): Offering a double whammy of copper and petroleum (among other essential products), BHP is a risky but intriguing dividend play.
- FAT Brands (FAT): While terribly risky due to consumer economy exposure, FAT stock could possibly move higher on revenge travel sentiments.
- Shell Midstream Partners (SHLX): With crude oil becoming significantly relevant again, midstream businesses should be reliable dividend stocks to buy.
- Riley Financial (RILY): Although speculative due to heavy losses, RILY could swing higher based on demand for wealth management services.
- Starwood Property Trust (STWD): Probably the most treacherous name on this list of dividend stocks, STWD may intrigue gamblers due to the core cynical thesis.
Hardly a popular topic due to its wide-ranging implications, rising fears of a recession are becoming much more pronounced. Primarily, the benchmark equity indices are struggling for momentum, which is not a great sign amid myriad political and economic pressure points. Further, governmental action to address the concerns of Main Street may exacerbate the crisis. About the only good news is that high-yield dividend stocks to buy may offer investors a reprieve.
For one thing, the growth narrative that has guided the arguably unloved bull market may have finally hit its peak. Even the post-coronavirus pandemic storyline, which basically posited that unprecedented fiscal and monetary support would drive up productivity, is becoming strained. As evidence of this dynamic, former heavy hitters like Netflix (NASDAQ:NFLX) have been forced to lay off workers. Under such a backdrop, dividend stocks increasingly make more sense.
Mainly, companies that offer passive income are focused (naturally) on profitability and sustainability, all other things being equal. While such a framework is a far departure from the sexy super-growth stories that analysts in less-complicated market cycles have delivered to their clients, right now, dividend stocks theoretically present the most rational investment. With the purchasing power of the dollar in rapid decline, investors are focused on pain mitigation.
That’s not to say that passive income is a guaranteed bet — far from it. However, with the turmoil in the global economy, investors ought to consider pivoting some portion of their portfolios to high-yield dividend stocks to buy.
|SNP||China Petroleum & Chemical||$50.14|
|SHLX||Shell Midstream Partners||$14.04|
|STWD||Starwood Property Trust||$23.57|
Rio Tinto (RIO)
At first glance, the current yield of Rio Tinto (NYSE:RIO) — standing at a stout 11.2% — is large enough to simultaneously entice and repulse. While high-yielding dividend stocks may be initially attractive due to their passive income potential, there is such a thing as too high. Like anything in life, if it’s too good to be true, it usually is.
But since the theme of this article is about dividend stocks with yields over 6%, you have implicitly accepted that it’s time to go big (rather than go home). In all seriousness, though, Rio Tinto offers an incredibly relevant business given the current juncture. As a mining firm producing materials essential to not only human civilization but also progress, RIO may eventually get out of its funk.
Presumably, that day may come sooner rather than later. For instance, its battery-grade lithium production business has obvious implications for the electric vehicle industry. Unless you see automakers completely give up on this narrative, RIO should maintain its pertinence.
China Petroleum & Chemical (SNP)
If you looked at China Petroleum & Chemical (NYSE:SNP) outside its geopolitical context, you might reasonably presume that SNP should rank among the top-performing dividend stocks to buy. After all, so many other hydrocarbon-related energy firms have printed outstanding numbers on their price charts. Yet as of the close of the May 2 session, SNP has only gained 2.4% year-to-date.
Despite the critical nature of China Petroleum & Chemical, geopolitics have imposed a dark cloud over the business. Understandably, relations between the U.S. and China have soured under the Trump administration. And it’s not like the Biden-led White House is in a hurry to restore said relationship given the difficult domestic and international political arena.
If that wasn’t enough, Beijing has enforced a zero-Covid policy, most notably resulting in the lockdown of Shanghai. To no one’s surprise, this issue has caused tremendous friction within the affected Chinese populace. As well, the temporary loss of Shanghai’s economic power is incredibly problematic.
Still, you can’t run away from fossil fuels. That’s why if you have the nerve, SNP could be interesting.
BHP Group (BHP)
As with the dividend stocks mentioned above, a cursory look at the yield for BHP Group (NYSE:BHP) may draw intrigue and skepticism at the same time. With a current yield of 10.4%, BHP is certainly knocking on the doorstep of what many conservative investors may consider too much of a good thing. However, the underlying relevance of the core business deserves extra attention.
Per its website, BHP specializes in providing the materials for essential infrastructures. Its core products include nickel, potash, iron ore and metallurgical coal. However, the top two that I’m interested in are copper and petroleum.
While lithium gets plenty of attention for the undergirding of advanced battery technologies, copper plays a significant role in the manufacturing of electric vehicles. From its conductivity to its utility for charging stations, copper is both a primary catalyst for EV production as well as an infrastructural necessity.
On the other end, as much as the world is pivoting toward clean and renewable energy alternatives, for now, petroleum is king. Therefore, BHP is one of the dividend stocks that can address the present and future of industry.
FAT Brands (FAT)
Without any hesitation, most investors will want to think twice, if not five times or more before plunking down cash for FAT Brands (NASDAQ:FAT). A global franchising company best known for its Fatburger brand, the company also owns Johnny Rockets, another popular burger joint. Ordinarily, the adventurous nature of these eateries make them more intriguing than say McDonald’s (NYSE:MCD).
But relatively speaking, McDonald’s 2.24% yield is very believable, if only because it’s rather low. On the other hand, FAT Brands’ 8.9% yield draws skepticism. With recession fears rising, investors are assuming that not too many folks are going to want to eat out, especially considering the implosion of consumer sentiment. Indeed, FAT stock is down almost 47%, which is worrying even for hardened speculators.
However, it’s possible that due to revenge travel — or consumers raring to vacation after being cooped up at home for the last two years — FAT stock could enjoy some downwind benefits. Keep in mind that escalating costs and Covid-19 restrictions may force more travel to be focused domestically, which would potentially serve FAT Brands well.
Shell Midstream Partners (SHLX)
Because of Russia’s unsettling decision to invade Ukraine, world leaders — particularly in the west — scrambled to adjust to a frightening new order. One “positive” impact, though, was the accelerated pivot to clean and renewable energy alternatives. As the Yale School of the Environment pointed out, many European countries have fast-tracked their renewable energy infrastructure strategies.
Well, as wonderful as the sentiment is, Rome wasn’t built in a day. And more than likely, neither can countries dependent on fossil fuels transition to green energy immediately. Essentially, this narrative is the argument for Shell Midstream Partners (NYSE:SHLX). While climate activists can yell at the top of their lungs, the scientific and economic reality is that hydrocarbons will be here to stay for a while.
Frankly, not many sources exist that feature the energy density of fossil fuels. Therefore, Shell Midstream’s core business of transporting and storing hydrocarbon products will be crucial, even under the politically charged environment.
Keep in mind that prospective investors must file a Schedule K-1 if you buy SHLX stock.
B. Riley Financial (RILY)
If you haven’t noticed by now, the ideas above for high-yield dividend stocks to buy have been very risky. Certainly, these are ideas you should not approach without conducting serious due diligence. But for the next two securities, we’re going to dive into an exceptionally risky arena, beginning with B. Riley Financial (NASDAQ:RILY).
On the surface, B. Riley doesn’t appear to be extraordinarily speculative. Yes, its yield of 8.3% is very much on the high side. However, several other dividend stocks above commanded much higher yields. However, the financial services firm has seen better days. On a YTD basis, RILY is down nearly 45%, reflecting concerns about broader market stability.
After all, if the privileged class don’t want to invest, why should anyone else?
However, if you’re a daring contrarian, you might take the opposite approach. Namely, the best analysts in the world guide their clients through bull and bear markets. Honestly, almost anyone can provide solid advice in a bull market. This implication assumes, of course, that B. Riley has the best analysts under its belt. But if you think it does, RILY might be a name to check out.
Starwood Property Trust (STWD)
If you’ve got the speculative bone, you’re in luck. Starwood Property Trust (NYSE:STWD) just might be what you’re looking for.
Structured as a real-estate investment trust (REIT), Starwood is the largest of its kind for the commercial mortgage space. Personally, this core business makes STWD one of the riskiest among dividend stocks simply based on economic realities. With benchmark interest rates elevated from their prior lows — and possibly about to become even more elevated — anything dealing with commercial or infrastructural lending is challenging, to put it mildly.
However, Starwood also features multifamily residential portfolios, one in Florida and the other in Ireland. Cynically, while median households in major metropolitan areas in the U.S. are paying a much higher portion of their income on core living expenses, these folks can’t just not pay.
Believe me, I feel awful for saying that. But it’s just the nature of the beast — one that could be profitable for the extreme gambler.
On the date of publication, Josh Enomoto 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.