4 Dividend Stocks Yielding 4%+

  • Many dividend stocks are highly sought after for the passive income they provide.
  • Realty Income (O): This REIT is also known as a monthly dividend stock.
  • NextEra Energy Partners LP (NEP): NEP stock is down YTD and its yield is up, making it an attractive buy.
  • AbbVie (ABBV): AbbVie’s dividend yield is much higher than the average yield of the S&P 500.
  • Kimberley-Clark (KMB): The value of KMB stock is the lowest it’s been since the start of the pandemic.
dividend stocks - 4 Dividend Stocks Yielding 4%+

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The market continues its downward trend. The U.S. Federal Reserve is raising interest rates in response to high inflation. Consequently, investors are selling because they fear high interest rates will cause a recession. Adding to investors’ negative sentiment are record drought in many places in the world and Russia’s invasion of Ukraine. On the other hand, the current bear market has created some deals. Stocks overvalued for years are now undervalued or at least fairly valued. Moreover, dividend yields have risen to the highest in a decade for some stocks. Below we discuss four dividend stocks yielding 4%+ that are also undervalued.

O Realty Income $58.19
NEP NextEra Energy Partners $72.19
ABBV AbbVie $142.59
KMB Kimberly-Clark $111.88

Realty Income (O)

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Realty Income (NYSE:O) is a real estate investment trust (REIT) that operates under a single-tenant, triple-net lease structure. The company develops and purchases commercial real estate and rents it to retail chains. Under the net lease agreement, the lease is responsible for the monthly base rent and real estate taxes, property insurance and maintenance. The average lease duration is about nine years and includes rent escalators. Total revenue was $2.78 million in the trailing 12 months. The current CEO is Sumit Roy.

The REIT is one of the five largest global REITs with properties in the U.S., U.K. and Spain. The company owns about 11,427 commercial properties and leases to about 1,125 clients. Realty Income’s occupancy rate median is 98.2%, much higher than its peers. The REIT also has geographic diversification, with Texas, the U.K., California, Illinois, Florida, Ohio and Georgia making up 44.8% of the rent base.

Realty Income is known as one of the monthly dividend stocks. The firm is also a Dividend Aristocrat, with 29 years of consecutive increases. The forward dividend yield is 5.19% above the five-year average of 4.35%. The dividend is growing at about a 3.4% annual rate in the past five years. The REIT has one of the most robust balance sheets compared to its peers at an A3/A- upper-medium investment grade credit rating.

Realty Income is undervalued, trading at a price-to-AFFO ratio of approximately 14.7X. This value is below its historical 10-year range.

NextEra Energy Partners LP (NEP)

Nextra Energy (NEE) website on a mobile phone screen
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NextEra Energy Partners LP (NYSE:NEP) is a clean energy limited partnership operating across the U.S. The company had an initial public offering (IPO) in 2014 and is a publicly traded subsidiary of NextEra Energy (NYSE:NEE). The company owns and manages wind, solar and storage projects. Also, it owns contracted natural gas pipelines in Texas and Pennsylvania. The partnership operates in the wholesale market, contracting out its clean energy power. Total revenue was $1.12 million in the last 12 months. The CEO is John Ketchum.

Although the company’s revenue has been growing, earnings per share (EPS) has been more volatile because NextEra Energy Partners is growing rapidly and increasing its energy base. The partnership is expanding rapidly, adding between 22 GW and 30 GW from 2021 to 2024 in its pursuit of becoming a renewable and clean energy leader.

The partnership’s units yield 4.29%, above the five-year average of 3.82%. In addition, the company is increasing the dividend at a double-digit rate of roughly 15% annually on average. Although the credit rating is only BB from S&P Global, the company is a subsidiary of NextEra Energy, which has an A-, an upper-medium investment grade credit rating.

NextEra Energy Partners has declined about 15% year-to-date, and the yield is up, making it a very attractive option among dividend stocks.

AbbVie (ABBV)

abbvie website and logo on mobile phone. ABBV stock
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AbbVie (NYSE:ABBV) is a global research and development (R&D) pharmaceutical company spun off from Abbott Laboratories (ABT) in 2013. The company is known for its blockbuster therapeutic, Humira, which treats autoimmune diseases. Humira is the no. 2 selling therapeutic globally. In addition, AbbVie has strengths in immunology and oncology. Other primary therapies include Synthroid, Rinvoq, Skyrizi, Imbruvica and Botox. Total revenue was $40.56 million in the past 12 months. The CEO is Richard Gonzalez.

AbbVie grows organically through R&D. However, like most large pharma companies, it periodically acquires other companies for new technologies and platforms. For example, the firm acquired Allergan in 2019 for $63 billion. More recently, AbbVie has cut deals for Syndesi and Soliton, and it has partnerships with a number of other small companies.

The forward dividend yield is about 4.1%, much higher than the average dividend yield for the S&P 500. The dividend has been growing at a solid double-digit rate of 18% in the past five years but off a low base. The moderate payout ratio of roughly 41% supports future growth and provides confidence about dividend safety.

Abbvie is undervalued now, with an earnings multiple of about 10X, below the five-year and 10-year averages. As a result, investors should look at this stock now.

Kimberley-Clark (KMB)

Kimberly Clark (KMB) sign, positioned outside the world headquarters’ main entrance.
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Kimberley-Clark (NYSE:KMB) is a more than a 100-year-old company that is well-known for its packaged consumer products. The company operates in three business segments: Personal Care, Consumer Tissue and K-C Professional. Some leading brands are Huggies, Pull-Ups, Little Swimmers, Kotex, Depend, Poise, Kleenex, Scott and Cottonelle. Total revenue was $20.13 million in the past 12 months. The CEO is Michael Hsu.

Kimberley-Clark only grows slowly through organic sales increases. It does so through new products and extensions. However, the company periodically buys large and small competitors like Thinx and Softex Indonesia. That said, many of the products it sells are necessities.

The dividend yield of roughly 4.21% is the highest in the past decade and nearly an entire percentage point above the five-year average. However, the high payout ratio of roughly 73% means future dividend increases will probably be modest. Despite the high payout ratio, the dividend safety is acceptable because of the consistent earnings and cash flow streams. Furthermore, Kimberley-Clark has an A/A2 upper-medium investment grade credit rating adding to the dividend safety.

Kimberley-Clark is trading at a price-earnings (P/E) ratio of about 19.5X within its five-year and 10-year ranges. The value is the lowest since the pandemic bear market.

On the date of publication, Prakash Kolli did not hold (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 GuidelinesThe author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money. 

Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor and blogger on dividend growth stocks and financial independence. Some of his writings can be found on Seeking Alpha, InvestorPlace, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, FXMag, and leading financial blogs. He also works as a part-time freelance equity analyst with a leading newsletter on dividend stocks. He was recently in the top 1.0% and 100 (81 out of over 9,459) of financial bloggers as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.


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