The average time a Wall Street investor holds a stock has shortened dramatically over the decades. At this point, buying and holding a stock for 10 years is a virtual eternity. But there’s a benefit to being a small investor because you can hold for that long and you don’t have to worry about anyone breathing down your neck about the performance of the stocks you own.
You can buy boring but reliable high-yield stocks like Realty Income (O -0.24%). Or dividend growth stocks with an income payoff that builds over time, such as Brookfield Asset Management (BAM -0.18%). Or even down-on-their-luck Dividend Kings like Target (TGT 1.83%) that are working on business turnarounds that will play out over years and not days. All three of these high yielders are worth close attention today.
1. Realty Income will put you to sleep, but you’ll have good dreams
Realty Income is the largest net lease real estate investment trust (REIT). It owns single-tenant properties for which the tenants are responsible for most property-level operating costs. It owns over 15,600 properties, so it has an extremely large portfolio that spans across retail and industrial assets across North America and Europe. This is good and bad at the same time. To get the bad out of the way right up front, Realty Income is a tortoise of a business because it takes so much investment activity to move the needle on the top and bottom lines.
On the good side, having such a large portfolio gives the REIT attractive access to capital markets, the size to take on deals that its smaller peers couldn’t handle, and the ability to act as an industry consolidator. While slow and steady is the pace here, history suggests that slow and steady can be very rewarding for conservative income investors. That’s particularly true when you consider the 5.6% dividend yield, which is backed by an investment-grade rated balance sheet and a dividend that has been increased annually for three decades. And the dividend is paid monthly, too, so Realty Income is kind of like a paycheck replacement.
If you are a conservative dividend investor, this monster-sized net lease REIT should be on your short list today, with a plan to hold it for at least the next 10 years, if not longer.
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2. Brookfield Asset Management’s dividend is growing at a monster pace
Brookfield Asset Management is one of the largest asset managers in Canada, but it is still much smaller than many of its U.S. peers. That’s actually a monster of an opportunity when you look at the dividend. The yield today is around 3.1%, which isn’t bad given the tiny 1.2% yield on offer from the S&P 500 index (SNPINDEX: ^GSPC). But the most recent dividend increase was a huge 15%, and management believes it can keep that rate of dividend growth going through at least the end of the decade. The yield and dividend growth combo here should interest dividend growth investors as well as growth and income investors.
The big story with Brookfield Asset Management is going to be its ability to accumulate assets. As an asset manager, it gets paid fees for managing other peoples’ money. Right now it has around $550 billion in fee-generating assets. The goal is to have $1.1 trillion by the end of the decade. It operates across the renewable power, infrastructure, real estate, private equity, and credit niches, so it has multiple levers for growth. The headliner here, however, is still that 15% dividend growth rate, which will double the current dividend in just five years. That’s a huge increase in the income you can collect from Brookfield Asset Management in a very short period of time.
3. Target’s monster dividend history suggests it’ll turn things around
Target is one of the largest retailers in the United States, competing against Walmart with a slightly more upscale look and feel. The big claim to fame here is the retailer’s monster dividend record, which includes 58 consecutive annual dividend hikes. That makes Target a Dividend King, one of a highly elite group of companies that have proven that they have durable business models. For the record, Target’s dividend streak is six years longer than Walmart’s. Still, Target has a historically high yield of around 4.6% today.
The truth is, Target’s high yield is a result of the fact that its retail concept isn’t resonating very well with consumers right now. Walmart’s everyday low prices are bringing in customers more than Target’s focus on fancier stores and products. It isn’t unusual for retail trends to wax and wane over time, and history suggests that Target will find a way to turn its business around. In fact, it has recently overhauled its management team with the goal of more proactively effectuating a business upturn. Given Target’s size, it could take a little while to get the ship moving in a new direction. Thus, you’ll want to go in with a plan to hold it for the long term.
But you’ll get paid very well to wait for the turnaround to play out with that lofty yield and the regular annual dividend increases that back it. For more aggressive investors, that should sound like a pretty good deal.
Monster stocks for every kind of dividend investing need
Realty Income is a monster-sized REIT with a reliable and large yield for income seekers. Brookfield Asset Management is targeting a monstrous dividend growth rate, for dividend growth and growth and income investors. And Target, as a Dividend King, has a monster of a dividend record and a historically high yield, for investors willing to dip into turnaround stocks. Take the time to get to know these high yielders and one, or more, could end up in your portfolio today.
Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income, Target, and Walmart. The Motley Fool recommends Brookfield Asset Management. The Motley Fool has a disclosure policy.
