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Back in 2014 offshore drilling giant Seadrill (NYSE: SDRL) was a darling for high-yield stock investors. At the time, Seadrill was the largest offshore driller in the world by market cap. Revenue was surging, hitting a fresh all-time high early in the year.
Most importantly for high-yield stock investors, Seadrill was paying one of the best dividends in the entire global stock market. Between 2010 and 2014 Seadrill’s dividend yield ranged between 7.0% and 10.8% — topping off above 11.0% in early January. Take a look below.
Despite the impressive run of revenue growth and dividend payments, by the end of 2014 Seadrill investors were begging for mercy. When the price of oil crashed in the summer of 2014, it took Seadrill’s revenue and dividend payment with it. By the end of 2014 the company had scrapped its dividend payment entirely.
Two days ago, Seadrill — once the largest offshore driller in the world — filed for bankruptcy, virtually wiping out all of its remaining stock and bond holders. It was a stunning turn of events for a once great company, and an important lesson for high-yield stock investors.
Not All High-Yield Stocks Are Created Equal
Some of the highest-yield stocks can also be the riskiest. For example, a high dividend yield can actually be a sign of distress if shares have fallen sharply. Other high-yield stocks may be benefiting from short-term industry tailwinds that are unsustainable in the long run.
For long-term income investors, having the wrong stocks in your portfolio can be costly. That’s why I am going to reveal seven of the most reliable, high-yield stocks in the S&P 500.
Not only have all seven high-yield stock on this list been paying a dividend for 25 years, they have also been raising their dividend 25 consecutive years. That makes these some of the most reliable high-yield stocks in the entire global stock market.
Take a look below.
|People’s United Financial||PBCT||4.1%|
|Tanger Factory Outlet||SKT||5.6%|
From this group I have chosen to highlight AT&T and Realty Income because of their outsized yields and impressive dividend histories.
AT&T (NYSE: T) is one of the largest and most successful telecom companies in the world.
That success has helped AT&T evolve into one of the best high-yield stocks in the S&P 500. T’s 5.4% dividend yield is a 175% premium to the S&P 500’s 2.0% yield. Not only does AT&T offer an outsized yield, but it’s also one of the most reliable. AT&T has increased its dividend for 31 consecutive years starting all the way back in 1986.
Looking forward, I am expecting more of the same from this global leader. AT&T benefits from multiple sustainable competitive advantages. The company’s primary advantage is that it operates in a highly regulated industry that makes it virtually impossible for new competition to enter the market.
Realty Income (NYSE: O) is one of the largest commercial property owners and managers in the United States. It owns and manages over 5,000 commercial properties across the country, including Puerto Rico. This industry leadership has turned Realty Income into a dividend powerhouse.
The company’s dividend yield of 4.3% is a 115% premium to the S&P 500’s 2% yield. Just like AT&T, that high yield also happens to be extremely reliable. The company has made 565 consecutive dividend payments in its 48-year history and has raised its dividend 93 times since being listed on the New York Stock Exchange in 1994.
Risks To Consider: The U.S. economy is evolving faster than ever. In 1965 the average age of an S&P 500 company was 33 years. In 1990 it was 20 and in 2026 it is predicted to fall to just 14. Although I expect all of the companies in my list to continue paying outsized dividends for many years, I recommend an annual evaluation to confirm the long-term trend.
Action To Take: High-yield stocks can be deceptive. Some of the highest yields can also be the most unreliable. Just look at Seadrill, with its cancelled dividend in late 2014 and recent bankruptcy filing. High-yield investors looking for the best and most reliable yields should start with my list of seven high-yield stocks, particularly AT&T and Income Realty. These stocks have passed the test of time and look set to continue paying outsized dividends for many years.
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