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3 Ultrahigh-yield Dividend Stocks You Can Buy And Hold For A Decade
Investing in a stock with a high dividend yield can be a great way to generate a lot of passive income. That's if the company can maintain its payout over the long term. Unfortunately, dividend sustainability becomes more of an issue with higher-yielding dividend stocks.
However, dividend durability shouldn't be a problem for W. P. Carey (NYSE: WPC), NNN REIT (NYSE: NNN), or VICI Properties (NYSE: VICI) in the coming years. Because of that, they look like great dividend stocks to buy for those seeking a big-time income stream over the coming decade.
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Building back even stronger
W. P. Carey had increased its dividend every year for a quarter century until late 2023. However, the diversified real estate investment trust (REIT) made the strategic decision to exit the troubled office sector. With that move came a dividend reduction due to the expected decrease in its earnings. The company also wanted to retain additional cash flow for new investments, which led it to lower its dividend payout ratio from around 80% at the time to a range of 70% to 75%.
Today, W. P. Carey offers a dividend yielding more than 6%. That high-yielding payout is on a very sustainable foundation. The REIT owns a high-quality portfolio of operationally critical properties (warehouse, industrial, retail, and others) secured by long-term net leases with built-in rent escalations. It currently has a weighted-average lease term of 12.2 years. Those net leases supply very stable cash flow because tenants cover all operating costs, including real estate taxes, routine maintenance, and building insurance.
They also feature rental escalation clauses that increase rents at either a fixed rate or one tied to inflation. Last year, its rents grew at around a 3% annual rate. Meanwhile, W. P. Carey has lots of financial flexibility to acquire income-producing properties, with a focus on those with better long-term fundamentals than the office sector, like warehouse and industrial properties. These growth drivers should enable the REIT to steadily increase its dividend, which it has done every quarter since its reset in late 2023.
An elite dividend stock
NNN REIT achieved a rare milestone last year. The retail-focused REIT delivered its 35th annual dividend increase. Only two other REITs and less than 80 publicly traded companies in the U.S. have reached that level.
The REIT's dividend currently yields around 5.7%. That hefty payout is on a rock-solid foundation. NNN REIT's portfolio of single-tenant net lease retail properties produces very stable cash flow backed by leases with a weighted-average remaining term of 10 years. The REIT also has a very conservative financial profile, including a reasonable dividend payout ratio and a solid investment-grade balance sheet.
NNN REIT's financial flexibility allows it to continue acquiring income-producing retail properties. It primarily purchases properties through existing tenant relationships via sale-leaseback transactions. As its tenants expand their retail footprints, NNN REIT will have more potential acquisition opportunities.
A low-risk wager on a high-yielding income stream
VICI Properties has increased its dividend in all seven years since its formation. The REIT has grown its payout at a peer-leading 7% compound annual rate during that period, well above the 2.2% average of other net lease REITs.
The REIT currently offers a nearly 5.7%-yielding dividend. That big-time dividend is on a very firm foundation. VICI Properties focuses on owning experiential real estate (e.g., gaming, hospitality, and entertainment destinations) secured by very long-term net leases. It currently has a weighted-average lease term of 41 years. Those leases feature increasing inflation protections (40% of its rent currently links rents to inflation, rising to 90% by 2035). Because of that, it should produce very stable and steadily increasing rental income.
VICI Properties also has a very strong financial profile, allowing it to invest in additional income-generating real estate. It will buy experimental properties in sale-leaseback transactions, fund development projects (often receiving the option to acquire the completed properties), and provide tenants with financing to expand existing properties in exchange for rental increases. These investments should grow its stable sources of income, allowing VICI Properties to continue raising its payout.
Durable dividend stocks
W.P. Carey, NNN REIT, and VICI Properties own high-quality properties secured by long-term net leases. They also have solid financial profiles, giving them the flexibility to continue expanding their portfolios of stable, income-generating properties. These features should enable this trio of REITs to pay stable and growing dividends over the coming decades. That makes them excellent options for those seeking attractive and durable passive income streams.
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Matt DiLallo has positions in Vici Properties and W.P. Carey. The Motley Fool recommends Vici Properties. The Motley Fool has a disclosure policy.
