5 of the safest high yielding dividend stocks on the planet

As an income investor, it is a delicate balancing act to build a dividend portfolio with a yield high enough to cover your expenses while ensuring the sustainability of your dividend income. In an environment with the S&P 500 with a paltry return of 1.3%, this may cause investors to choose a stock whose dividend is on shaky ground, otherwise known as a yield trap.

Fortunately, there are still many safe high yielding stocks in the investment universe. Here are five of the least risky options income investors can consider adding to their portfolio.

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Enterprise Product Partners: 8% return

Despite its market-crushing performance, the Master Limited Partnership (MLP) Enterprise Product Partners (NYSE: EPD) offers one of the safest distributions (MLP equivalent of a dividend) overall.

With a network of more than 50,000 miles of pipelines to transport crude oil, natural gas and refined products across the country, Enterprise Products Partners is one of the largest middleman companies in the world. It is no exaggeration to suggest that it plays a vital role in the modern world economy.

Given that 87% of last year’s business came from fixed fee arrangements based on the volume of product passing through its pipeline, business is very stable. Even in an environment with significant headwinds linked to COVID-19 last year, Enterprise’s distributable cash flow fell only 3.3% from 2019 to $ 6.4 billion . Coupled with the company’s strong payout coverage ratio of 1.6 last year, the stock offers a safe and consistent high return. This explains the streak of 24 consecutive years of increasing distribution of Enterprise Products Partners.

Magellan Midstream Partners: 8.7% return

As enterprise product partners, Magellan intermediary partners (NYSE: MMP) is a bet that the demand for refined products and crude oil is not going to go away anytime soon.

Because refined products are inputs into the manufacture of products like bandages and anesthetics, this looks to be a safe bet for the next two decades. The essential nature of crude oil is why the International Energy Agency (IEA) predicts that total global oil demand will actually increase by 9% from 2019 to 2040. With 12,000 miles of pipelines for products refined and crude oil, Magellan Midstream Partners is expected to generate a return of 8.5%. take advantage of this healthy perspective.

The company’s business model is also very stable, like that of Enterprise Products Partners, with more than 85% of its cumulative activity to date coming from fee agreements.

Since Magellan plans to cover its distribution nearly 1.2 times this year, distribution is largely insulated from the threat of a downturn in business. The company has been able to increase its secure distribution for more than 20 consecutive years.

British American Tobacco: 8.6% yield

While British American Tobacco (NYSE: BTI) is known for its traditional cigarette brands such as Newport and Camel, it intends to change that with its rapidly growing non-combustible brands. These include the vape brand Vuse and the heated tobacco brand Glo, which the US Food and Drug Administration (FDA) has cleared for sale as reduced risk products compared to traditional cigarettes.

And in the short time that these non-combustible brands have been around, they have already won over more than 16 million consumers. While non-combustible brands only accounted for 12% of British American’s revenue in the first half of this year, category sales grew 50% year-over-year. As more and more consumers switch to non-combustible products, the company is expected to continue to capture a large share of this market to generate future growth.

Based on analysts’ earnings per share (EPS) forecast for mid single-digit growth next year, British American Tobacco’s massive 8.6% return is also well hedged, along with its dividend payout ratio. likely to be between 60% and year.

Verizon: 4.9% yield

Whether through the internet at home or smartphones, the world is becoming increasingly dependent on data for various purposes. Much of this demand is met by the telecommunications giant Verizon Communications (NYSE: VZ).

The new generation of mobile networks known as 5G will be crucial for the success of upcoming growth trends such as virtual and augmented reality, as well as helping the information-based economy to function. Verizon’s 5G network now covers 230 million customers in the United States and is expected to continue to grow, with analysts forecasting 4% annual profit growth over the next five years.

This should allow Verizon to build on its 15 straight years of dividend hikes with 2-3% increases, which is decent growth considering its nearly 5% return.

Lockheed Martin: 3.3% return

Like it or not, the military industrial complex is here to stay. This was once again very clear when the United States House of Representatives overwhelmingly passed a defense budget of $ 777.9 billion in September for fiscal year 2022, an increase of 5 % of expenses compared to last year. Given its variety of aircraft such as F-16 fighter jets and armed Blackhawk helicopters, Lockheed Martin (NYSE: LMT) should continue to gain from the increase in defense spending.

With ever-increasing defense budgets and the critical role of Lockheed Martin’s products in national security, analysts predict the company’s EPS will grow by nearly 12% per year over the next several years. This growth should allow the company to capitalize on its 19 consecutive years of dividend growth.

Lockheed Martin’s 3.3% yield, beating the market, and the potential for moderate dividend growth is a powerful combination that income investors will appreciate.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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