The Best Stocks to Invest $1,000 in Right Now
Key Points
The S&P 500 index is near all-time highs and has a low dividend yield of 1.1%.
The stock market is narrowly focused on a few large technology companies.
If you look beyond technology, you'll find attractive high-yield stocks like these in the healthcare, finance, and energy sectors.
- 10 stocks we like better than Bristol Myers Squibb ›
The 1.1% dividend yield on offer from the S&P 500 index (SNPINDEX: ^GSPC) is underwhelming. However, you don't have to settle for that low yield if you're willing to do a little extra legwork. Look beyond a few high-profile tech stocks, and you can find yields as high as 6.6% from industry-leading businesses like Bristol Myers Squibb (NYSE: BMY), Realty Income (NYSE: O), and Enterprise Products Partners (NYSE: EPD). Here's a quick look at each.
1. Business as usual for Bristol Myers Squibb
Bristol Myers Squibb is one of the world's largest drug companies. While Wall Street is focused on GLP-1 weight loss drugs, Bristol Myers Squibb focuses on treating cardiovascular issues, immune disorders, and cancer. GLP-1 drug advances are exciting, but they aren't the only important developments in the healthcare sector.
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Bristol Myers Squibb is offering a 4.5% dividend yield with a dividend payout ratio that's around 85%. The payout ratio is important because the pharmaceutical company is facing patent cliffs that have investors worried about the future. When blockbuster drugs lose patent protection, their revenues often fall dramatically. Bristol Myers Squibb's dividend has some wiggle room before it would be at risk of being cut.
The company is developing new drugs to offset the impact of patent cliffs. If history is any guide, it will eventually find new blockbuster drugs, as it has before. In fact, what's happening today is normal for a drug company. If you can handle normal business swings, this drugmaker could be a good high-yield option today. A $1,000 investment will let you buy 18 shares.
Image source: Getty Images.
2. Realty Income is boring, which is exciting
Realty Income is one of the world's largest real estate investment trusts (REITs). It has an investment-grade-rated balance sheet. While its portfolio is focused on net-lease retail assets, it also has exposure to industrial properties and a handful of unique assets, such as casinos and data centers. It's also geographically diversified, with investments in the United States, Europe, and, more recently, Mexico.
Conservatively managed, Realty Income is built from the ground up to be a reliable dividend stock. That's highlighted by a 30-year streak of annual dividend increases. The dividend has grown slowly over time, but the 4.2% growth rate edges out inflation. Add in the roughly 5.3% dividend yield, and Realty Income could be a great fit for conservative income lovers who don't mind owning dividend tortoises. You can buy 16 shares with $1,000.
3. Enterprise Products Partners' energy focus isn't what it seems
Energy prices are known for being volatile. Enterprise Products Partners sidesteps that risk by operating one of the largest energy infrastructure businesses in North America. It charges fees for the use of its assets, producing reliable cash flows to support its lofty 6.6% distribution yield. The price of oil and natural gas is less important than the volume of these fuels that it transports.
Like Realty Income, Enterprise is a rather boring business. It has an investment-grade-rated balance sheet and a 27-year streak of annual distribution increases. Its distributable cash flow covers its distribution 1.7 times. Given the importance of energy to the world, most investors should have an energy stock in their portfolio. For dividend lovers, Enterprise Products Partners is a great pick. A $1,000 investment will allow you to buy 30 units of this master limited partnership (MLP).
The best stocks show up when you dig a little
Bristol Myers Squibb, Realty Income, and Enterprise all hail from different sectors. And they all offer highly attractive dividend yields. If you're looking at the market's tiny yield, don't give up. There are still great dividend stocks out there. You just need to look beyond the headline-grabbing technology stocks that get all the attention.
Should you buy stock in Bristol Myers Squibb right now?
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Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions in and recommends Bristol Myers Squibb and Realty Income. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
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