There Are Only a Handful of S&P 500 Stocks That Yield Over 5%. Here's My Top Pick to Buy in September.

There aren't too many dividend stocks that yield more than 5%. Those that do can be separated into high- and low-risk categories, and most investors, especially those who rely on passive income, are looking for low-risk options.

Realty Income (NYSE: O) boasts a 5.3% dividend yield, and it's as reliable as they come. Here's why it's my pick for the top S&P 500 (SNPINDEX: ^GSPC) stock with a yield above 5%.

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The reliable, high-yielding REIT

Realty Income is a real estate investment trust (REIT), a structure that pays out 90% of earnings as dividends. REITs often play a big role in a dividend-focused portfolio, although there are all sorts of REITs, some of which are high-risk and some that don't pay high yields.

REITs buy and lease properties, and they typically have an industry focus. Realty Income is a retail REIT, meaning it predominantly leases its properties to retailers. Its tenant roster includes some of the largest and most stable retailers in the U.S., such as Walmart and Home Depot. Grocery and convenience stores make up more than 20% of its total portfolio, and it services other essential retail categories like pharmacy and home improvement, which is why its tenant base is so reliable.

However, as the company grows, it has entered new industries. It recently entered into a sale-leaseback deal with Wynn Resorts, and gaming now accounts for 3.1% of the portfolio. It also has a significant industrials tenant base and sees an opportunity to open data centers, adding a $1 trillion opportunity. It's moving into global properties as well, and geographically, the U.K. accounts for 15% of its properties today.

Realty Income owns nearly 16,000 properties worldwide and grows by acquiring new properties and smaller REITs. It's well-capitalized with a diverse range of funding sources, including private equity and debt funding, and it's highly selective about its investments: It has deployed $74 billion in property investment since 2019 from a total sourced volume of $586 billion.

Why Realty Income is a top buy now

Realty Income is a buy for its dividend. It pays it monthly, an unusual perk, and it has raised it for the past 115 quarters. But the stock is still off its pre-pandemic high, as the market has soured on real estate stocks. Mortgage rates remain elevated, and despite Realty Income's solid performance, sentiment remains negative.

If interest rates eventually come down, Realty Income stock is likely to rise. Since yield and stock prices move inversely, the best time to buy is before prices rise and yields fall. However, Realty Income is an excellent choice at any time. If you're looking for a top high-yielding dividend stock, you can't do better than Realty Income.

Jennifer Saibil has positions in Walmart. The Motley Fool has positions in and recommends Home Depot, Realty Income, and Walmart. The Motley Fool has a disclosure policy.