Dividend Yields Are Near Record Lows. Here's Where You Can Lock in a Bigger Payday.

Key Points

• The S&P 500's dividend yield is getting down to its record low.

• Several sectors still offer attractive dividend yields.

• Many top real estate and energy stocks offer lower-risk, high-yielding payouts.

• 10 stocks we like better than Brookfield Renewable ›

With stocks in rally mode in recent months, the S&P 500's dividend yield is declining. It's approaching 1.2%, which is near its record low, last hit in 2000. Because of that, investors aren't generating as much dividend income on new investments these days.

However, while most stocks are currently offering a paltry amount of dividend income, there are some places where you can lock in a bigger payout. Real estate and energy currently offer much higher dividend yields (3.4% on average). Because of that, they're great spots to go shopping if you want to lock in a bigger payday. For perspective, a $1,000 investment would generate $34 of annual dividend income at a 3.4% yield, while only producing $12 at a 1.2% yield.

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Here are some top income stocks for those seeking higher yields without incurring additional risk to consider.

Image sources: Getty Images.

High-octane energy dividend stocks

Many energy stocks currently have higher dividend yields. Several offer the opportunity to generate income without the exposure to volatile energy prices.

For example, Kinder Morgan (NYSE: KMI) currently has a dividend yield above 4%. The natural gas pipeline giant backs that high-yielding payout with a very strong financial profile. Take-or-pay contracts and commodity price hedges lock in 69% of its cash flows, while fee-based contracts provide another 26% of its earnings. Meanwhile, Kinder Morgan pays out a conservative portion of its stable cash flow in dividends (44% of its cash flow from operations in 2025). This low payout ratio enables it to retain substantial excess free cash flow to invest in expansion projects, and its expansion investments grow its cash flow, which enables Kinder Morgan to increase its dividend. It delivered its eighth straight annual dividend increase this year.

Brookfield Renewable (NYSE: BEPC)(NYSE: BEP) is another excellent income stock in the energy sector. The stock of the leading global renewable energy company currently yields around 4.5%. It backs that high-yielding payout with very stable cash flow.

Brookfield sells the bulk of the power it produces under long-term fixed-rate power purchase agreements (90% for an average of 14 years). Most of those agreements link power rates to inflation (70% of its revenue). That provides it with stable and growing cash flow to support its growing dividend. Brookfield also invests capital into developing and acquiring additional renewable energy assets. Those growth catalysts drive the company's view that it can increase its dividend by 5% to 9% annually. Brookfield has grown its payout at a 6% compound annual rate since 2001.

Cashing in on rental income

The real estate investment trust (REIT) sector is also fertile ground for dividend income. Many REITs generate stable cash flow backed by long-term leases.

NNN REIT (NYSE: NNN) currently yields over 5%. The REIT focuses on owning freestanding retail properties secured by triple net (NNN) leases. Those leases require tenants to cover all property operating costs, including routine maintenance, real estate taxes, and building insurance. NNN REIT pays out a conservative percentage of its stable income via dividends, which allows it to continue acquiring income-producing retail properties.

The REIT's steadily expanding portfolio has enabled it to routinely increase its dividend. Last year, it hit the milestone of 35 consecutive years of increasing its payout.

Mid-America Apartment Communities (NYSE: MAA) has a dividend yield of around 4%. The apartment landlord generates stable and growing rental income, driven by strong demand for rental properties in the Sun Belt region where it operates. Mid-America pays out a conservative portion of its rental income, enabling it to retain cash to fund new apartment investments (acquisitions and development projects). Those growth drivers enable the REIT to routinely increase its dividend. It has hiked its dividend for 15 straight years.

Plenty of places to lock in lucrative income streams

While the average dividend yield on most stocks is down near an all-time low these days, there are still several places to hunt for more dividend income. Many energy stocks and REITs currently offer significantly higher dividend yields without incurring additional risk. Because of that, they're great stocks to buy for those seeking a bigger income payday.

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Matt DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners, Kinder Morgan, and Mid-America Apartment Communities. The Motley Fool has positions in and recommends Kinder Morgan and Mid-America Apartment Communities. The Motley Fool recommends Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.