5 Fantastic Dividend Stocks You May Be Overlooking
Key Points
Ares Capital and MPLX offer yields of roughly 9.9% and 8.5%, respectively, backed by strong track records.
Bristol Myers Squibb and Edison International pay attractive yields despite patent-cliff and wildfire concerns.
NNN REIT yields nearly 6% and has a longer streak of dividend increases than Realty Income.
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Some stocks seem to always enter the conversation when the topic of dividends comes up. Several members of the Dividend Kings, a group of companies that have increased their dividends for at least 50 consecutive years, often top the list.
But income investors don't have to limit themselves to the same bunch of familiar names. Here are five fantastic dividend stocks that you may be overlooking.
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1. Ares Capital
Ares Capital (NASDAQ: ARCC) isn't a Dividend King. However, it has maintained or grown its dividend for 69 consecutive quarters. That's definitely nothing to sneeze at. Even better, Ares Capital pays a forward dividend yield of roughly 9.9%.
Why isn't this stock better known? One likely reason is that Ares Capital is a business development company (BDC). Many investors aren't familiar with BDCs, but they play a key role in providing financing to middle-market businesses with revenue between $10 million and $1 billion. Ares Capital is arguably the best-managed BDC. It's also the largest publicly traded BDC.
Importantly, Ares Capital's portfolio is highly diversified. The company has 636 portfolio businesses. Its largest investment represents only around 1% of total assets.
2. Bristol Myers Squibb
Bristol Myers Squibb (NYSE: BMY) (BMS) is a relatively well-known drugmaker. But some income investors could underestimate just how attractive its dividend is. BMS' forward dividend yield tops 4%. The company has paid a dividend for 94 consecutive years and has increased its payout for 17 consecutive years.
The main knock against BMS is that it faces a patent cliff. The good news, though, is that the company's growth portfolio now makes up around 59% of total revenue. Sales for drugs in that growth portfolio, including Opdivo Qvantig, Breyanzi, Reblozyl, Camzyos, and Opdualag, are soaring. BMS also has a promising pipeline, with over 30 late-stage programs.
3. Edison International
Edison International (NYSE: EIX) offers a forward dividend yield of 5.9%. The utility stock has increased its dividend for 22 consecutive years. So why isn't Edison on the radar screens of more income investors? Wildfires.
The electric utility is battling multiple lawsuits related to California wildfires. Edison International's stock remains more than 20% below its peak set earlier this year. But the California legislature could take up wildfire liability reform next year.
Meanwhile, Edison continues to generate ample earnings and free cash flow to fund its dividend program. Its dividend payout ratio is a low 37%.
4. MPLX
MPLX LP (NYSE: MPLX) isn't the biggest midstream energy company. However, it pays one of the juiciest distribution yields in the industry -- 8.5%. Moreover, MPLX has grown its distribution by 12.5% annually for three years running.
Like other pipeline stocks, MPLX is enjoying a strong tailwind from data center demand for natural gas. The company is investing to capitalize on this AI-related opportunity, including expanding the Belvieu Alternative NGL (BANGL) Pipeline to handle 300,000 barrels per day.
5. NNN REIT
Realty Income (NYSE: O) probably gets the most investor attention among real estate investment trusts (REITs). But there's another REIT that tops Realty Income in several ways.
NNN REIT (NYSE: NNN) pays a forward dividend yield just shy of 6%, higher than Realty Income's yield of 5.5%. NNN has also increased its dividend for 37 consecutive years, a longer streak than Realty Income's.
The REIT's dividend appears to be safe, too: NNN's adjusted funds from operations (AFFO) payout ratio is 68%. Its property portfolio is well diversified, with no single tenant contributing more than 5% of annualized base rent (ABR). NNN's portfolio is also defensively positioned, with 88.7% of ABR coming from tenants in service and non-discretionary retail sectors.
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Keith Speights has positions in Ares Capital, Edison International, NNN REIT, and Realty Income. The Motley Fool has positions in and recommends Ares Capital, Bristol Myers Squibb, NNN REIT, and Realty Income. The Motley Fool has a disclosure policy.
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