The Best High-Yield Financial Stock to Invest $1,000 in Right Now
Key Points
This high-yield financial giant has increased its dividend annually for 31 years.
The company has an investment-grade-rated balance sheet and a diversified business.
The 5.2% yield on offer is more than four times higher than the 1.1% you would collect from an S&P 500 index ETF.
Tensions are running high on Wall Street today. Consumers were already tightening their budgets even before the geopolitical conflict in the Middle East upended global energy markets. Fears of a recession, perhaps on a global scale, are well-founded.
If you are looking for reliable high-yield dividend stocks in this environment, you need to err on the side of caution. Realty Income (NYSE: O) and its 5.2% yield could be the solution you are looking for if you have $1,000 or $10,000 to invest.
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What you get for $1,000
To put some numbers on this, a $1,000 investment will let you buy around 15 shares of Realty Income as of this writing. Each share offers an annual dividend of $3.23. So, for $1,000, you will generate around $48 in annual income. You can scale that up with simple multiplication. A $10,000 investment will generate around $480 in annual income, while a $100,000 investment will yield $4,800 in annual passive income. Those are estimates, however, and rounded down so they err on the low side.
Image source: Getty Images.
Those numbers won't stay the same for long, however, as Realty Income has a long history of increasing its dividend on a quarterly basis. That said, its annual streak of dividend increases is an impressive 31 years and counting. So your dividend checks will likely grow steadily over time. And the real estate investment trust's dividend is paid monthly, so it is as close to a paycheck replacement (including regular raises) as you can get on Wall Street.
Realty Income is built to last
The dividend streak is important today because it was created through the dot-com crash and associated recession, the Great Recession, and the coronavirus pandemic. Realty Income has faced very hard times and never skipped a beat on its dividend.
The foundation of the business is a large portfolio of single-tenant net lease retail properties (roughly 79% of rents). A net lease requires the tenant to pay most property-level expenses. Retail assets are relatively easy to buy, sell, and release as needed. On top of that, Realty Income owns industrial assets and a collection of more unique properties, such as vineyards, casinos, and data centers. Overall, with more than 15,500 properties spread across the United States and Europe, Realty Income is the largest net lease REIT.
Realty Income is using its size in other ways, too. For example, it has begun offering investment management services to institutional investors. And it has started to make debt investments, too. Both build on the REIT's core competencies and offer new avenues for long-term growth.
It is also important to note that Realty Income is operated in a very conservative manner. That's highlighted by an investment-grade-rated balance sheet. But the benefit of this goes well beyond financial strength when you factor in Realty Income's size. Being large and investment-grade rated gives the REIT advantaged access to capital markets, which allows it to compete aggressively when buying properties. Long-term dividend investors will find that Realty Income is built to survive through both good times and bad.
Realty Income has a lot of runway
There's another small factor to consider here. Realty Income's average lease term is 8.8 years, which should be long enough to see the company through even a bad economic downturn. When it comes to high-yield REITs, Realty Income is one of the most attractive choices you can make, particularly if you are worried about the economic future right now. In truth, it is a bit boring, but that's exactly why it will help you sleep comfortably at night even as you collect fat dividend checks.
Should you buy stock in Realty Income right now?
Before you buy stock in Realty Income, consider this:
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Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.
