The best high-yielding dividend stocks do one thing exceptionally well. They grow their dividends. Over the last half-century, dividend growth stocks have delivered significantly higher total returns (dividend income plus price appreciation) than companies that didn’t increase their dividends or don’t pay them.
Realty Income (NYSE: O) and Main Street Capital (NYSE: MAIN) have extensive track records of increasing their high-yielding dividends. That makes them some of the best high-yielding dividend stocks to buy for those with $1,000 to invest right now.
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Realty Income has a simple mission. The real estate investment trust (REIT) aims to pay a dependable, steadily growing monthly dividend. It has certainly delivered on that goal over the years. Realty Income has increased its dividend for 31 consecutive years, including for the past 113 quarters in a row. It has grown its payout at a 4.2% compound annual rate during that time frame. That has helped drive its robust 13.3% compound annual total return since its stock market listing in 1994.
The REIT’s monthly dividend currently yields 4.8%, more than triple the S&P 500‘s level (1.1%). At that rate, Realty Income could turn a $1,000 investment into about $48 in annual dividend income (roughly $4 per month).
Realty Income is in an excellent position to continue increasing its dividend. The REIT expects to invest $8 billion to expand its real estate portfolio this year, which should increase its cash flow per share by about 3% at the midpoint. Meanwhile, with a strong balance sheet and a $14 trillion investable market opportunity, Realty Income should have no shortage of growth opportunities going forward.
Main Street Capital is a business development company (BDC). It provides debt and equity capital to smaller private companies. Those investments generate interest and dividend income.
As a BDC, Main Street Capital must pay at least 90% of its taxable income in dividends. The company does this through a unique dividend policy. Main Street Capital pays a monthly dividend set at a sustainable level. Additionally, the BDC periodically pays supplemental quarterly dividends.
Main Street Capital has never cut or suspended its monthly dividend. Instead, the company has increased the payment by 136% since going public in late 2007. Meanwhile, it has paid a stable or growing supplemental dividend each quarter for the past several years.
