If you are looking to find yield in today’s market, you have to dig a little deeper than usual. That’s because the S&P 500 index is trading near all-time highs and offering a skinny little yield of just about 1.2%. That’s way too small a number to entice most dividend investors.
But bump the dividend yield figure up to 5.6% and you’ll likely find a lot of takers. What’s interesting is that you can get an ultra-high yield like that without taking on a huge amount of risk if you are selective. If you want safe dividends in 2025 and beyond, Realty Income(NYSE: O) and Enbridge(NYSE: ENB) are two stocks you need to know about.
Realty Income is the largest net lease real estate investment trust (REIT). A net lease requires the tenant to pay for most property-level operating costs. Across a sufficiently large portfolio, this is a relatively low-risk approach in the REIT sector. Realty Income’s portfolio contains over 15,000 properties and, by market cap, it is over three times the size of its next closest peer.
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Although the vast majority of the properties the REIT owns are single-tenant retail assets, it also has exposure to industrial properties and some unique assets, like vineyards and casinos. The portfolio also extends across the pond to Europe. It is one of the most diversified REITs you can own.
However, the real draw with Realty Income is its dividend. The lofty 5.6% dividend yield is really just the start. Even more attractive is the fact that the REIT has increased its dividend annually for three decades. And within that streak is another one, as Realty Income has hiked the dividend each quarter for 112 quarters in a row.
That’s a reliable dividend stock, but it gets even more enticing when you add in the company’s investment-grade-rated balance sheet. That provides a solid backstop to the dividend should there be any problems with the portfolio.
Enbridge also offers investors a lofty 5.6% dividend yield. Like Realty Income, Enbridge’s streak of dividend increases, in Canadian dollars, is three decades long. And Enbridge has an investment-grade-rated balance sheet, too. While Enbridge operates in the highly volatile energy sector, it happens to be a North American giant in the most reliable niche of the energy sector: the midstream.
Enbridge owns energy infrastructure assets, such as pipelines, which customers pay fees to use. The prices of the commodities flowing through the system are less important than demand for energy, which tends to be robust even when energy prices are weak. Enbridge generates reliable cash flows to support its lofty dividend through the entire energy cycle.
What’s most exciting about Enbridge, however, is how it handles its portfolio of assets, which include oil and natural gas pipelines, regulated natural gas utilities, and renewable power assets. The goal is to adapt to the world’s changing energy needs as they evolve. That has translated into a slow shift from oil toward natural gas and clean energy.
However, if you are looking for a lifetime of income, this approach means you can count on this energy stock to keep paying you well even as the world transitions away from the dirtier carbon fuels that currently support its dividend.
It is easy for dividend investors to become enamored of a high yield, overlooking the risks of the company backing that yield. You don’t have to fall into that trap with stocks like Realty Income and Enbridge. They offer ultra-high yields and safe business models that have rewarded investors with decades of dividend growth. That trend is likely to continue for years to come.
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Reuben Gregg Brewer has positions in Enbridge and Realty Income. The Motley Fool has positions in and recommends Enbridge and Realty Income. The Motley Fool has a disclosure policy.
