If you’re looking to increase your passive income stream, there are a handful of high-yielding dividend stocks worth your attention. AbbVie (NYSE:ABBV), Ares Capital (NASDAQ:ARCC)And Real estate income (NYSE:O) have what it takes to deliver big dividend payments to your portfolio in the years to come.
Whether you’re interested in a high initial yield, rapid payout growth, or a little of both, these dividend payers have what it takes to generate plenty of cash flow over the long term. Best of all, you don’t need to lift a finger after hitting the buy button.
1. AbbVie
In terms of revenue, AbbVie is the world’s fourth largest drugmaker. The company has increased its dividend 45% over the past five years, despite the largest patent drop in its industry’s history.
Humira, an injection used to treat arthritis, psoriasis and inflammatory bowel disease, was the world’s best-selling drug, with U.S. sales reaching $18.6 billion in 2022.
AbbVie’s stock price has been under pressure because the company lost patent-protected exclusivity for Humira in the United States last year. The pharmaceutical stock offers a dividend yield of 3.6% at recent prices. and despite Humira-related losses, payouts could continue to rise rapidly over the next five years.
Humira’s global sales fell 36% year-on-year in the first quarter, but total revenue rose 0.7% thanks to strong growth in Skyrizi, a new psoriasis treatment, and Rinvoq , a new treatment for arthritis.
Skyrizi and Rinvoq launched in 2019, but they have been so successful that AbbVie believes that by 2027 they will contribute to more than $27 billion in combined annual sales.
2. Ares Capital
Ares Capital is a business development company (BDC) which offers a whopping 9.3% dividend yield at recent prices. It has only increased its dividend by 14.3% over the past five years. However, with such a high initial yield, simply maintaining the current payout is enough to generate a return that satisfies most investors.
Ares Capital and its BDC peers are essentially lenders aimed at operating companies too large for small business lending, but too small for a traditional U.S. bank to consider. About 82% of its loans granted were to businesses that earn more than $25 million annually before interest, taxes, depreciation and amortization (EBITDA).
With many companies hungry for capital, Ares Capital’s underwriting team can select highly reliable borrowers. At the end of March, only 1.7% of its portfolio at cost was in a non-accumulation situation. This is less than half the average non-accrual rate across BDC’s industry. With a highly experienced underwriting team and an already extensive list of existing borrowers, this BDC could continue to maintain and increase its payouts for many years to come.
3. Real estate income
Realty Income is the largest publicly traded net lease real estate investment trust (REIT). It’s also one of the most reliable dividend producers in history. The REIT pays a monthly dividend which it has increased 126 times since it began trading in 1994.
At recent prices, Realty Income shares offer a dividend yield of 5.9%. The company has increased its dividend by 16.1% over the past five years, and many years of steady dividend increases seem likely.
Realty Income benefits from a diversified portfolio. Its three main clients – Dollar GeneralWalgreens and Dollar Tree — are responsible for less than 10% of the annual rent contracted. It has clients in retail, but many are grocery and home improvement store operators who are insulated from changing consumer behavior.
Decades of growing cash flow have earned Realty Income an A3 credit rating of Moody’s. This means it can borrow at lower interest rates than almost all of its peers. It may not be the fastest-growing dividend payout in your portfolio, but it could be the most reliable. Adding a few stocks now seems like a smart move for most investors.
Should you invest $1,000 in AbbVie right now?
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Cory Renauer holds positions within Ares Capital. The Motley Fool holds positions and recommends Moody’s and Realty Income. The Motley Fool has a disclosure policy.
3 High-Yielding Dividend Stocks to Buy Now for a Lifetime of Passive Income was originally published by The Motley Fool
