All the volatility in the marketplace this year has created some opportunities for income-focused investors. That's because dividend yields rise as stock prices decline. While several market sectors have rebounded from their initial COVID-19 sell-off, energy and real estate remain under pressure.
Many companies in both sectors are in financial trouble, leading to a wave of dividend cuts. However, lots of others are in solid shape and now offer investors even more enticing payouts. Here are five buy-worthy income stocks from those sectors that all yield more than 5%.
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Medical Properties Trust: Current yield 6.1%
Medical Properties Trust (MPW 6.18%) is a real estate investment trust (REIT) focused on owning hospital properties that it leases back to operators. While these facilities have been ground zero for the COVID-19 outbreak, that hasn't stopped tenants from paying rent. Overall, the REIT has collected more than 95% of what it billed each month during the pandemic, putting Medical Properties on track to achieve its full-year earnings forecast, which implies that it will pay out a conservative 65% of its cash flow in support of its high-yielding dividend. Add in a healthy balance sheet, and this REIT's payout is on solid ground.
Kinder Morgan: Current yield 7.1%
Energy infrastructure giant Kinder Morgan (KMI 0.15%) is experiencing some pressure from this year's oil market downturn. Overall, it expects all the volatility to cause its cash flow to be about 10% below its initial outlook. However, that's still enough money to comfortably cover its dividend as well as all its planned capital expenses. Add in a solid investment-grade balance sheet, and Kinder Morgan's big-time payout is on a sustainable footing.
SL Green Realty: Current yield 7.1%
SL Green Realty (SLG 2.89%) is a REIT focused on owning office and retail properties in New York City. Its tenants have experienced a significant impact as COVID-19 ravished that region. However, most continue to pay rent, as the company collected 89.1% in April and 84.7% in May as of its last update. With the city starting to reopen, these numbers should improve.
Because rent collections are under some pressure, SL Green's cash flow is likely to dip this year. However, that shouldn't affect its dividend since it typically pays out a very conservative 50% of its cash flow. Furthermore, it has a strong balance sheet, which it boosted this year by raising $1 billion in cash via asset sales. That gives it a nice cushion as well as the flexibility to resume repurchasing some of its beaten-down stock.
Enbridge: Current yield 7.7%
Canadian pipeline giant Enbridge (ENB 0.74%) has largely been immune to the impact of this year's oil market downturn. That's because its low-risk business model has limited its exposure to fluctuations in volumes and commodity prices. Thus, the company remains on track to achieve its cash flow forecast. With its current payout ratio only about 65% of its cash flow, the payout is on solid ground, especially when adding in its investment-grade balance sheet. That provides it with the financial flexibility to finance its expansion program, which should support future dividend increases.
Williams Companies: Current yield 8.5%
Natural gas pipeline operator Williams Companies (WMB -0.07%) expects the energy market downturn to have a minor impact on its financial results this year, with it currently expecting to hit the low end of its initial guidance ranges. That puts the company on track to generate enough cash to cover its dividend with about $1 billion to spare, giving it nearly all it needs to fund this year's planned capital spending. Add that to its solid investment-grade balance sheet, and Williams' big-time dividend is on solid ground.
Sustainable amid the storm
Hundreds of companies have slashed or suspended their dividends this year, with a bulk of the cuts coming from the higher-yielding energy and real estate sectors. However, not all payouts in those industries are on shaky ground, with Medical Properties, SL Green, Williams, Enbridge, and Kinder Morgan among those standing out for their sustainability. They're all attractive options for investors seeking to boost their portfolio's yield.
