The stock market has pulled back in recent weeks as traders have grown more fearful of a potential recession. Fortunately for us, short-term economic concerns often create lucrative opportunities for long-term investors.
Market selloffs lead to lower stock prices. And buying stakes in great businesses when they’re on sale is a proven way to build lasting wealth.
Dividend stocks can be particularly smart buys during market downturns, as their yields rise and their prices fall. That means more dividend income for you at a lower cost.
If you’re on the hunt for some high-yield stocks to add to your diversified portfolio, read on.
High-yield dividend stock to buy No. 1: Energy Transfer
The world craves energy. Demand for power generation is set to soar in the coming decade, fueled by powerful trends like the artificial intelligence (AI) boom. AI data centers have a nearly insatiable thirst for electricity -- and the reliable and cost-effective energy sources needed to supply it.
Enter Energy Transfer (ET -4.53%). The infrastructure giant owns and operates more than 130,000 miles of pipelines that help to transport natural gas and crude oil across the United States. Combined with its extensive network of storage, processing, refining, and export facilities, these nearly irreplaceable assets make Energy Transfer a vital part of the nation’s power grid.
NYSE: ET
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Oil and natural gas providers are set to benefit from an easing of regulations that have stifled the expansion of pipeline projects in recent years. The Trump administration wants to foster cheap and dependable energy supplies in the U.S. Making it easier to produce and transport vital fuels like oil and gas could help it achieve its goals.
As a publicly traded limited partnership, Energy Transfer is designed to pass its steadily rising profits on to investors via large cash distributions. This passive income-producing stalwart currently yields 7%. With the AI boom and deregulation set to fuel its expansion, Energy Transfer expects to grow its cash payout by as much as 5% annually.
High-yield dividend stock to buy No. 2: Realty Income
Like energy infrastructure, real estate could provide you with a lucrative stream of passive income. Thankfully, you don’t need to wrestle with the costs and nuisances that often come with being a landlord. Real estate investment trusts (REITs) can provide you with a far easier and safer way to profit from investment properties. And Realty Income (O 0.26%) is the best in the business.
NYSE: O
Key Data Points
Realty Income’s diversified investment portfolio and prudent capital allocation strategy help to reduce the risks for investors. The REIT has stakes in more than 15,000 commercial properties leased to over 1,500 clients in 89 industries. Over 90% of the rent it collects comes from businesses that tend to hold up well during economic downturns and, importantly, are insulated from the threats posed by e-commerce. Nondiscretionary, discount, and service-oriented retailers make up more than 70% of its portfolio. Top customers include Walgreens, Walmart, and Home Depot.
This smart approach has allowed Realty Income to achieve occupancy rates of at least 96% for more than three decades, including an impressive 98.7% in 2024. It’s also enabled this best-in-class REIT to deliver consistent cash returns to its shareholders. Realty Income has paid a whopping 657 consecutive monthly dividends since its founding in 1969, including 110 straight quarterly increases.
As a REIT, Realty Income is structured to pass at least 90% of its profits on to its shareowners. These cash payouts currently equate to a forward annual dividend yield of 5.8%.
Looking ahead, lower interest rates -- a key goal of the Trump administration -- could be a boon for the real estate industry. Access to cheaper debt financing would make it easier for Realty Income to earn attractive returns on its investments. And more profits for this well-run REIT should mean larger dividends for its shareholders.
