Last week, I read something online about the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD). It’s considered to be one of the better U.S.-listed dividend equity ETFs. It got me wondering about high-yield dividend stocks.
I’m not sure if I’ll find dividend stocks in SCHD’s portfolio that yield over 7%. The ETF’s 3o-day SEC yield is 3.84%, 55% less than 7%. It tracks the performance of the Dow Jones U.S. Dividend 100 Index, which consists of 100 stocks that have paid dividends for at least 10 consecutive years and are financially sound.
Not surprisingly, a quick check of the ETF’s top 10 shows no stocks yielding 7% or higher, although Verizon Communications (NYSE:VZ) comes close at 6.7%.
Therefore, I’ve broadened the search to include all stocks with a market capitalization of $2 billion or higher, yielding 7% or more. According to Finviz.com, that comes to 91. That should allow me to pick stocks from three different sectors.
Here are my three ideas.
Stellantis (STLA)
Stellantis (NYSE:STLA) is the parent company of Chrysler, Jeep, Ram, Fiat, Alfa Romeo, Maserati, Peugeot, etc. It currently yields 7.6%. It has a total yield of 11.3% between dividends and share repurchases. Although its shares are down over 3% year-to-date, they’ve delivered an annualized total return of 18.4% over the past five years.
I have to admit I’m biased about Stellantis. My family has owned Jeeps for years. The old Jeep Cherokee was one of my first vehicles as a working adult. It got me through a lot of snowstorms.
Morningstar Canada senior editor Andrew Willis discussed why Stellantis stock was so cheap in February. He mentioned the merger with Peugeot, which should provide the company with greater economies of scale and expansion of some of its higher-end brands, such as Alfa Romeo, Jeep, and Maserati, which should improve profitability.
Analysts are optimistic about its stock. Of the 29 that cover it, 18 (62%) rate it a Buy, with a $28.63 average target price, 26% higher than where it’s currently trading.
It trades at less than 4x its $6.01 earnings estimate for 2024.
EPR Properties (EPR)
EPR Properties (NYSE:EPR) is a real estate investment trust (REIT) that invests in experiential real estate, such as movie theaters, Topgolf and other Eat & Play facilities, ski resorts, waterparks, gyms, and many more.
It currently yields 8.3%. Between dividends and share repurchases, it has a total yield of 8.5%. Its shares are down nearly 17% year-to-date, and its annualized total return of 3.29% over the past 1o years is underwhelming.
However, its assets ($5.7 billion) are second to none in entertainment. I could see it reverting to the mean over the next 10 years. Over the past 15 years, it’s got a healthy 11.0% annualized total return.
Despite a slight decline in Q1 2024 revenue, to $167.2 million from $171.4 million a year earlier, it managed to increase its net income per share by 8.7% to $0.75 from $0.69 a year earlier.
In the first quarter, it acquired the Enchanted Forest Water Safari in Old Forge, New York, for $33.4 million. This is the largest water park in New York State, operating year-round. If you’re an income investor, it’s an excellent long-term hold.
Atlantica Sustainable Infrastructure (AY)
Atlantica Sustainable Infrastructure (NYSE:AY) owns, develops, and operates renewable energy projects in the U.S., South America, Europe, Africa, and Canada. They provide 2.2 gigawatts (GW) of renewable energy.
It currently yields 7.7%. Between dividends and share repurchases, it has a total yield of 7.7%. Its shares are up over 10% year-to-date, generating an annualized total return of 8.01% over the past five years.
Why invest?
The world is moving to renewable energy. Maybe at a slower pace than once imagined, but we are headed in that direction even if the transition takes much longer.
Its 45 operating assets have 100% contracted revenue with PPAs (power purchase agreements) in place with an average term of 13 years. Approximately 73% of the revenue is from renewable energy. The remainder is generated from efficient natural gas and heat (14%) and transmission lines (13%).
Atlantica has 2.2 GW of renewable energy and 6.0 gigawatt hours (GWh) of storage projects in various stages of development.
Over the next five years, it plans to reduce its debt from $4.32 billion in 2023 to $2.41 billion by 2028, increasing its profitability.
It’s expected to earn $0.53 a share in 2024 and $0.63 in 2025.
In the long term, I see it becoming more than just an income play. However, you’ll have to be patient.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
