Dividend investing offers a reliable path to passive income and long-term wealth building, especially when stock prices stagnate or decline. Regular payouts provide cash flow regardless of market direction, and reinvesting dividends historically drives much of total return.
High-yield stocks, however, carry risks. Yields above 5% often signal underlying issues—declining earnings, high debt, or sector-specific pressures. Some companies cut dividends when cash flow weakens, eroding both income and principal. Investors must look beyond the yield to assess sustainability, payout ratios, and business strength.
That said, not all high yields are traps. The three dividend stocks below each offer yields above 5%, so let’s dive in to see if they are worth buying.
Realty Income (NYSE:O) stands out as a premier real estate investment trust (REIT) focused on single-tenant retail properties. The company leases space to essential retailers like dollar stores, pharmacies, and convenience chains under long-term net leases. These contracts require tenants to cover taxes, insurance, and maintenance, delivering highly predictable revenue.
In the first half of 2025, occupancy remained strong at 98%, reflecting the resilience of its tenant base even in economic slowdowns. Management plans to invest $5 billion in new acquisitions this year, and guides for AFFO in the range of $4.24 to $4.28 per share for 2025. The dividend is paid monthly and O bills itself as “The Monthly Dividend Company,” having created the strategy from its founding in 1969.
The REIT has increased the payout for 112 consecutive quarters — a track record spanning three decades. With a payout ratio around 75% of funds from operations and an investment-grade balance sheet, the 5.5% forward yield appears secure.
O stock trades at roughly 14 times adjusted funds from operations, with the stock sitting below its historical average, offering value for income-focused investors. For those seeking consistent, inflation-protected cash flow without the volatility of growth stocks, Realty Income serves as a cornerstone holding.
Enterprise Products Partners (NYSE:EPD) operates as a leading midstream energy partnership, owning an extensive network of pipelines, storage terminals, and processing plants. Unlike upstream producers exposed to oil and gas price swings, Enterprise earns the majority of its revenue — currently around 82% — from fixed-fee contracts. This structure provides stability even during commodity downturns.
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