These 3 Stocks Yield 7% and Are a Buy Right Now: Enbridge (ENB), Altria (MO) and Omega Healthcare (OHI)

Dividend growth investing is an amazing long-term investment strategy. However, it’s not perfect.

One of the drawbacks of the strategy is that it can take years for the compounding process to play out.

Reinvesting growing dividends back into more growing dividends and watching your wealth and passive income pile up? It’s awesome!

But with many high-quality dividend growth stocks yielding between 1% to 4%, it can take a long time before you’re collecting serious dividend income.

And not all investors have the time to let this happen organically. Well, higher-yielding dividend growth stocks allow you to circumvent that – they already pay big dividends.

Now, higher yield comes with drawbacks. We’re typically talking about lower growth, lower quality, and higher risk. There’s no free lunch in life.

That said, some higher-yielding dividend growth stocks are of high enough quality in order to potentially make the stretch for yield worth it.

Today, I want to tell you about three dividend growth stocks offering market-smashing yields of 7%. These are good businesses, and all three stocks look buyable here. Ready?

Let’s dig in.

High Yield Dividend Growth Stock #1: Enbridge (ENB)

Enbridge is a world-class energy infrastructure company.

This is a business that performs in the best of times and the worst of times. Even during the pandemic-induced economic and stock market crash last year, Enbridge kept on pipelining energy products. You know what else they continued to pipeline? Their big, fat dividend straight into shareholders’ brokerage accounts.

With a yield at right about 7%, this stock is a monster income producer.

And it’s not just yield, either. There’s also growth here. In fact, Enbridge has been increasing its dividend for 25 consecutive years, with a five-year dividend growth rate of 10.4%. You almost never see a yield this high paired with a double-digit dividend growth rate. It’s a rare and compelling combination of yield and growth. This dividend is big, growing, and very reliable.

Plus, the stock looks reasonably valued.

It’s up almost 25% YTD. But there could be a lot more where that came from. We put together a full analysis and valuation video on Enbridge back in May, showing how the stock is possibly worth almost $50/share. With the stock currently under $40/share, there’s a lot of potential upside here. Meantime, you’re getting a humongous dividend while you wait.

High Yield Dividend Growth Stock #2: Altria (MO)

Altria is undoubtedly a sin stock, with exposure to industries like tobacco, alcohol, and even cannabis.

But if sin is in for you, this stock should definitely be on your radar. Altria has been one of those rare stocks where the yield has been high for a long time, as if the market is basically pricing in a dividend cut, yet Altria has come through time and time again with its big dividend, making the market look silly. Some of their recent dividend raises have only been in the low-single-digit range. But when it’s a yield this high, you don’t need a ton of dividend growth to make sense of the investment.

This stock is yielding right about 7% here, which is five times higher than the broader market’s yield.

In this low-rate world, a 7% yield that’s actually safe is practically unheard of. Yet that’s what you get with Altria. It’s increased its dividend for 51 consecutive years. That makes it a Dividend King. There are only a handful of stocks in the whole world with 50 or more consecutive years of dividend increases, as it takes a special kind of business to be able to rack up a track record like that. (MO) may as well be shorthand for more – as in mo’ money.

A lot to like about Altria. Another thing to like? The valuation.

The stock looks reasonably valued right now. I basically see it as fairly priced. Relative to what’s arguably an expensive stock market yielding well below 2%, Altria’s attractive. We put together a full analysis and valuation video on Altria in November, estimating fair value on the stock at right about $50/share. Even after its 20%+ run YTD, it doesn’t look expensive.

High Yield Dividend Growth Stock #3: Omega Healthcare (OHI)

Omega Healthcare Investors is a triple-net REIT that owns and rents out healthcare properties.

Want to be a landlord without doing any of the hard work? Want to be exposed to areas of healthcare like skilled nursing facilities and assisted living facilities? Well, Omega Healthcare gives you that. They own properties like skilled nursing facilities and let qualified operators run those facilities. They then collect rent and send out a big dividend to their shareholders.

How big of a dividend? The stock yields just over 7%.

Again, this isn’t some low-quality, junk business that’s regularly cutting its dividend and seeing its stock price slide. Omega Healthcare has increased its dividend for 18 consecutive years. It’s not the lowest-risk stock in the world, no. And with recent dividend increases coming in at less than 2%, it’s also not the fastest-growing stock in the world. If you want more growth and less risk, you’ll have to accept much lower yields. If you want a big, fat, juicy dividend, on the other hand, step right up. Because Omega Healthcare is delivering.

This high yield comes with an undemanding valuation.

The stock is up less than 5% YTD. That recent relative underperformance could be an opportunity. The stock trades hands for a P/FFO ratio of 11.5. That’s analogous to a P/E ratio on a normal stock. In this market, that’s an extremely low valuation. The P/CF ratio, at 11.6, is below its own five-year average of 12.5. So the stock looks cheap even relative to itself. The payout ratio of slightly over 80% is a tad high. But if you want to stretch for yield without taking on obscene risk on some junk stock, Omega Healthcare is an appealing long-term dividend growth stock investment idea.

— Jason Fieber

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.