The S&P 500 is offering a yield of only 1.35%. In my best possible Chandler impression, “Could that yield be any lower?” That said, there are a lot of individual stocks within the stock market offering yields way higher than this.
And you don’t have to go buy junky stocks in order to get your hands on some of that income. No, there are actually some stocks that offer quality and yield.
These stocks don’t just have high yields, by the way. These are dividend growth stocks that are growing their dividends year in and year out. So you get a lot of income today.
And you get that growth in your income that allows you to keep up with inflation and retain your purchasing power. Now, many of the higher-yielding dividend growth stocks out there are very popular and well-known.
However, some of these stocks fly way under the radar. And that could be your opportunity.
Today, I want to tell you about three under-the-radar dividend growth stocks offering yields of between 5% and 7%. Ready? Let’s dig in.
The first under-the-radar high-yield dividend growth stock I want to tell you about is Iron Mountain (IRM).
Iron Mountain is a real estate investment trust that specializes in physical and digital data protection and management.
Iron Mountain is not exactly a household name to your typical consumer. But companies definitely know Iron Mountain. It serves approximately 95% of the Fortune 500, providing low-cost but critical information management services. They maintain highly secure storage facilities, including underground vaults that are patrolled by armed guards. Iron Mountain is not messing around when it comes to protecting data.
They’re also not messing around with income – the stock yields 5.7%.
That’s more than four times higher than the S&P 500’s yield. Plus, it’s not only a simple income play here. Iron Mountain has increased its dividend for 11 consecutive years, with a five-year dividend growth rate of 5.1%. Recent dividend increases have been somewhat small, but that’s largely because the company is expanding its presence in digital data to mitigate against the risks of physical storage obsolescence.
Almost nobody talks about this stock, but it might finally be on investors’ radar.
I say that because the stock is up a whopping 51.5% YTD. Despite this massive run, though, the stock is still not all that expensive when you compare it up against the market or your typical REIT. The P/CF ratio is only at 13.4 right now. That’s well below the broader market’s cash flow multiple. And if you compare that up against a lot of other REITs, it’s extremely low.
Take Digital Realty Trust (DLR) – for example. They’re in the digital data real estate niche that Iron Mountain is moving toward. Digital Realty’s P/CF ratio is at 24.1 right now, which is almost twice as high as Iron Mountain’s. Iron Mountain could be set for an even higher run, especially with the possibility of a positive rerating on its increasing digital presence.
The second under-the-radar high-yield dividend growth stock I want to highlight is Omega Healthcare Investors (OHI).
Omega Healthcare Investors is a triple-net real estate investment trust that primarily invests in skilled nursing facilities and assisted living facilities.
The long-term demographic trend of the world growing older is well-known. But less well-known are some of the companies that should benefit from this megatrend. Omega Healthcare is one such example. Again, definitely not a household name. And certainly not a stock that gets a lot of airtime. No matter. It continues to hum along nicely and pay out a monster dividend to its shareholders.
This stock yields a market-crushing 7.2%. That’s more than five times that of the S&P 500’s yield – and it’s the highest in today’s article. If you want serious yield and you don’t have time to wait for dividend raises to compound for you, Omega Healthcare is kind of like a “dividend time machine” that fast forwards the whole income compounding process.
It’s not the kind of long-term compounder that, say, Apple (AAPL) – is, but it’ll get the income job done for sure. Not just income, either. Omega has increased its dividend for 18 consecutive years, with a 10-year dividend growth rate of 6.1%. Recent dividend increases have been meager, but any dividend increase at all is pretty nice when you’re getting a 7%+ yield.
This stock has been a laggard YTD, up only 6.5%. The valuation looks very reasonable.
The P/CF ratio of 11.5 is not only well below the broader market’s cash flow multiple but also measurably lower than the stock’s own five-year average P/CF ratio of 12.4. So the stock looks very reasonable in both absolute and relative terms, against both the market and itself. However, this is a stock that’s always kind of cheap, so it’s hard to say that it’s particularly undervalued right now. It’s just constantly unloved by the market. But if you love income, this stock might be one you want to cozy up to.
Last but not least, let’s talk about the under-the-radar high-yield dividend growth stock that is ONEOK (OKE).
ONEOK is an American midstream energy company and owner of one of the country’s premier natural gas liquids systems.
There are a lot of options in the midstream space, but ONEOK flies way under the radar. I don’t see it mentioned nearly as much as other players in the midstream space. To be fair, it’s not as large as some competitors. Its market cap is under $25 billion. Still, it’s a very large company. Know what else is large? Its dividend.
ONEOK yields a mammoth 7%.
While a lot of midstream energy companies, particularly master limited partnerships, burden their investors with poor long-term stock performance, dividend cuts, and unnecessary tax headaches, ONEOK does none of that. No K-1 form here. And the dividend has not only not been cut in recent years – it’s been increased for 18 consecutive years. The 10-year DGR of 14.2% is super high for a yield like this, although, again, recent dividend raises have been small. And performance has been strong. The stock is up over the last five years, unlike plenty of other midstream stocks. This stock should be on your radar.
Actually, this stock shouldn’t only be on your radar. It should perhaps be in your portfolio.
During 2021, the stock has recovered a lot of its pandemic-induced plunge – up 42% YTD. But it’s still below $55/share. This stock was around $80/share before the pandemic. So there could be a ton of upside left here. Almost every basic valuation metric for this stock is in line with, or below, its respective recent historical average. The P/CF ratio of 11.7 is not far ahead of its five-year average of 11 – and energy is still rebounding, which should allow cash flow to fully recoup. Also, the 7% yield is 100 basis points higher than the stock’s five-year average yield. Consider loading up on this stock if you haven’t already.
— 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.
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