Bull Market Buys: 3 S&P 500 Dividend Stocks to Own for the Long Term | The motley fool

The S&P 500 index is currently yielding 1.3% or more. That’s a very low number, but you can do much better if you dig into the index and pick good companies with relatively high yields. Three stocks that should be on your list as potential long-term holdings UDR (UDR 0.93%), T. Rowe Price (TROW -0.37%)AND Income from real estate (O 0.28%). That is why.

UDR provides housing, a basic necessity

Ultimately, UDR is a pretty boring real estate investment trust (REIT). It owns approximately 60,000 apartments in communities in urban and rural areas. Notably, about 25% of rentals come from the nation’s fastest-growing Sunbelt region, with 35% from the West Coast and 40% from the Northeast. It also has exposure to high-end (A-level assets) and mid-level (B-level assets) apartment complexes. In other words, UDR is spreading its bets in an attempt to create a portfolio that can survive through the typical property cycle.

Right now things are tough. A glut of new apartments has led to a tough rental market at the same time as interest rates have risen, driving up costs. Investors are concerned, driving the share price and dividend yield down to 4.2%. This is near the highs of the last decade, which hints that the UDR is on sale now. But here’s the interesting thing: UDR is telling investors quite clearly that things will get better soon because the number of new apartments opening for business will slow over the next two years. If that happens, Wall Street’s view of this REIT is likely to improve materially.

A sticky business and no debt underpins T. Rowe Price’s future

If you’re looking for dividend stocks without much volatility, you probably won’t like T. Rowe Price Asset Manager. Although its client base tends to be very sticky, as investors prefer not to move assets as often, its assets under management (AUM) are highly affected by market action. And Wall Street can be pretty volatile at times. But T. Rowe Price is poised for volatility because it has no long-term debt on its balance sheet.

The yield here is also near decade highs at 4.2%. The reason is that investors are concerned about the shift from mutual funds to lower-cost exchange-traded funds (ETFs). This is a very real problem, but T. Rowe Price is not ignoring it. It is offering ETFs and other investment products, as alternative assets, that appear to have growth potential. The good news, as mentioned, is that customers tend to be sticky, so T. Rowe Price has plenty of time to shift its business. And you have an opportunity to collect a generous dividend yield while doing so.

Real estate income is the biggest and best

When it comes to the net rent REIT niche, one name stands above all others: Real Estate Income. (A net lease requires the lessee to pay most of the property’s operating costs.) Continuing a theme here, the REIT’s 4.9% yield is near its highest level in a decade. So, as with the other dividend stocks on this list, it looks like real estate income is on sale right now.

But the real draw is the scale of the real estate income, with over 15,400 properties. Looking at the market cap, it is more than three times the size of its next biggest competitor. Add an investment grade rated balance sheet and real estate income has favorable access to the capital markets. A lower cost of capital means he can be aggressive on the acquisition front and still make profitable acquisitions. Although this is a slow and steady turtle, if you like having the biggest and best turtle, now seems like a good time to consider jumping on board.

Three high-yield picks from the S&P 500 index

There’s nothing wrong with simply buying an index fund, but the S&P 500 is meant to be representative of the broader economy and thus isn’t focused on providing investors with income. If you’re focused on income, you’ll probably want to choose from what constitutes a vetted list in the S&P 500. If you do, you’ll find that UDR, T. Rowe Price, and Real Estate Income are distinguished by high yield.