Unlocking High-Yield Opportunities in a Low-Yield Market
The current stock market landscape is characterized by near all-time highs, resulting in a paltry 1.2% dividend yield on the S&P 500 Index. However, savvy investors can still find attractive yields of 5% or more in certain stocks. Two high-yield stocks that stand out are Realty Income (NYSE: O) and Toronto-Dominion Bank (NYSE: TD).
A Safe Haven: Realty Income
Realty Income, a net lease REIT, boasts a dividend yield of approximately 5.1%, significantly higher than the average real estate investment trust (REIT) yield of 3.7%. The company’s monthly pay dividend has been increased annually for 29 consecutive years, making it an attractive option for income-seeking investors.
With a market capitalization of over $50 billion and a portfolio of more than 15,400 properties across North America and Europe, Realty Income is the largest net lease REIT. Its size, diversification, and investment-grade rated balance sheet provide the company with advantaged access to capital markets, enabling it to compete aggressively for deals while maintaining profitability.
While Realty Income may not be a high-growth stock, its stability and consistent dividend payments make it an excellent choice for those seeking a foundational holding for their high-yield portfolio.
A Higher-Risk Opportunity: Toronto-Dominion Bank
Toronto-Dominion Bank, also known as TD Bank, is currently facing challenges, including a $3.1 billion fine for failing to prevent money laundering in its U.S. division. As a result, the bank’s shares have fallen, and its dividend yield has risen to around 5.2%.
Despite these issues, TD Bank’s core Canadian operations remain unaffected, and the bank’s protected market position in Canada provides a stable foundation. Assuming the bank can navigate its current challenges, it will likely resume growth in the future.
TD Bank has already set aside funds to pay the fine and has begun upgrading its internal controls. While 2025 may be a transition year, the bank’s long-term prospects appear promising.
A Risk Barbell Approach
By combining Realty Income and Toronto-Dominion Bank in a portfolio, investors can create a moderate-risk high-yield strategy. Realty Income provides a safe haven, while TD Bank offers a higher-risk opportunity with potential for long-term growth.
This approach allows investors to balance their risk exposure while generating attractive yields in a low-yield market. While conservative investors may prefer to avoid TD Bank due to its headline risk, most investors should feel comfortable adding the bank to their portfolio and collecting a fat dividend yield while waiting for better days to arrive.
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