If history gives a hint about the future, it indicates that companies in certain industries tend to generate stable earnings or cash flows that lead to stable dividends.
If we choose the quality companies from these industries, we can then build a diversified portfolio that generates a secure, growing income stream. Below, I list some possibilities.
Utilities: A Must-Own Sector
Earnings generated by utilities are relatively stable because people need to use electricity, gas, and water, etc. no matter if the economy is doing well or not.
One utility that came out strongly from the last recession was Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP). Since 2009 it has been a five-bagger.
Brookfield Infrastructure is a rock solid utility, which owns and operates a global, quality portfolio of infrastructure assets, including toll roads, railroads, ports, pipelines, and telecom towers.
Its trusted management, Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM), employs value investing and actively recycles mature assets for higher returns. Because management owns 30% of the partnership, retail unitholders can expect the management to be unitholder-friendly.
Indeed, Brookfield Infrastructure has increased its distribution every year since 2009. Going forward, it gives the guidance to grow its distribution by 5-9% per year. Currently, it offers a yield of 4.5% to start.
Real Estate Stocks
REITs is an option for investors to gain diversification in real estate, as REITs typically own and operate a portfolio of real estate properties. Some even offer above-average yields. Investors can select REITs with properties in good locations and excellent management teams.
Northwest Healthcare Properties REIT (TSX:NWH.UN) is a good example. It owns 141 healthcare properties, including medical office buildings and hospitals, with a weighted average lease expiry of over 10 years.
Its portfolio is geographically diversified: it earns 41% of its net operating income from Canada, 31% from Brazil, 22% from Australasia, and 6% from Germany. It offers a yield of 7.5%.
In the U.S., Simon Property Group (NYSE:SPG) and Store Capital (NYSE:STOR) have retreated to reasonable valuations after being overvalued last year. They are well-run REITs with the room to grow their distributions. To start, they offer yields of 4.1% and 4.8%, respectively.
I’ve added new thoughts into this article. But I’ve reached the word limit allowed from my Seeking Alpha article. You can find more examples in the original article here: Retirees: The Best 3 Places To Look For Dividend Income
If you like what you've just read, consider subscribing via the "Subscribe Here" form at the top right so that you will receive an email notification when I publish a new article.Disclosure: At the time of writing, I own shares of BIP.UN, NWH.UN, SPG, and STOR.
Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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