After a volatile week on Wall Street, CNBC’s Jim Cramer picks three high-dividend stocks. enbridge, pfizer and real estate income — and explained why I think they are fairly reliable.
“There are a lot of risky high-yield stocks out there. Yields are skyrocketing because investors believe the company can’t continue to cover its dividend costs,” Cramer said. “But these three are not, and I consider them very safe.”
As an oil pipeline rather than an oil producer, Enbridge focuses on volume of goods rather than cost, Kramer noted. He further added that rising oil production bodes well for Enbridge, business is predictable and the customer base is wealthy. Government regulation could hinder oil pipeline companies, Cramer added, but he said that’s less of a concern under the Trump administration. With Enbridge’s yield of just over 5.6%, Cramer said the company offers solid downside protection as well as long-term growth potential.
For Kramer, Pfizer could serve as a “corporate bond equivalent,” noting the pharmaceutical giant’s yield is nearly 6.9%. He also hinted that the drugmaker could use recently acquired businesses to build a strong pipeline. This could help offset the large number of patent expirations the company faces in the coming years. Kramer also said that Pfizer’s large cash flow will easily cover the dividend, adding that in the long run the company could “get through this difficult period” and the stock could break out.
Realty Income, a real estate investment trust, primarily leases commercial real estate to retail and industrial customers, Kramer said. Although he said the stock price “hasn’t been particularly exciting lately,” the company’s yield is about 5.7%. Kramer suggested some investors are concerned about Realty Income’s tenant base, which includes retail pharmacies. walgreensplans to close many stores over the next few years. But Kramer was more optimistic, noting that Realty Income’s occupancy rate was 98.7% at the end of last quarter. Many of the tenants, such as grocery stores, convenience stores and 100-yen shops, sell essential goods and are well-equipped to weather a weak consumer spending environment, he added.
“These days…growth is the best defense in any environment, but I certainly don’t blame anyone for seeking dividend protection,” he said. “Especially when markets look volatile and short-term interest rates may be falling.”
