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Got $5,000? These 3 Dividend Stocks Are Yielding More Than 5%

Motley Fool - Fri Jan 27, 2023

Leaving cash in your bank account may be safe, but it could be costing you money. With stocks, if you choose wisely, you can earn a higher rate on your investment within a reasonable boundary of risk. For example, on a $5,000 investment, you could be collecting up to $250 in dividends each year on a stock that pays 5% annually.

Three stocks that pay even more than that today are Physicians Realty Trust (NYSE: DOC), VerizonCommunications (NYSE: VZ), and Bank of Nova Scotia (NYSE: BNS). Here's why you should consider buying shares of these businesses.

1. Physicians Realty Trust

Physicians Realty Trust is a real estate investment trust (REIT) that collects income from hundreds of medical facilities across the U.S. Since it's generally a stable industry, healthcare can offer some great consistency for investors holding shares of the REIT.

In its most recent quarter (ended Sept. 30, 2022), Physicians Realty Trust reported revenue of $131.5 million, or a year-over-year increase of 14.1%. Its funds from operations, or FFO, was $0.26 per share -- unchanged from a year ago. That's higher than the $0.23 that the REIT pays out in dividends.

Although investors might normally want more of a buffer between earnings and dividend payments, that's not as big a concern for REITs. They normally have predictable earnings numbers and a low need for cash unless they are acquiring additional properties.

With a stable business filled with relatively safe tenants, Physicians Realty Trust can be a great option for a $5,000 investment. At 6%, its dividend yield is more than three times higher than the S&P 500 average of 1.7%.

2. Verizon Communications

Investors can earn an even higher yield from Verizon Communications. Its 6.6% yield is a rarity for a big blue-chip stock, and it's the highest payout on this list. Investors have been bearish on the company because it has been losing subscribers to competition, but Verizon's financial results remain strong.

On Tuesday, the company reported its fourth-quarter earnings numbers. Operating revenue of $35.3 billion for the last three months of 2022 showed a modest 3.5% increase from the same period last year. Adjusted earnings per share of $1.19, while down 10% from a year ago, are still 83% higher than the $0.65 quarterly dividend that Verizon pays, suggesting that the yield is safe.

While investors may be concerned about a slowdown in the business this year, with a potential recession hurting demand for new phones, Verizon's financials are strong enough and its bottom line is big enough to absorb potential headwinds this year and for the business to still deliver solid results. Despite the bearishness -- shares of Verizon are down 25% in the past year -- the telecom stock is still an excellent option for income-oriented investors.

3. Bank of Nova Scotia

Bank of Nova Scotia, or Scotiabank as it's commonly called, is one of the highest-yielding bank stocks you'll find on the stock market. The top Canadian-based bank pays a yield of 5.9%. While it's the lowest yield on this list, I'd argue that the payout may also be the safest as it's coming from one of the big five banks in Canada with strong financials to support the dividend.

The company last reported earnings in November. For the period ending Oct. 31, 2022, its net income totaled 2.1 billion Canadian dollars, which was down 18% year over year as it included some adjustments and nonrecurring charges. On an adjusted basis, its net income was CA$2.06 per share versus CA$2.10 in the prior-year period.

Its payout ratio is around 50%, leaving Scotiabank plenty of buffer in case conditions in the economy worsen this year and the bank feels the effects on its financials. Investors should find comfort in the big bank's track record -- it has been paying a dividend since 1833. Wars, inflation, recessions, and all sorts of headwinds have not stopped it from distributing a dividend.

Even if there is a recession in the global economy this year, Scotiabank and the other top banks are all in good positions to recover from it, and it isn't a significant enough risk to deter long-term investors from buying and holding the dividend stock.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Bank Of Nova Scotia, Physicians Realty Trust, and Verizon Communications. The Motley Fool has a disclosure policy.

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