While there are many ways to generate significant returns in the market, one of the safest approaches is to invest in dividend stocks. Of course, you can earn income through bonds and savings accounts, too. But reinvesting dividends over time can lead to much greater compounding and wealth creation.
Right now, some dividend stocks may seem less appealing, with interest rates near their peak and short-term bonds offering such lofty yields. For very passive investors, bonds are not a bad option presently. However, for those seeking higher total returns, quality dividend stocks remain compelling despite slightly higher risk.
In fact, many dividend paying stocks boast substantial yields of more than 5% and have strong track payout track records. These stocks also often have massive upside potential, making them far more profitable investments over the long run, given the fact that capital appreciation can boost returns substantially
Let’s explore three dividend stocks that currently yield more than 5%. Of course, higher yields often signal higher risk, so prudent due diligence is necessary. However, with careful selection, these stocks can produce a growing passive income stream along with substantial long-term capital gains. While some income investors are flocking to bonds today, I believe dividend stocks will generate far greater wealth over the coming years and decades.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties (NYSE:IIPR) is often lumped together with volatile, unprofitable cannabis stocks due to the company’s involvement in the cannabis industry. However, IIPR operates quite differently as a real estate investment trust () specializing in cannabis cultivation and processing properties. In my view, IIPR merits consideration despite the challenges facing the cannabis sector right now.
Naturally, IIPR stock has experienced substantial volatility, with a steep 75%+ decline from its 2021 peak. Fears that cannabis companies would be unable to pay rent stoked bearish sentiment. Thankfully, IIPR has defied those concerns so far. However, IIPR still faces a double whammy of bearishness from cannabis and commercial real estate.
I don’t believe commercial real estate headwinds are as threatening for IIPR as traditional REITs, though, since the company doesn’t face pressure from remote work trends. Its properties cater to cannabis cultivation and processing, not offices. Indeed, IIPR has proven resilient, collecting 97% of rents last quarter.
Currently, IIPR stock offers an attractive forward dividend yield around 9%. Its dividend has increased for five straight years as well. With shares trading at just 10-times earnings, this stock’s valuation looks appealing too. This seems inexpensive for any cannabis-related company.
In summary, IIPR deserves a look despite the challenging backdrop. It has held up well so far and offers income, a reasonable valuation, and exposure to cannabis’s long-term potential. While risks remain, the excessive pessimism creates an opportunity worth considering.
Cogent Communications (CCOI)
Cogent Communications (NASDAQ:CCOI) appeals to me as a balanced play on broadband growth, with CCOI stock offering appealing income. CCOI stock currently sports a 5.7% forward dividend yield with 12 consecutive years of dividend growth. Meanwhile, Cogent provides relative stability along with an intriguing growth outlook.
In my view, government initiatives aimed at improving broadband access should provide tailwinds. Cogent is projected to grow revenue by 57% this year and 20% in 2024 as well. Though earnings fluctuate, the company generates enough cash to fund dividends and expansion opportunities.
Cogent’s strategy of acquiring telecom businesses at reasonable prices and improving their profitability has fueled recent success. It continues expanding through acquisitions, with its purchase of the Sprint Wireline business significantly boosting its scale and growth prospects.
CCOI expects this deal to achieve $180 million in annual cost savings for Sprint’s North American network, $25 million for Sprint internationally and $15 million for Cogent itself. Meanwhile, it received $700 million from T-Mobile for transit services, providing funds to pay dividends and deleverage.
All things considered, I see CCOI stock offering an appealing mix of income, moderate growth, and relative stability. The broadband space faces uncertainty, but Cogent appears well-positioned to navigate challenges while rewarding shareholders.
Walgreens Boots Alliance (WBA)
Walgreens Boots Alliance (NASDAQ:WBA) may leave a sour taste in investors’ mouths after recent struggles, but with shares approaching record lows, the company’s valuation seems too enticing to ignore. Trading around $20 per share, WBA stock currently trades below 2008 levels. I believe this excessive pessimism sets up substantial upside when sentiment improves.
Of course, Walgreens faces stiff headwinds, and recent results have disappointed. However, much of this seems priced in at current bargain valuations. With a forward dividend yield at 9.1% and nearly 50 straight years of dividend increases, income investors have ample incentive to buy and hold WBA stock.
Fundamentally, I expect Walgreen’s results to improve as consumer spending picks up. Management is targeting $1 billion in cost savings in 2024 as well, which should boost profits. WBA stock likely bottomed during the summer and appears poised to recover from depressed levels, in my opinion.
Walgreens does have its work cut out for it, with a significant amount of work on the horizon for the company’s management team to right this ship. But the best upside usually materializes when a given company hits rock bottom, and I believe WBA stock fits that description following its steep decline.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.