After a volatile week on Wall Street, CNBC’s Jim Cramer picked out three stocks with high dividends — Enbridge, Pfizer and Realty Income — and explained why thinks they’re fairly reliable.
“There are a lot of high yielders that are dangerous — their yields soar because investors don’t believe the company can keep covering the cost of the dividend,” Cramer said. “But these three are not like that, and I regard them as very, very safe.”
As an oil pipeline, not an oil producer, Enbridge is more levered to the volume of the commodities, not the cost, Cramer pointed out. More oil production bodes well for Enbridge, he continued, adding that the business is predictable and the customer base is wealthy. Government regulation can hamper oil pipeline companies, Cramer added, but he indicated that is not much of a concern under the Trump administration. With Enbridge’s yield just over 5.6%, Cramer said the company offers solid downside protection as well as long-term growth potential.
To Cramer, Pfizer can act as a “bond equivalent,” noting that the pharmaceutical giant has a nearly 6.9% yield. He also suggested that the drug maker has the potential to use the businesses it’s acquired recently to build up a powerful pipeline — which could offset the numerous patent expirations the company is facing over the next few years. Cramer also said Pfizer’s hefty cash flow allows it to easily cover the dividend, adding that longer term, the company could “get through this tricky period” and see its stock break out.
Real estate investment trust Realty Income primarily leases commercial properties to retail or industrial businesses, Cramer noted. While he said the stock “hasn’t exactly been on fire lately,” the company does offer about a 5.7% yield. Cramer suggested some investors are concerned about Realty Income’s tenant base, including retail pharmacy Walgreens, which plans to close many stores over the next few years. But Cramer was more sanguine, pointing out that Realty Income’s occupancy rate came in at 98.7% at the end of the previous quarter. Many of its tenants — such as grocery, convenient and dollar stores — sell necessities and are equipped to weather a weaker consumer spending environment, he added.
“These days…growth is your best defense in any environment, but I’ll never fault anyone for wanting some dividend protection,” he said. “Especially when the market’s looking shaky and short-term interest rates might be coming down.”
