Our article explores the top 10 dividend stocks that generate more return than the US average rental yield.
Investors have primarily favored dividend investments as a source of passive income. However, the recent rise in interest rates, geopolitical uncertainties after the change in the U.S. presidency, and fears of a potential economic slowdown have set the stage for a debate between stocks and rental income. Though real estate has traditionally been a reliable income source, Global Property Guide stated that the national average rental yield in the U.S. staggers around 6.1%. Rising property maintenance costs and mortgage rates owing to economic shifts affect the stability of the rental income, leaving investors unable to make their portfolio decisions. On the other hand, yields from several dividend stocks exceed this threshold, despite the unfavorable U.S. stock market.
READ ALSO: 7 Most Undervalued Dividend Stocks to Buy According to Hedge Funds
The U.S. stock market has experienced heightened volatility in recent months, influenced by Federal Reserve policy shifts. Meanwhile, corporate layoffs have increased, contributing to a slowdown in consumer spending. The rise in borrowing costs has added pressure to equity markets. Trade conflicts between the U.S. and China, as well as with neighboring countries like Canada and Mexico, have further contributed to uncertainty for international businesses. Even amid these headwinds, some dividend-paying stocks have remained resilient, acting as a source of stable income for investors, in a turbulent market.
Meanwhile, the real estate market is facing its challenges. Rising mortgage rates and the declining demand for properties in multiple U.S. regions have slightly reduced the attractiveness of rental investments. Landlords in various areas are experiencing a squeeze in their profit margins because of maintenance expenses, insurance costs, and property taxes. As a result, while real estate remains an option, dividend stocks provide an alternative for investors to generate passive income without burdening themselves with property management complications.
Liquidity and diversification enhance the appeal of dividend stocks. Unlike real estate investments, dividend stocks typically require less capital and can be sold more quickly. In this regard, dividend stocks offer flexibility for investors to adjust their portfolios in an evolving market condition. At times, such as now, when economic uncertainty along with Federal Reserve policies affect both equities and real estate markets, dividend-paying stocks interest investors seeking a balance between income generation and stability. Many companies continue to prioritize shareholder returns and offer dividend yield exceeding both inflation and the national average rental yield, providing an opportunity for investors to capitalize on consistent income streams without being tied to the challenges of property ownership.
Our article presents 10 dividend stocks that offer yields higher than the U.S. average rental yield, allowing investors to benefit from regular payouts and potential price appreciation – the advantages that rental properties do not always guarantee. Whether you are a retiree looking for steady income, an investor seeking to diversify away from real estate, or simply someone looking to sail through the volatile market of today with a reliable investment approach, these stocks could help in adjusting your portfolio.
With that said, let’s countdown the top 10 dividend stocks offering yields greater than the average U.S. rental return. Stick with us as we unveil the top 5. You might be amazed.
Our Methodology
Our list has been compiled based on a few criteria. Primarily, we considered only those stocks that offer a dividend yield of more than 6.1%. This represented the U.S. average rental yield. Stocks with a Buy recommendation from analysts were included in our list to ensure the companies featured have solid fundamentals. The final list is ranked according to dividend yield, as of March 22. We additionally considered the number of hedge funds tracked by Insider Monkey as of Q4 2024 backing the stocks, to estimate the institutional interests for the stocks as well.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Sunoco LP (NYSE:SUN)
Dividend Yield: 6.13%
No. of Hedge Funds: 3
Sunoco LP (NYSE:SUN) is a leading wholesale distributor of motor fuels, supplying gas stations, convenience stores, and commercial customers. The company is headquartered in Texas and lays its focus solely on fuel distribution. Operating an extensive logistics network, the company has created a large customer base for its business. Sunoco LP increased its market share through a combination of strategic partnerships and a strong retail presence in the U.S. market.
Sunoco LP (NYSE:SUN) delivers a dividend yield of 6.13%. Though comparatively lower than many of the other stocks in our list, the company positions itself as a reliable option for income investors, by exceeding the U.S. average rental yield of 6.10%. The company achieved a record year in 2024 with a 62% increase in its adjusted EBITDA, compared to 2023, reaching $1.56 billion. Such rise in value was attributed to the strong financial performance and synergies, resulting from the efficient and complete integration of NuStar assets. The company also expects to achieve a 5% growth in distributions this year, thus solidifying its dividend payment capabilities.
Hedge fund activity in Sunoco LP (NYSE:SUN) is minimal, with Insider Monkey reporting just three funds holding stakes at the end of Q4 2024. However, analyst sentiment remains positive, reflected in a Buy rating and a median price target of $64, with a 12.76% projected upside. The ex-dividend date for the company falls on May 09, 2025.
9. Haverty Furniture Companies, Inc. (NYSE:HVT)
Dividend Yield: 6.14%
No. of Hedge Funds: 13
Haverty Furniture Companies, Inc. (NYSE:HVT), headquartered in Georgia, is a specialty retailer offering premium home furnishings through its 120 stores strategically located across 16 states. The company attracts buyers and builds a strong customer base by leveraging its high-quality craftsmanship and personalized customer service. The in-house design team, in addition to customizable furniture options, makes the company stand out in the market. It primarily operates in the Southern and Midwest regions of the United States.
Haverty Furniture Companies, Inc. (NYSE:HVT) attracts its investors with a solid dividend yield of 6.14%. As reported in the Q4 earnings results, the company has maintained a strong gross margin of 60.7% for the year. Additionally, the year was completed with zero funded debt and over $120 million in cash, which translates positively to investors interested in benefiting from long-term dividend payments, since the debt in the mix will be low. Opening of new stores in St. Petersburg, Florida, Greenwood, Indiana, and Houston in 2024, increases the likelihood of growth in FFO in 2025.
Haverty Furniture Companies, Inc. (NYSE:HVT) has garnered support from 13 hedge funds, listed in the Insider Monkey Q4 2024 database, indicating moderate institutional interest. Despite having only one analyst covering the stock, the Buy rating remains intact. The 1-year median price target has been set at $30, representing an upside of 43.33% to the current price. Investors can purchase the stocks till May 23, 2025, to benefit from the next payout.
