High-Yield Investments to Consider Amid Stock Market Highs

The stock market is currently near record highs, leading to a drop in the S&P 500 Index (SNPINDEX: ^GSPC) dividend yield to just 1.2%. For those focused on dividend income, this figure is less than appealing. However, investments such as Realty Income (NYSE: O) and Toronto-Dominion Bank (NYSE: TD) offer yields exceeding 5%. It’s essential to recognize the varying risk levels associated with these options.

Realty Income: A Steady Income Source

Realty Income currently boasts a dividend yield of about 5.1%. This figure significantly outperforms the average real estate investment trust (REIT), which yields around 3.7%. Notably, Realty Income has consistently raised its monthly dividend for 29 years running.

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So, what is Realty Income’s business model? The company operates as a net lease REIT, leasing single-tenant properties while requiring tenants to cover most operational expenses. Although individual properties can be risky, Realty Income’s extensive portfolio—over 15,400 properties across North America and Europe—helps mitigate that risk. With a market cap exceeding $50 billion, the company is the largest in its category. Its strong balance sheet allows Realty Income to access capital markets effectively and compete for new property deals. This stability positions Realty Income as an excellent foundational investment for dividend-focused investors.

Toronto-Dominion Bank: A Cautious Buy Opportunity

Recent headlines have painted a grim picture of Toronto-Dominion Bank, commonly known as TD Bank. The bank faces fines of approximately $3.1 billion for its U.S. operations’ failure to prevent money laundering activities. Regulatory scrutiny will keep TD Bank under a microscope for an unspecified duration, limiting its ability to expand in the U.S. This challenging situation has understandably influenced its stock price, pushing the dividend yield up to around 5.2%, a historically high figure for the institution.

Despite the negative headlines, now might be a good time to consider purchasing shares in TD Bank. It’s important to highlight that the issues primarily affect its U.S. operations; the bank’s core Canadian division is doing well. As the second-largest bank in Canada by deposits, TD enjoys a protected market position due to stringent regulations in the country. Its current difficulties are unlikely to threaten its overall stability.

If you trust that TD Bank can weather this storm, it should bounce back eventually. The bank has already set aside funds to cover its fines and is working on improving its internal controls. Transitioning its U.S. business may be challenging in 2025, but this initiative aims at establishing a stronger foundation for future growth. Once it regains regulatory confidence, TD Bank can resume its expansion plans.

For now, taking advantage of this situation may lead to significant long-term gains. While more conservative investors might prefer to stay clear of TD Bank’s current headlines, the higher dividend yield should attract many others willing to wait for calmer times ahead.

Two High-Yield Stocks to Explore

Realty Income serves as a safe investment choice, while TD Bank offers a higher-risk opportunity due to its current controversies. Both investments boast dividend yields that exceed the stock market average. When paired together, they create a balanced investment approach, combining lower-risk and moderate-risk options in a two-stock portfolio.

A Second Chance to Seize Potential Gains

Do you sometimes feel as though you’ve missed out on buying successful stocks? If so, this could be your moment.

Occasionally, our experienced analysts pinpoint specific stocks with high growth potential, referred to as a “Double Down” stock. If you’re worried about missing your window to invest, now is an opportune time to get in before it’s too late. The performance data supports this perspective:

• Amazon: A $1,000 investment in 2010 would now be worth $21,285!*
• Apple: A $1,000 investment in 2008 would now be valued at $44,456!*
• Netflix: A $1,000 investment in 2004 would translate to $411,959!*

Right now, we are issuing “Double Down” alerts for three impressive companies, and this opportunity may not arise again soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 14, 2024

Reuben Gregg Brewer has positions in Realty Income and Toronto-Dominion Bank. The Motley Fool has positions in and recommends Realty Income and Vanguard Real Estate ETF. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.