If you're unhappy with your options in the stock market right now, you're not alone. Valuations appear high and many dividend yields look low. In fact, the 3% yield being offered by consumer goods stalwart PepsiCo (PEP 1.65%) is looking pretty good right now, considering that other dividend mainstays like Johnson & Johnson and Procter & Gamble are yielding even less.
However, if you're really looking for a decent yield from a secure company, you might want to look beyond consumer staples stocks and into other investment classes. Most real estate investment trusts (REITs), master limited partnerships (MLPs), and yieldcos are just as easy to buy as stocks, and they too can offer a winning combination of price growth along with a stable, high payout.
Here's why you might want to consider yieldco Atlantica Sustainable Infrastructure (AY 3.28%), MLP Brookfield Infrastructure Partners (BIP 2.82%), or REIT Stag Industrial (STAG -1.29%), all of which have much higher dividend yields than Pepsi.
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1. Atlantica Sustainable Infrastructure: For the long term
Like REITs and MLPs, renewable yieldcos are structured to return most of the money they make to investors in the form of dividends. Atlantica Sustainable Infrastructure makes its money from a diversified group of renewable assets in locations across the globe. These include wind farms in Uruguay, solar farms in Spain, and water desalination plants in Algeria.
Atlantica's assets aren't just geographically diversified, but also churn out reliable amounts of income, backed by long-term, fixed-rate contracts, many of which are government-regulated. Better yet, Atlantica isn't facing any pending contract renewals: The nearest contract expiration date on any of its assets isn't until 2032, which means it should be able to continue churning out cash to support its current 5.8% yield for another decade at least.
The yieldco looks to have plenty of future growth in the pipeline, judging by the number of expansion projects on its plate in Q1 2020. Now is a good time to consider buying in.
2. Brookfield Infrastructure Partners: A powerful growth engine
Brookfield Infrastructure Partners is similar to Atlantica in that it operates a globally diversified set of assets, and that its structure requires it to return most of the cash it generates to investors. An MLP's payout, though, is called a "distribution" as opposed to a "dividend," but it fulfills the same function.
Currently, Brookfield Infrastructure Partners is yielding 4.8%, with plans to grow that payout by between 5% and 9% per year. That growth shouldn't come at the expense of reliability: More than 95% of Brookfield's assets are governed by the same kinds of reliable contracts underpinning Atlantica's.
One note of caution for investors: Because of their structure, MLPs often require extra work at tax time, and the rules governing their operation don't play well with some types of accounts, particularly (tax-deferred) retirement accounts. Luckily, Brookfield recognized this and created C corporation Brookfield Infrastructure (BIPC 0.84%), which will (in theory) pay the same yield as the MLP version but will be more broadly accessible to retirement accounts.
Whether you pick the MLP or the traditional stock, Brookfield looks like a long-term winner.
PEP Dividend Yield data by YCharts.
3. Stag Industrial: The REIT place at the REIT time
Essentially, REITs are to real estate what MLPs are to infrastructure and yieldcos are to renewable energy. Often, REITs focus on a particular sector or sectors of the real estate market, and that's caused problems during the coronavirus pandemic. In particular, REITs that focused on retail and office space have been hit hard by business closures and cost-cutting.
One REIT that is holding up fairly well, though, is Stag Industrial, which owns U.S. industrial real estate like manufacturing plants, warehouses, and distribution centers across 38 states. With many consumers relying on e-commerce while homebound due to coronavirus concerns, warehouses and distribution centers have become more important to businesses. This trend seems likely to continue.
Stag's dividend is currently yielding 4.9%, and although it has upped its payout every year since its inception in 2011, that dividend growth has slowed dramatically in recent years. While Stag certainly seems likely to benefit from growth in e-commerce, investors will want to keep an eye on the company to make sure that such growth is translating to the company's bottom line -- and to a higher payout for investors.
It should be easy to remind yourself to check up on Stag if you buy in: This REIT pays its dividend in monthly installments instead of quarterly, making it easy to keep top of mind.
Investor takeaway
Pepsi is a reliable dividend payer, and its current 3% yield is nothing to sneeze at. However, if you're looking for higher yields without sacrificing payout reliability, you should also consider alternative investments like Atlantica Sustainable Infrastructure, Brookfield Infrastructure Partners, and Stag Industrial as part of a balanced dividend portfolio.
