Key Points
Enterprise Products Partners has a 6% yield and a highly reliable fee-based business.
Realty Income has a 4.8% yield backed by a massive portfolio of retail-focused properties.
General Mills has a 5.4% yield and owns some of the world's best-known food brands.
The financial saying "there is no such thing as a free lunch" is one that all dividend investors should keep in mind as they research potential high-yield stocks. With the average stock in the S&P 500(SNPINDEX: ^GSPC) offering a scant 1.1% yield, any investment that offers a dramatically higher yield most likely comes with trade-offs.
But don't let that stop you from digging into the story behind Enterprise Products Partners(NYSE: EPD) and its ultra-high 6% distribution yield; Realty Income(NYSE: O) and its 4.8% dividend yield; Or General Mills(NYSE: GIS) and its tasty 5.4% yield. Here's a quick overview of each of these high-yielders.
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1. Enterprise Products Partners
Enterprise Products Partners operates one of the largest pipeline businesses in North America. It generates reliable fee income from its customers by helping them move oil and natural gas around the world. Demand for energy is generally strong even when energy prices are low, so the volumes moving through Enterprise's network of energy infrastructure assets tend to remain consistent throughout the energy cycle. That provides reliable cash flows to support the lofty distribution and current 7% distribution yield.
There are two big caveats. First, Enterprise is a slow-growing business. So the yield is likely to make up the lion's share of returns over time. While the distribution has been increased annually for 27 years, distribution growth is likely to be modest.
The bigger issue for many investors will likely be the fact that Enterprise is structured as a master limited partnership (MLP). MLPs are designed to pass income on to unitholders in a tax-efficient manner, but they are complicated to own. Notably, you'll have to deal with a K-1 form when you file your own taxes, and you probably should avoid owning MLPs in tax-advantaged retirement accounts. They are best for avid investors and those who use tax professionals.
2. Realty Income
Realty Income is the largest net lease real estate investment trust (REIT). It is huge, owning over 15,500 properties across North America and Europe. It is also starting to branch out into other investment opportunities, including debt financing and asset management. It is one of the most diversified REITs you can buy. And it has an incredible track record, with 30 years of annual dividend growth supporting its 4.8% yield.
That said, roughly 80% of rents come from retail assets, so there is some economic sensitivity to consider. And the size of the business means growth is likely to be very slow over time, even as management seeks new opportunities, such as investing in casinos and developing an asset management business. Specifically, the annualized dividend growth rate over the past 30 years was 4.2%. That beats inflation, but it means the yield is going to be the main source of return over time.
3. General Mills
General Mills is a large packaged food company. It owns iconic brands and has a long history of successfully navigating changes in consumer preferences. The key fact for dividend investors to know is that General Mills has paid dividends every year for 127 years. The company very clearly places a high value on the dividend. That's the good news backing the stock's lofty 5.4% yield.
The bad news is that General Mills isn't performing particularly well right now. Consumer tastes are shifting toward healthier options, and households are increasingly tightening their budgets. General Mills has already warned that 2026 is an investment year. Wall Street has punished the stock, which is why the yield is so high. Assuming the company successfully navigates the current industry headwinds, as it has done many times before, there could be a material turnaround appeal in the stock to go along with the hefty yield.
Three high-yield stocks to jump on in 2026
As noted above, every investment comes with some negatives. The high yields offered by Enterprise, Realty Income, and General Mills will likely offset their respective risks. That said, Realty Income and Enterprise are probably most appropriate for conservative income investors. General Mills would be better for those with a more aggressive investment approach.
Should you buy stock in Enterprise Products Partners right now?
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Reuben Gregg Brewer has positions in General Mills and Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
