We All Love Big Income: 2 Great Picks

I can still remember the feeling I had the first time I got paid for a job. I had a sense of accomplishment, something that had never happened to me previously. The love for payday never seems to go away.

When it comes to the stock market, many people dismiss the idea of making money from it, as if it's a pointless task. But it is possible for the markets to do their thing while paying for your retirement needs. Let us now take a look at two companies that pay outstanding dividends, to support a solid income stream.

Pick #1: RNP - Yield 8.7%

Cohen & Steers REIT and Preferred and Income Fund (RNP) is a Closed-End Fund ("CEF") that invests in a combination of blue-chip real estate investment trusts, or REITs, and non-REIT preferred shares. As rate sensitive sectors, these have experienced sharp pullbacks over the past year due to rising rates. Despite the decline in NAV in 2022, RNP raised its distribution and also paid a large special dividend at the end of the year.

RNP’s portfolio consists of a 50-50 split of REITs and non-REIT preferreds. The REIT segment comprises high quality companies that have demonstrated operational resilience, and dividend payability through varying economic conditions. The preferred portfolio holds primarily banking, insurance, and utility preferreds that sport high yields and sport substantial upside to par.

RNP has 80% of its leverage locked at fixed rates with interest rate swaps. The CEF carries an average interest rate of just 1.8% and an average term of 3 years. This strategy directly benefits investors through these elevated rates. RNP is trading at a 3% discount to NAV, providing a great opportunity to pick up some more shares!

Pick #2: NEP - Yield 7.6%

NextEra Energy Partners, LP (NEP) is a growth-oriented limited partnership that acquires, manages, and owns contracted clean energy projects with stable, long-term cash flows. NEP recently raised its dividend to $0.854/share, up 12% YoY. Management reiterated guidance that the distribution will grow at a 12-15% annual rate through 2026. 

NEP expects acquisitions to pick up in the second half of the year, and management expects "double-digit" growth in Earnings Before Interest, Tax, Depreciation, and Amortization (‘EBITDA’) and Cash Available For Distributions (‘CAFD’) in the second half to support the distribution guidance.

For investors who are willing to look at the big picture, this is a great buying opportunity. NEP's management has an excellent track record for hitting its guidance, and the market will be surprised with solid results that will be reported in the upcoming quarters. When traders sell, I am happy to load up.

Conclusion

We are long-term income investors. We seek a lifestyle supporting cash flow during both a bull and bear market. Our investments pay real and recurrent cash; we buy when Wall Street sells in fear. Our “model portfolio” has 45+ dividend payers with an overall +9% yield to empower your financial freedom through economic uncertainties and geopolitical events.

We at HDI, our long-term objectives remain the same – to transform our portfolio into a reliable cash machine. You, too, can do the same; we have two high yielding picks to get started. To financial freedom and beyond!