The stock market has pulled back in recent weeks as traders have grown more fearful of a potential recession. Fortunately for us, short-term economic concerns often create lucrative opportunities for long-term investors.
Broad sell-offs can push down the prices of even great businesses, and buying those stocks when they're on sale is a proven way to build wealth over time.
Dividend stocks can be particularly smart buys during market downturns and corrections, as their yields rise when their prices fall -- assuming, of course, that those macroeconomic issues don't result in the companies in question cutting their payouts. But if their dividends are sustainable, buying low means more income for you at a lower cost.
If you're on the hunt for some high-yield stocks to add to your diversified portfolio, these two are worth considering now.
High-yield dividend stock to buy No. 1: Energy Transfer
The world craves energy. Demand for power generation is set to soar in the coming decade, fueled by trends like the artificial intelligence (AI) boom. AI data centers have a nearly insatiable thirst for electricity -- and the reliable and cost-effective energy sources needed to supply it.
Enter Energy Transfer (ET 0.75%). The infrastructure giant owns and operates more than 130,000 miles of pipelines that transport natural gas and crude oil across the United States. Combined with its extensive network of storage, processing, refining, and export facilities, these nearly irreplaceable assets make Energy Transfer a vital part of the nation's power grid.
Oil and natural gas providers are set to benefit from a rollback of environmental regulations and permitting rules that have stifled the expansion of pipeline projects in recent years. The Trump administration wants to foster cheap and dependable energy supplies in the U.S. Making it easier to extract and transport fossil fuels could help it achieve that goal.
As a publicly traded master limited partnership, Energy Transfer is designed to pass its steadily rising profits on to investors via large cash distributions. This passive income-producing stalwart yields 7% at its current share price. With the AI boom and deregulation set to fuel its expansion, Energy Transfer expects to grow its cash payout by as much as 5% annually.
High-yield dividend stock to buy No. 2: Realty Income
Real estate can also provide a lucrative stream of passive income -- and thankfully, you don't need to wrestle with the costs and nuisances that often come with being a landlord to get it. Real estate investment trusts (REITs) can provide you with a far easier and safer way to profit from investment properties. And Realty Income (O -1.02%) is the best REIT in the business.
Its diversified portfolio of properties and its prudent capital allocation strategy help to reduce the risks for investors. The REIT has stakes in more than 15,000 commercial properties leased to over 1,500 clients in 89 industries. More than 90% of the rent it collects comes from businesses in categories that tend to hold up well during economic downturns and, importantly, are insulated from the threats posed by e-commerce. Nondiscretionary, discount, and service-oriented retailers occupy more than 70% of its portfolio. Top tenants include Walgreens, Walmart, and Home Depot.
This approach has allowed Realty Income to keep its occupancy rates at 96% or more for over three decades, including an impressive 98.7% in 2024. It has also enabled the REIT to deliver consistent cash returns to its shareholders. Realty Income has paid 657 consecutive monthly dividends since its founding in 1969, and built a streak of 110 straight quarterly increases.
Because it's a REIT, Realty Income must distribute at least 90% of its profits to shareholders every year via dividends. At the current share price, those payouts give the stock a forward yield of 5.8%.
Lower yields on U.S. Treasuries -- which President Trump believes will result from his policies -- could be a boon for the real estate industry. Access to cheaper debt financing would make it easier for Realty Income to earn attractive returns on its investments. And more profits for this well-run REIT should mean larger dividends for its shareholders.
