Investing for solid dividend yields can be a great strategy for some investors, and if you're looking to follow this strategy, selecting companies with solid underlying businesses and a track record of performance is a good place to start.
Companies in infrastructure or with infrastructure-like qualities can be good investments, as they tend to have businesses with a high barrier to entry and arguably good visibility of future revenues.
I've selected three companies that are currently paying dividend yields of better than 5% for you to consider.
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AGL Energy Ltd (ASX: AGL)
AGL is one of the country's major energy suppliers, with a market position that ensures it is likely to have a steady stream of income over the long term, barring unforeseen events.
That's not to say the business does not have its challenges, with investing in the energy transition and managing energy supply and pricing all factoring into the company's financial performance.
The stock is down 13.9% over the past year to $8.42.
Managing Director Damien Nicks told a recent conference that the company was expecting growing demand from the data centre sector in the coming years, as the emerging industry's power needs doubled from current levels.
Mr Nicks said during the update that AGL expected underlying net profit to be $610 to $680 million, tightening the guidance from $580 to $680 million.
AGL currently pays a 5.81% trailing dividend yield, with its next dividend payment scheduled for September.
APA Group (ASX: APA)
Another energy company here, but this time in the gas pipeline game.
APA has performed quite well from a share price standpoint over the past year, adding 32.3% to be changing hands for $10.77.
That level is just higher than Macquarie's price target for the company, which it recently pegged at $10.41.
Encouragingly, Macquarie expects the APA dividend yield to grow from 5.7% this year to 5.9% by FY28.
One of the drivers for the company, Macquarie said, is the growth in data centre demand for power, and from the retirement of the nation's coal fleet.
Macquarie said the federal gas reservation policy also creates incentives for energy companies to develop new gas fields, while adding that APA has improving balance sheet capacity.
Stockland Corporation Ltd (ASX: SGP)
Morgan Stanley analysts see upside in Stockland's share price, with a price target of $4.90 compared with the current price of $4.32.
The broker thinks there could be some residential settlements headwinds for the property development company following recent interest rate increases and changes to tax laws in the Federal Budget.
They say Stockland has in the past mitigated downturns with land sell-downs or joint ventures, but say this might be far off at this stage.
They said:
We see limited scope for material land profits in FY27, as Kogarah/Waterloo/DCs all still require detailed planning, power, and/or tenant commitments. However, the FY28+ pipeline looks robust and could drive a higher weighting to development profits vs traditional resi over the next cycle.
Morgan Stanley is forecasting the Stockland dividend to stay steady at 25.2 cents out to FY28, which at the current share price is a 5.8% dividend yield.
