Top 3 Dividend Stocks to Buy in September

Looking for dividends? This is a tough one today given the market’s shockingly low yield of around 1.3%. But if you’re willing to look, and perhaps make some reasonable risk/reward trade-offs, you can find great companies with returns well above those of S&P 500 index.

Here’s why you might want to consider adding Federal Realty Investment Trust (FRT -0.42%), Real estate income (A 0.11%)and Toronto-Dominion Bank (T.D -0.25%) in your dividend portfolio today.

Federal Realty is the only dividend REIT king

For some investors, the most important things about a dividend are that it is paid every quarter and that it grows year over year. In fact, for some retirees, this type of consistency is just as important as the dividend yield because it helps them plan for their future.

Federal Realty has you covered, with 57 consecutive annual dividend increases (and counting). This is the longest streak in the real estate investment trust (REIT) sector and makes the company a high-elite dividend king.

The company owns a relatively small portfolio (approximately 100 properties) of highly-located shopping malls and mixed-use assets. He is always buying and selling assets to ensure he has the best opportunity in front of him. This includes the ability to redevelop a property to increase its value. It is a favorable company in the retail niche.

There is a trade-off to consider with this stock. Investors know how well managed the REIT is and generally price it higher than its peers. That’s why the dividend yield is “only” 3.8%. However, this is well above the market average, and for conservative investors, it could be worth the premium to own such a reliable dividend payer.

Realty Income is the £800 gorilla in net leasing

If you’re looking for a higher yield from a REIT, then you might want to consider Real Estate Income and its 5% yield. That’s significantly more than the 3.9% the average REIT uses ETF Vanguard Real Estate Index (NYSEMKT: VNQ) as an industry proxy. The really notable thing here, though, is the dominance that Realty Income has in its net rental niche. With a market cap of about $54 billion, it’s about 4x the size of its closest peer. Do not underestimate the importance of this.

Realty Income’s size and financial strength (its balance sheet is investment grade) gives it advantageous access to the capital markets. This gives the REIT the freedom to bid aggressively on property deals and still make a profit. Moreover, it can accept offers that would be too large for its smaller competitors to consider. And it has the means to act as an industry consolidator. There’s no reason to believe Realty Income’s 29-year dividend growth streak is in danger of being snapped. Add in a globally diversified portfolio and there’s even more to appreciate here for those looking for a little more yield from their REITs.

Toronto-Dominion Bank is changing things

Moving on to banks, one of the highest yielding options is Canada’s Toronto-Dominion Bank, commonly called TD Bank. The bad news ahead: TD Bank is at loggerheads with US regulators over deficiencies in its money-laundering controls. There’s a big fine on the way (the bank has already set aside about $3 billion in anticipation) and it will likely take some time for the bank to regain the trust of US regulators. Overall, TD Bank’s growth will likely be a little slower than hoped. That’s why investors have punished the stock, pushing the yield to an all-time high of 5%.

If you think in decades and not days, TD Bank’s mistake is a long-term opportunity. First, the bank is Canadian, where strict regulations have isolated it from the competition. It simply has a very strong foundation. As for the US, the market where the bank has expanded its reach, time will eventually heal that wound and TD Bank will start growing again. It will just take time, but given the huge yield (the average bank is only 2.5%), you are well paid to wait. It’s also worth noting that TD Bank has paid a dividend every quarter since 1857, so this is a very reliable dividend stock. If you can handle a turnaround story with fairly low risk, TD Bank might be the dividend stock for you.

Dividend shares are available!

Don’t give up on dividend investing just because the market yield is pitifully low. You just have to work a little harder to find the gems that will fit perfectly into your own portfolio. Dividend King Federal Realty, industry giant Realty Income and turnaround story TD Bank are examples of diamonds you can find if you take the time to look.