When investors think of less risky income, they commonly consider fixed-income securities like bonds. However, there are certain stocks also that can also provide a steady stream of income in the form of dividends.

Dividend Considerations

Dividend-paying companies are generally the ones that have reached a certain size and are no longer able to sustain higher levels of growth. These companies choose to pay out part of their earnings as a way to provide a return to their shareholders.

However, dividend payment in absolute dollar terms cannot be the only gauge of good income stocks. A more reliable measure is the dividend yield which is calculated by dividing the annual dividend per share by the share price. Income investors look for dividend yields of at least 5%, so as to attain a respectable stream of returns.

Further, many companies keep increasing their dividend payments over the years to keep pace with inflation in the economy. This is also a sign of the company’s strong growth in the past and the fact that it is poised to deliver solid earnings in the future as well. However, it is important to note the sustainability of hikes in dividends to ensure that the company is not being overly optimistic.

The company’s past dividend policy is another important factor to consider. Firms that have been paying dividends for a long time are most likely to continue the trend.

Income Investing

Dividends are a less risky component of total return compared to capital appreciation. Also, dividend stocks are historically less volatile than non-dividend stocks. This could be a vital factor if volatility levels run higher from here. These stocks are a safe bet to create wealth as dividends generally act as a hedge against economic uncertainty. Moreover, they reflect a company’s solid financial structure and healthy underlying fundamentals.

Thus, though the income investing style is almost always overlooked, such a strategy cushions an investor’s portfolio, given the said stocks’ low risk, diversification benefits and ready access to funds.

7 Crown Picks

The holy grail of income investing is thus pretty simple – find fundamentally strong companies with sustainable high dividend yields to obtain a steady and predictable stream of money over the long term.

With the help of the Zacks Stock Screener, we have zeroed in on seven stocks that bear solid prospects with a minimum market cap of $1 billion, flaunt a Zacks Rank #2 (Buy) or better and offer a dividend yield of minimum 5%. All these stocks have a steady dividend yield of above 5% in the last five years and a good dividend growth history.

Williams Partners, L.P. (WPZ - Free Report) is a master limited partnership engaged in gathering, processing, transportation and storage of natural gas and natural gas liquids. This Zacks Rank #2 company has been paying dividends since 2010, and its stock has returned over 30% year to date. Key stats to note:

Current dividend yield: 9.5%
5-year dividend yield: 6.3%
5-year historical dividend growth: 23.7%

Moreover, Williams Partners’ earnings estimates for the current quarter and current year have risen drastically over the past two months, indicating even better days ahead.

Starwood Property Trust, Inc. (STWD - Free Report) is focused primarily on originating, investing in, financing and managing commercial mortgage loans and other commercial real estate-related debt investments. REITs (Real Estate Investment Trust) are usually concrete income destinations and this Zacks Rank #2 is no exception. It has garnered a steady flow of dividends since 2009 while its stock has returned over 8% year to date. (Looking for the Best Stocks for 2017? Be among the first to see our Top Ten Stocks for 2017 portfolio here.)

Current dividend yield: 8.6%
5-year dividend yield: 8.2%
5-year historical dividend growth: 2.5%

Meanwhile, Starwood has seen estimates rise over the past month for both current year’s and next year’s earnings.

Red Wood Trust, Inc. (RWT - Free Report) is another REIT to look out for. This Zacks Rank #2 company has a dividend history dating back to 1996. The company’s shares have returned nearly 17% year to date.

Current dividend yield: 7.2%
5-year dividend yield: 7.0%
5-year historical dividend growth: 2.6%

The company’s current-year earnings estimates have moved north by 7.3% over the last two months and it boasts a positive record of earnings surprises in the last four quarters.

NuStar GP Holdings, LLC (NSH - Free Report) owns some interest in NuStar Energy L.P. They are one of the largest asphalt refiners and marketers and independent terminal and petroleum liquids pipeline operators in the U.S. The Zacks Rank #2 company’s stock has returned nearly 31% year to date and has been paying dividends since 2006.

Current dividend yield: 8.0%
5-year dividend yield: 7.3%
5-year historical dividend growth: 1.5%

Notably, the company has seen estimates rise for both the current year’s and next year’s earnings, over the past month.

Alliance Holdings GP, L.P. (AHGP - Free Report) through its subsidiaries, produces and markets coal primarily to utilities and industrial users in the U.S. The company is currently sports a Zacks Rank #1 (Strong Buy) and its shares have returned over 39% year to date. It has been paying dividends since 2006.

Current dividend yield: 7.9%
5-year dividend yield: 8.0%
5-year historical dividend growth: 3.9%

Being in the Coal industry, Alliance Holdings has huge scope to grow. Its earnings estimates have increased drastically over the past two months for both current year and the next year.

Alliance Resource Partners, L.P. (ARLP - Free Report) is another Coal industry pick with great stats. The Zacks Rank #2 company has been paying dividends since 1999. The company’s stock has returned a whopping 67.5% year to date and has solid prospects.

Current dividend yield: 7.6%
5-year dividend yield: 8.3%
5-year historical dividend growth: 2.8%

The company has witnessed solid upward estimate revisions for both current year and next-year earnings over the past two months.

Macquarie Infrastructure Corporation (MIC - Free Report) owns, operates and invests in a diversified group of infrastructure businesses, which provide basic, everyday services. Shares of Macquarie have returned over 13% year to date. The company has been paying dividends since 2005 and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Current dividend yield: 7.6%
5-year dividend yield: 8.3%
5-year historical dividend growth: 2.8%

Additionally, the company’s current quarter and next-year earnings estimates have seen a boost in the last month.

Bottom Line

The cash in your hand as a result of dividend income is a confirmation that the returns from your investment are really there and you can reinvest or expend them according to your will. Thus, though considered “boring” by many, income investing promises returns that are anything but dreary, in the long-run. Amid the unpredictable equity market setting, they are the safest bet.