Here's My Favorite Stock to Buy With a Dividend Yield Over 4%

With the S&P 500 trading near its all-time high, the piece identifies two high-yield dividend candidates—Hess Midstream Partners (NYSE: HESM) and Simon Property Group (NYSE: SPG)—as potentially attractive bargain opportunities for income-focused investors. The video (using Jan. 29, 2026 morning prices; published Feb. 1, 2026) provides analyst views and disclosures (Matt Frankel holds SPG; Motley Fool has positions in and recommends SPG; HESM was not among Motley Fool Stock Advisor's top-10 picks) but does not present detailed financial metrics such as yields, revenues, or earnings in the article.

Analysis

Market structure: Income-seeking flows at current S&P highs favor high-yield, cash-flow names — SPG (retail REIT with pricing power in prime malls) and HESM (fee-based midstream) capture direct benefit while non-prime mall REITs and unhedged upstream E&Ps are losers. If 10-yr yields compress 75–100 bps versus today over 3–6 months, implied cap-rate compression could re-rate SPG NAV by ~8–15%; conversely a 75–100 bp rise would knock 10–20% off valuation. Commodity linkage means a sustained WTI >$80 for 60+ days materially boosts HESM distributable cash; a WTI < $70 for 60 days materially stresses volumes and coverage. Cross-asset: stronger REIT bid narrows spreads to corporates, suppresses short-duration Treasury demand, and raises options skew on high-yield names; rising oil lifts junk bond spreads of E&Ps but tightens midstream credit spreads.

Risk assessment: Tail risks include a macro recession (GDP contraction >1% annualized over two quarters) that trims mall traffic and forces occupancy downgrades, and an oil-price shock (WTI -30% in 90 days) that reduces midstream throughput and distribution coverage. Short-term (days–weeks) moves will be driven by CPI/Fed signals and monthly retail metrics; medium term (3–6 months) by SPG quarterly same-store NOI and HESM coverage ratios; long term (12+ months) by secular retail trends and energy capex shifts. Hidden dependencies: HESM cash flow depends on Hess Corp’s upstream activity and hedge-roll outcomes; SPG depends on tourism/airport traffic recovery and luxury tenant health. Catalysts: Fed commentary, CPI prints (next 30–90 days), SPG Q1 results, and multi-week WTI regimes are primary price movers.

Trade implications: Tactical allocations — favor modest, hedge-aware buys: SPG as core income (size 2–3% portfolio) with covered-call overlay and tight risk controls; HESM as tactical yield play (1–2%) with puts or credit-hedges if oil volatility rises. Options: sell 1–3 month OTM calls (8–12% OTM) on SPG to harvest yield; buy 6–12 month puts 12–18% OTM on HESM as tail protection. Pair trades: long SPG versus short low-quality mall REITs (e.g., CBL) to express premium for premium retail real estate; long HESM versus short unconsolidated small upstream names if oil fundamentals weaken.

Contrarian angles: Consensus underestimates rate-sensitivity — a modest rise in 10-yr to >4.5% for 10+ sessions will be catalytic to re-rate REITs far faster than earnings changes imply; that risk is underpriced by yield chasers. Conversely, the market may under-appreciate upside: a stable-to-falling 10-yr plus WTI >$80 would likely compress spreads and lift SPG/HESM total returns by double digits within 6–12 months. Historical parallels: 2016 midstream recovery shows strong asymmetry—distributions recover quickly with sustained commodity strength; unintended consequence is illiquidity at peak yield-chase moments that can magnify drawdowns if dividends are cut.

Key Decisions for Investors

• Establish a 2–3% portfolio long position in SPG (Simon Property Group) within 30 days, funded from cash or underperforming cyclical exposure; overlay by selling 1–3 month covered calls 8–12% OTM to boost yield, and trim/stop-loss if SPG falls 12% or 10-yr yield >4.5% for 10 consecutive sessions.
• Initiate a 1–2% tactical long in HESM (Hess Midstream) with a 6–12 month horizon; simultaneously buy a 6–12 month put ~15% OTM (or long a small CDS-equivalent hedge) and increase to 3% only if WTI sustains >$85 for 30+ days. Exit/reevaluate if WTI < $70 for 60 days or distributable cash flow coverage falls below 1.0x on consecutive quarter report.
• Run a pair trade: long SPG (size 2%) vs short low-quality mall REITs (e.g., CBL, size 1–1.5%) to express relative strength of premium retail real estate; rebalance if SPG/CBL spread narrows by >300 bps or if SPG same-store NOI misses by >100 bps.
• Macro hedges and opportunistic trades: if CPI/ Fed signals push 10-yr >4.5% for 10+ days, reduce REIT exposure by 50% and rotate proceeds into short-dated Treasury exposure; if WTI >$80 for 30+ days, buy XLE 3–6 month call spreads sized 1% of portfolio to capture energy upside that benefits HESM.