Dividend yield have been under pressure in recent years. Several factors have played a role in this yield compression. Old high yielding sectors like energy and real estate have suffered a wave of dividend cuts due to difficult conditions in these sectors. Meanwhile, tech companies have preferred share buybacks to dividends. Add all this to the rise in stock prices and the average dividend yield of companies in the S&P 500 is down to 1.3%.
However, there are still some solid options for return-oriented investors. Three dividend stocks with returns more than double those of the S&P 500 are OK Real Estate (NYSE: ADC), Brookfield infrastructure (NYSE: BIP)(NYSE: BIPC), and Medical Property Trust (NYSE: MPW). Here’s why they stand out as solid options for investors looking for yield.
Focused on the right kind of commercial real estate
Agree Realty is a real estate investment trust (REIT) which has independent retail stores. While commercial real estate has come under pressure as more people shop online, this trend has not had much of an impact on Agree Realty tenants. This is because the company focuses on retail stores leased to home improvement stores, grocery stores, dollar stores, drug stores, and auto parts and service centers, which are less likely to be disrupted by. electronic commerce. The company also focuses on financially strong retailers, most of which have superior credit ratings.
These characteristics allow the company to generate stable rental income, which it uses to support its 3.6% monthly dividend. The company also has a track record of quality. This gives him the financial flexibility to continue to expand his portfolio. Agree Realty currently plans to spend between $ 1.1 billion and $ 1.3 billion on additional acquisitions this year. This should allow the company to increase its cash flow, allowing it to continue to increase its dividend. Agree Realty has already increased its payments at a compound annualized rate of 4.5% over the past 10 years, including the 8.5% increase over the past year.
Lots of fuel to keep growing
Brookfield Infrastructure has a globally diversified portfolio of critical infrastructure assets such as pipelines, power lines, toll roads and ports. These assets generate stable cash flow, which Brookfield uses to support its 3.7% dividend.
One thing that stands out about Brookfield’s dividend is its steady growth. The company has increased its payments every year since its inception in 2009. This upward trend looks set to continue for the foreseeable future. Brookfield estimates that it can increase cash flow from its existing operations at an annual rate of 6% to 9% over the next several years, through increases in contractual rates linked to inflation, expansion plans and higher volumes as the global economy grows. Additionally, Brookfield believes acquisitions can add 1% to 5% to its annual total cash flow per share. This should easily support his plan to increase his payment at an annual rate of 5% to 9%.
A healthy payment
Medical Properties Trust is a hospital ownership REIT. It leases these facilities to hospital operators on long-term contracts, which generate regular cash flows. The company uses this money to pay its 5.5% dividend.
The REIT has an excellent history of growing this dividend. He has increased his payment in each of the past eight years, increasing the payment by a compound annual rate of 5% during that time. The determining factor was a constant regime of acquisitions.
Medical Properties has already secured $ 3.4 billion in new investments this year. This should give the company plenty of fuel to keep growing its dividend. At the same time, it has a solid financial profile and a broad set of acquisition opportunities, which should enable it to continue to develop its portfolio, cash flow and dividend in the years to come.
Great options for investors looking for yield
While it is increasingly difficult to find higher dividend-paying stocks, solid options exist. What sets Agree Realty, Brookfield Infrastructure and Medical Properties apart from most is that they have twice the returns of the S&P 500 and expect to keep increasing those payouts in the years to come. They should thus produce attractive total returns for their investors.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.