With inventory costs swooning this yr, dividend yields are greater. Due to that, revenue buyers have extra choices in the event that they’re searching for a much bigger payout.
Three high-yielding dividend stocks some Idiot.com contributors actually like this month are Postal Realty (NYSE: PSTL), Medical Properties Belief (NYSE: MPW), and AGNC Funding (NASDAQ: AGNC). With payouts above 6%, they’re a number of occasions above the 1.7% dividend yield of the S&P 500. This is why these shares are nice choices for yield-seeking buyers to purchase this December.
Postal Realty delivers a yield of 6% at its present worth
Marc Rapport (Postal Realty): Postal Realty has been paying shareholders a dividend yield of 6% or a contact greater for a giant chunk of this yr and there is cause to imagine that there is extra to return. This distinctive real estate investment trust (REIT) has raised its dividend each quarter because it went public in 2019.
What makes it distinctive is its clientele. True to its identify, Postal Realty owns and manages put up places of work and its tenant is the U.S. Postal Service. That is a portfolio of greater than 1,600 services massive and small which might be absolutely occupied by one recession-resistant group that, to this point, has all the time delivered on its lease no matter financial cycle.
Postal Realty can also be rising, including 66 properties within the third quarter alone. Its steadiness sheet seems sound sufficient to proceed on that monitor, with 83% of its debt in fixed-rate obligations at a mean fee of three.63%, with “no notable debt maturities till 2026 and enough dry powder to navigate this setting,” in response to CEO Andrew Spodek within the third-quarter report.
One pink flag for me with Postal Realty is its excessive payout ratio of about 118% primarily based on present money circulation. REITs sometimes run greater in that metric than different equities however one this excessive does bear watching. Dividend cuts are not within the quick offing, although.
That payout is supported by funds from operations (FFO), which for Postal Realty have greater than doubled per share prior to now three years to $1.06. And with a share worth simply north of $15 that provides this inventory a price-to-FFO ratio of about 14.4, which makes shares look fairly priced, too, for this reliable dividend machine.
I personal shares of Postal Realty and wouldn’t hesitate to purchase extra so long as its income and portfolio continue to grow and its financials stay correspondingly sound. A dividend reduce would possibly make me rethink however proper now, however after 13 straight quarterly will increase, to this point, so good.
A wholesome checkup
Matt DiLallo (Medical Properties Belief): Shares of Medical Properties Belief have taken a beating this yr. The healthcare REIT‘s inventory worth has misplaced greater than 45% of its worth. That sell-off has pushed the hospital proprietor’s dividend yield as much as an eye-popping 9%.
Sometimes, a dividend yield approaching the double digits is a warning signal that the payout may not be wholesome. Nonetheless, that is not the case for Medical Properties Belief. Analysts count on the corporate to provide about $1.45 per share of adjusted funds from operations (FFO) subsequent yr. That is greater than sufficient to cowl the corporate’s present dividend outlay of $0.29 per share every quarter ($1.16 per share annualized).
In the meantime, Medical Properties Belief has a wholesome steadiness sheet. It has primarily fixed-rate debt with restricted near-term maturities and ended the third quarter with a 5.8 occasions leverage ratio, which is a wholesome stage for a REIT. The corporate has additionally enhanced its liquidity by promoting a number of belongings this yr. It has offers lined up that ought to herald $650 million of proceeds subsequent yr as they shut. That is sufficient cash, for instance, to repay its 2023 debt maturity of $446.8 million with room to spare.
Due to that, the REIT has the liquidity to proceed buying hospital actual property as accretive alternatives come up. These offers would assist develop its adjusted FFO, which may permit Medical Properties Belief to proceed growing its dividend. The healthcare REIT has raised its dividend cost for eight straight years, rising by 12% since early 2020.
The market has been too pessimistic about Medical Properties Belief this yr. Due to that, buyers can scoop up shares of this high-quality REIT at a a lot lower cost, locking in a big-time dividend yield this month.
The clouds are parting for the mortgage REITs
Brent Nyitray (AGNC Funding): The previous yr has been completely horrible for the mortgage area. After feasting on straightforward refinances throughout the COVID-19 pandemic, originators noticed volumes evaporate because the Federal Reserve pushed up rates of interest to tame inflation. Mortgage real estate investment trusts have struggled in addition to mortgage-backed securities have underperformed Treasuries. AGNC Funding could also be one of many first mortgage REITs to bounce again when the Fed alerts that it’s near ending its fee hikes.
AGNC Funding’s portfolio is nearly solely mortgage-backed securities, that are backed by the U.S. authorities. Because of this if the economic system does enter a recession and mortgage defaults rise, AGNC Funding will nonetheless get its scheduled principal and curiosity funds. Company mortgage-backed securities are a number of the most liquid bonds exterior of Treasuries and the corporate speculated on its third-quarter earnings conference call that a lot of the underperformance over the previous yr has been because of bond fund managers reacting to redemptions by promoting probably the most liquid merchandise within the portfolio. This implies company mortgage-backed securities overshoot on the draw back and infrequently bounce again simply as shortly.
The massive occasion this month is the Fed assembly on Dec. 13 and 14. Traders will get a brand new spherical of financial projections and a brand new forecast for the federal funds fee going into subsequent yr. If the Fed alerts it’s near completed with fee hikes, the mortgage REITs would possibly develop into nice candidates for a bounce again as buyers reinvest in mortgage-backed securities, that are buying and selling on the least expensive stage relative to Treasuries for the reason that 2008 monetary disaster. At present ranges, AGNC pays a month-to-month dividend of $0.12 per share, which supplies the inventory a dividend yield of 14.4%. The inventory is not for the faint of coronary heart, however the yield is likely to be too good to disregard.
10 shares we like higher than Medical Properties Belief
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Brent Nyitray, CFA has no place in any of the shares talked about. Marc Rapport has positions in AGNC Funding Corp., Medical Properties Belief, and Postal Realty Belief, Inc. Matthew DiLallo has positions in Medical Properties Belief. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.