Dividend stocks are the cornerstone of many investors portfolio -- and for good reason. Companies that pay out dividends tend to be both stable and highly profitability, which is an attractive combination.
With that in mind, we asked a team of Fools to highlight a high-yield dividend stock that they think is worth buying today. Read on to see why they picked Cedar Fair (FUN 0.41%), Digital Realty Trust (DLR 1.20%), and National Health Investors (NHI 1.29%).
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Cedar Fair: Not all fun and games
Anders Bylund (Cedar Fair): Yep, theme parks and roller coasters can be both serious and investable.
That's what I see in theme park operator Cedar Fair today. The company sports a generous 5.3% dividend yield, backed by reliable positive cash flows and healthy returns on invested capital. Payouts have increased in each of the last five years. These are hallmarks of great long-term income stocks.
Moreover, Cedar Fair's share prices are rising quickly -- and the stock may still be undervalued. Granted, the company's earnings history is on the spotty side as Cedar Fair fell short of Wall Street's earnings targets in three of the last four reports. But management doesn't issue financial guidance, leaving the mere handful of interested analysts without official targets around which to build their financial models. So, there's no reason to be surprised when analyst guesses land far from the actual results.
There's a lot to love here for serious income investors. Cedar Fair combines respectable earnings growth and a solid financial foundation with a high dividend yield and strong payout increases.
FUN Dividend data by YCharts.
Riding the digital wave
Brian Feroldi (Digital Realty Trust): Ever wonder where big companies keep all of the data that they generate? The answer is in massive data centers that house thousands of servers. With consumer and business demand for data on the rise, it shouldn't come as much of a surprise to learn that demand for these data centers has been red hot.
One company that is benefiting from this trend is Digital Realty. This company is a real estate investing trust, or REIT, that buys and builds data centers all around the world. It then turns around and leases out space in its center to thousands of customers, including a handful of tech giants that include IBM, Facebook, and Oracle.
Looking ahead, rapid consumer adoption of cloud computing and 4k video should ensure that demand for data remains robust for years to come. That means that the world is going to need an ever increasing supply of data centers, which plays right into Digital Realty's hand.
Over the past 11 years, Digital Realty has greatly expanded its profitability, leading it to hike its dividend payout by 12% annually. While that growth rate is likely to be tough to maintain, I think that company is well positioned to deliver annual dividend increases in the high single-digits from here. That's an attractive growth rate for a company that currently yields 3.4%, which makes this a great stock for income-focused investors to consider buying today.
Something special ahead?
Cory Renauer (National Health Investors): America's getting older fast, which makes long-term care facilities for its elderly citizens a growth industry. This high-yield dividend stock finds itself smack in the middle as a financier of senior housing operations across the country.
At recent prices, the real estate investment trust (REIT) offers a nice 4.9% yield. That's not bad, but I think you can reasonably expect a bit more this year. Since 2009, NHI has increased its regular quarterly payment at least once each year, and it needs to nudge the next payment higher to keep up its streak. I also think another special dividend could be in the cards this year.
REITs can avoid corporate income taxes, but they must distribute at least 90% of their taxable income to shareholders as dividends. While traditional companies can add excess earnings to their cash piles, REITs tend to reward investors with special dividends. When the company last reported, it was expecting adjusted funds from operations to rise at least 6.3% over 2015's results to $4.36 per share. With a quarterly payout of $0.90, it looks like there's plenty of room for a special dividend in addition to a modest quarterly payout bump.
While this could be a great year to be an NHI shareholder, you might want to hang on well into the future. With an aging demographic pushing up demand for the types of senior housing and other healthcare facilities that make up NHI's investment portfolio, wealthy investors could enjoy steadily increasing payouts from this REIT for many years to come.
