One of the secrets smart investors know is the benefit of getting paid to invest in stocks. While capital appreciation is the gravy, receiving regular dividend payments is the meat and potatoes of the investment diet.
We asked three Foolish investors to weigh in on a dividend stock they think any successful investor would want to own. Read on to learn why Welltower (NYSE:HCN), Apple (NASDAQ:AAPL), and Pitney Bowes (NYSE:PBI) would be dividend stocks to make a meal out of.
Get paid for owning healthcare properties
Keith Speights (Welltower): Imagine getting regular checks for owning healthcare properties that appeal to a fast-growing demographic group. If you own Welltower stock, you don't have to use your imagination at all. It's the nation's oldest healthcare real estate investment trust (REIT) and focuses on senior housing -- an area that should grow considerably as baby boomers age.
What about those regular checks? Welltower receives lease payments from nearly 1,300 properties in the U.S., Canada, and the U.K. As a REIT, the company must distribute at least 90% of its income to shareholders in the form of dividends. Right now, Welltower's dividend yields 4.59%, which should be attractive to nearly any investor.
The company also claims a good track record of dividend increases. Welltower has raised its dividend each year since 2008. During this period, the dividend has increased by 32%.
Of course, successful investors would also like growth from their dividend stocks. That's where Welltower's focus on senior housing comes into play. The company began making a dramatic shift in its portfolio late last year to reduce its exposure to long-term and post-acute care facilities and strengthen its focus on premium private-pay senior housing properties. That was a smart move that should pay off for investors by improving the company's balance sheet and increasing profitability.
Boring is beautiful
Brian Stoffel (Apple): Former Fool Morgan Housel put it best when he said successful investing is like piloting a plane: "hours and hours of boredom punctuated by moments of sheer terror." The sheer terror are market swoons -- and investors make many mistakes during this period -- but it's really mastering the boring part that makes you a successful investor.
That's why I think successful investors are comfortable owning shares of a company like Apple. Sadly, the company isn't the exciting juggernaut it once was. It hasn't come out with "the next big thing" since the iPad was released in 2010 -- a generation ago by today's tech standards.
But in a way, that's the point: Apple has built a moat around itself because of the ecosystem it has created. While it's not the strongest moat in the world, users are loath to switch away from an iPhone or Mac if they have all of their devices synced, and most of their critical information -- including music, pictures, and documents -- on Apple's cloud. That's pretty boring.
But it's also pretty lucrative. Currently, the company has a quarter-trillion dollars on its balance sheet. Over the past year, it brought in over $53 billion in free cash flow, and only had to use 23% of that to pay its 1.8% dividend yield -- an extremely healthy ratio. Trading at just 14 times said cash flow, successful investors would be wise to consider the company in their own portfolios.
Rich Duprey (Pitney Bowes): Postal and business services provider Pitney Bowes is best known for helping companies -- including 90% of all Fortune 500 businesses -- stamp and ship mail and packages around the world. Once renowned for its analog franking machines that made quick work of applying postage to envelopes, today's Pitney Bowes is every bit as much as technology company. Its digital effort is among its fastest-growing segments, jumping 11% in constant currency terms in the first quarter, with global e-commerce surging 20% year over year.
Although you might wonder what took so long, Pitney Bowes is now determined to go after internet-based mailing and shipping solutions company Stamps.com (NASDAQ:STMP), which is a more consumer-facing service. Stamps.com was the first company approved to offer a software-only mailing and shipping solution way back in 1999, and though Pitney Bowes has its own competing service (SendPro), it is only now it is giving it a big push.
In May, Pitney Bowes it launched a limited-time offer to send mail and packages at a third of the cost of what Stamps.com charges, and when the promotion ends, it will cost $0.99 less than its rival's service (though for businesses, it will be $10 more).
While Stamps.com has first-mover status and a fairly well-recognized name in the space, Pitney Bowes has nothing to lose by the effort. And it's all part of a transformation that has changed Pitney Bowes from needing to cut its dividend several years ago to exploring future growth.
With a stock that trades at just eight times next year's earnings estimates and at a fraction of its sales, its annual dividend of $0.75 currently yields a hefty 5% -- a worthy payment while waiting for Pitney Bowes' digital efforts to fully gain traction.