High-dividend stocks can make excellent retirement investments, as tax-deferred dividend investment can take full advantage of long-term compound gains. If the dividends are safe and the company also has long-term growth potential, it's even better.

With the market hitting new record highs several times lately, it's getting difficult to find attractively priced stocks that fit this description. However, there are some exceptions. Here are two real estate investment trusts, or REITs, which both pay more than 5% and have lots of potential to grow.



Recent Stock Price

Dividend Yield

EPR Properties




HCP, Inc




Data Source: TD Ameritrade. Prices and dividend yields are current as of 8/9/2017.

An investment in the rise of the millennial generation

EPR Properties (NYSE:EPR) is a unique REIT in the market in that it invests in three different, but very specific, property types -- entertainment, recreation, and education. As of the latest available data, EPR has 368 properties in 43 states, the District of Columbia., and Canada.

The entertainment properties are the largest part of the portfolio, making up 52% of the net operating income, and mainly include megaplex theaters. EPR's recreation properties make up another 21%, and mostly include golf entertainment complexes, ski parks, and waterparks. Finally, about 26% of the portfolio is made of education properties, particularly public charter schools.

Young adults at a movie theater.

Image Source: Getty Images.

The entertainment and recreation categories are a play on the aging millennial generation, which generally includes people who are currently between 21 and 35 years old. There are about 75 million millennials, making it the largest segment of the population, and the big consumer trend that's emerging as millennials get older is that they value experiences over ownership.

According to a report by UBS, the millennial generation could be worth as much as $24 trillion by 2020, giving them incredible spending power. Theaters, waterparks, ski resorts, and other experience-based businesses could be big beneficiaries of the increasing millennial wealth. EPR's education properties add another element of diversification, and are also a market with lots of growth potential in the coming years, since there are currently over 1 million students on public charter-school waiting lists.

Finally, consider that EPR trades near its 52-week low due to overall real estate sector weakness, as well as weakness in most businesses related to brick-and-mortar retail (service businesses like movie theaters are a type of retail). The stock now trades for just 13.3 times its 2017 adjusted FFO guidance and yields nearly 6% -- making it a bargain for long-term investors.

Healthcare real estate could be a fantastic growth opportunity

While EPR Properties is a play on the younger generation of Americans, a healthcare real estate investment trust like HCP (NYSE:PEAK) could be an excellent growth and income play on the older generation. Specifically, the baby-boomer generation is starting to reach retirement age, and it's no big secret that older Americans utilize healthcare more frequently than the average person.

Chart of projected growth in the 75-and-up age group.

Image Source: HCP Investor Presentation.

After a rather eventful 2016, which resulted in HCP separating its riskier assets into a newly created REIT called QCP, the remaining HCP is now one of the highest-quality portfolios of healthcare real estate owned by any REIT.

HCP's portfolio is primarily composed of three property types -- senior housing, life science, and medical-office properties. The senior-housing properties are mostly located in metropolitan areas where the senior citizen net worth is above average. Some are structured as triple-net leases, while others are operated as partnerships with some of the top-notch senior-housing operating companies.

In addition, HCP is the largest owner and developer of life-science properties on the West Coast, and its medical office buildings are mostly affiliated with hospital and healthcare systems and maintain occupancy rates above 90%.

There are two main avenues by which HCP could grow going forward. The first is development, which can be an excellent value creator when done properly. Think of it this way: If you can build a property from the ground up for $8,000,000 that would cost you $10,000,000 to buy on the open market, you're creating an instant $2,000,000 in value. HCP has $640 million in committed ground-up developments, mostly in the life-science category, and also has a "shadow development" pipeline of more than $1 billion, thanks to its land holdings.

Finally, in addition to its development opportunities, HCP has plenty of opportunities to make attractive acquisitions in the existing inventory of healthcare properties. In fact, HCP estimates that there is a current investable universe of about $660 billion between its three core property types. And now that HCP has a solid asset portfolio and a more attractive balance sheet, it has the financial flexibility to pursue attractive opportunities. At a valuation of 15.3 times 2017's projected FFO, HCP looks like an excellent way to play the growth opportunity in senior healthcare.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.