There's no shortage of outstanding opportunities that tend to fly under investors' radars. However, finding alternatives worth further consideration can sometimes be a bit time-consuming. To help get income-seeking investors started, we asked three of our investors to find a few unknown, but amazing dividend stocks.
The three that made the final cut include nursing facility real estate investment trust (REIT) Omega Healthcare Investors (NYSE:OHI), display driver upstart Himax Technologies (NASDAQ:HIMX), and another REIT specializing in medical facilities, Medical Properties Trust (NYSE:MPW).
A quarterly crowd pleaser
Cory Renauer (Omega Healthcare Investors): Consistently increasing dividend payouts each year is a hallmark of good dividend stocks. After raising its payout for 22 consecutive quarters, my pick is a truly amazing stock that also offers a whopping 9.5% yield.
There's a reason this real estate investment trust (REIT) offers such a big yield: Investors are worried it won't be able to sustain its payout going forward. This REIT collects rent from around 77 different operators of skilled nursing and long-term care facilities scattered throughout the country. Through the use of long-term triple-net leases, the company's revenue stream is generally stable. In the third quarter of 2017, though, the company had to record a $194.7 million impairment on leases concerning Oriana Health after it fell behind on rent.
Oriana's troubles stem from changes to Medicare and Medicaid that hurt, but hardly bankrupted scores of Oriana's peers. Omega is transitioning portions of the Oriana portfolio to other operators and expects contractual rent from the properties to fall from $46 million to as low as $32 million after the transition.
If another operator falls behind on rent, the stock would stagger, but the REIT would more than likely recover. Adjusted funds from operations during the three months ended last September fell 5% year over year to $0.79 per share. That's far enough above the current quarterly payout of $0.66 per share to expect more quarterly payout bumps.
Bring on 2018
Tim Brugger (Himax): Though 2017 started off a bit rough, and the year ended on a sour note thanks to a negative analyst comment, display driver and wafer level optics (WLO) provider Himax is poised for a watershed year. Not only does the relatively little Himax (its market capitalization is only $1.45 billion) offer a world of upside, at 2.9%, its dividend yield is well above that of its average peer.
Following the groundwork laid in the third quarter, it wouldn't be surprising if Himax ends its fiscal year with a bang. Last quarter's $197.1 million was a 30% increase sequentially, and gross margins were considerably higher than Himax expected thanks to a "favorable product mix."
The product mix included a quarter-over-quarter increase of 86% in non-driver sales, led by Himax's upgraded WLO offering. Himax expects WLO shipments to "accelerate significantly" in the fourth quarter and into 2018. Strong demand will be met by further increasing production capacity to meet customer demand, beyond last year's expansion.
Additional manufacturing capabilities are also needed to ramp up Himax's new SLiM 3D sensing production. Built in partnership with Qualcomm, SLiM is designed for Android OS devices. According to Himax, customer interest has already become so great it will need the extra space to meet demand. SLiM is expected to begin shipping in mid-2018.
Toss in Himax's early-stage smart car efforts, which generated over $20 million in sales last quarter, and it boasts multiple avenues of growth ahead. And considering its outstanding payout, Himax is an amazing dividend stock.
Alabama doesn't just have college football champions
Keith Speights (Medical Properties Trust): Alabama is more known for its amazing college football teams than as a home of companies paying amazing dividends. But Medical Properties Trust (MPT) certainly qualifies as a great dividend stock -- and it's headquartered in Birmingham, Alabama.
MPT is a REIT that focuses on leasing properties to healthcare providers. As of Sept. 30, 2017, the company owned 271 properties in the U.S., Germany, U.K. Italy, and Spain. MPT makes around two-thirds of its total revenue from leasing to general acute care hospitals, but its customer base also includes rehabilitation hospitals and long-term acute care hospitals.
The company's dividend currently yields 7.3%. Although MPT spent more on dividends during the first nine months of 2017 than it generated in operating cash flow, its dividend doesn't appear to be in trouble. Analysts project that the REIT will increase earnings significantly more in the next few years than it has recently.
It might be a little worrisome that five customers generate three-fourths of MPT's total revenue, with one of those customers, Steward Health Care System, accounting for 23% of revenue. However, I don't think that concentration of risk should be too concerning.
MPT probably won't be a tremendous growth play. The stock gained 12% last year, while the S&P 500 index jumped 19%. However, this REIT is a great and largely overlooked choice for income investors.