I made a pretty unusual New Year's resolution this year. I committed to putting a chunk of my idle cash to work in dividend-generating investments. Now, the reason that was unusual is that I'm a growth investor. I value capital gains over payouts. However, looking for a little more balance in my portfolio after a strong 2020, I decided to venture out of my comfort zone to buy into some REITs and out-of-favor dividend payers in the hopes of smoothing out my market exposure.
I've purchased more than a dozen dividend payers so far in 2021, but let me go over seven of them right now: Invitation Homes (INVH 0.17%), IBM (IBM -2.10%), Healthcare Trust of America (HTA -0.80%), Physicians Realty Trust (DOC -1.84%), Healthcare Properties (PEAK -2.44%), Verizon (VZ 0.38%), and Telefonica (TEF -0.10%).
I've been discussing the suburbanization trend since the pandemic began. Ever since we all had to start working at home, learning at home, and generally just spending a lot more time at home, a lot of folks have been inspired to swap their small dwellings in major metropolitan markets for bigger ones in suburbs and small towns. And Invitation Homes is one of the smartest ways to cash in on this migration.
People can get more bang for the buck -- or at least more living space, bigger yards, and a presentable Zoom room -- in the suburbs. Invitation Homes is a leader in buying up homes in rising markets, sprucing them up, and then renting them out. It had 79,397 homes in its growing portfolio at the end of September, and it's not having any problem leasing them out. Its average occupancy rate is 97.8%. There will always be some people who fall behind on their rent payments, but it collected a decent 97% of rents owed in its latest quarter. As a bonus, have you seen the direction real estate prices have been moving in? The value of its portfolio is improving. With a yield of 2.3%, this is the lowest of the payouts in this list, but that does include a dividend hike last week.
I'll be honest. "Buying IBM" was not originally on my 2021 investing bingo card. I like my tech holdings to be thriving, disruptive companies. IBM is languishing and disrupted. However, after seeing the stock crater after a rough quarter last month, I began to view this tech sector veteran in a new light.
Revenue declined 6% in the fourth quarter, and the bottom line took an even bigger hit. The software segment -- which was supposed to be the new growth driver after IBM completed its acquisition of Red Hat two summers ago -- has only continued to deteriorate. However, its dividend payout appears sustainable, and at current share prices, it yields 5.5%. And IBM's trading at just 11 times this year's projected earnings and less than 10 times next year's profit target.
With fixed-income investments yielding a pittance, it's only natural to look at real estate, and a REIT offers a way to buy into a basket of properties run by a proven management team that has to regularly distribute the lion's share of its funds from operations. Among the more resilient players in this niche are REITs specializing in medical centers and other healthcare-related buildings.
Healthcare Trust of America, Physicians Realty Trust, and Healthcare Properties currently yield between 4.5% and 5.1%. This is a niche that has proven to be pandemic- and recession-proof. Folks still need to go in for procedures, and medical professionals are pretty good about making their rent payments on time. There are some nuanced differences between the three in terms of their mixes of tenants, but I found it hard to choose a favorite. I just figured I would buy the basket. And I did.
Verizon and Telefonica
Telecom stocks were out of favor in 2020. Despite the promise of the 5G revolution and the even greater importance of smartphones and connectivity in the new normal of the pandemic, investors turned their backs on the sector. Verizon is a name you likely know as one of the two leading U.S. wireless carriers. Telefonica is based in Spain, and it has a strong presence across Europe and Latin America.
Telefonica's yield clocks in at a whopping 10.7%. I had initiated a position in Telefonica last summer, but I decided to call again last month. And Verizon with its 4.6% yield is a new addition to my portfolio.
Critics will argue that there were some good reasons that telecommunication stocks have lost their luster. Telefonica is working on its fifth consecutive year of slightly declining revenue. Verizon and its stateside peers are suffering as a lack of international travel has left them collecting far less in lucrative roaming charges. I see 5G and the post-pandemic global economic recovery as two strong catalysts that should help turn things around for both companies. Until then, I'll wait around collecting some juicy dividend checks.