Dividend yields have been under pressure in recent years. Several factors have played a role in this yield compression. Former high-yielding sectors like energy and real estate have endured a rash of dividend reductions because of challenging conditions in those industries. Meanwhile, technology companies have preferred share buybacks over dividends. Add all that to rising stock prices, and the average dividend yield of companies in the S&P 500 is down to 1.3%.
However, there are still some solid options out there for yield-focused investors. Three dividend stocks with yields more than double that of the S&P 500 are Agree Realty (ADC +0.36%), Brookfield Infrastructure (BIP 1.08%)(BIPC +0.00%), and Medical Properties Trust (MPW 0.36%). Here's why they stand out as solid options for yield-seeking investors.
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Focused on the right kind of retail real estate
Agree Realty is a real estate investment trust (REIT) that owns freestanding retail locations. While retail real estate has been under pressure as more people shift their purchases online, that trend hasn't had much impact on Agree Realty's tenants. That's because the company focuses on retail locations leased to home improvement stores, grocery stores, dollar stores, pharmacies, and auto parts and service centers, which are less susceptible to disruption from e-commerce. The company also focuses on financially strong retailers, the bulk of which have investment-grade credit ratings.
Those features enable the company to generate stable rental income, which it uses to support its 3.6%-yielding monthly dividend. The company also boasts an investment-grade balance sheet. That gives it the financial flexibility to continue expanding its portfolio. Agree Realty currently expects to spend between $1.1 billion to $1.3 billion on additional acquisitions this year. That should enable the company to grow its cash flow, allowing it to continue increasing its dividend. Agree Realty has already grown its payout at a 4.5% compound annualized rate over the past 10 years, including boosting it by 8.5% over the past year.
Plenty of fuel to keep growing
Brookfield Infrastructure owns a globally diversified portfolio of critical infrastructure assets like pipelines, power lines, toll roads, and ports. These assets generate stable cash flow, which Brookfield uses to support its 3.7%-yielding dividend.
One thing that stands out about Brookfield's dividend is its steady growth. The company has increased its payout each year since its formation in 2009. That upward trend appears poised to continue for the foreseeable future. Brookfield estimates that it can grow the cash flows of its existing businesses at a 6% to 9% annual rate over the coming years, driven by inflation-related contract rate increases, expansion projects, and higher volumes as the global economy grows. In addition, Brookfield believes that acquisitions can add an incremental 1% to 5% to its annual cash flow per share tally. That should easily support its plan to grow its payout at a 5% to 9% annual rate.
A healthy payout
Medical Properties Trust is a REIT focused on owning hospitals. It leases these facilities to hospital operators under long-term agreements, which generate steady cash flow. The company uses that money to pay its 5.5%-yielding dividend.
The REIT has an excellent history of growing that dividend. It has increased its payout in each of the last eight years, expanding the payout by a 5% compound annual rate during that timeframe. The driving factor has been a steady diet of acquisitions.
Medical Properties has already secured $3.4 billion of new investments this year. That should give the company plenty of fuel to continue growing its dividend. Meanwhile, it has a solid financial profile, and vast acquisition opportunity set, which should enable it to continue expanding its portfolio, cash flow, and dividend in the coming years.
Excellent options for yield-seeking investors
While it's getting harder to find higher-yielding dividend stocks, strong options do exist. What makes Agree Realty, Brookfield Infrastructure, and Medical Properties stand out from most others is that they boast yields double that of the S&P 500 and expect to continue growing those payouts in the coming years. They should thus produce attractive total returns for their investors.
