Many investors appreciate the income that dividend stocks pay. Yet all too often, a dividend stock offers either a high yield or growth prospects, but not both.
Fortunately, you can do better. If you're looking for dividends with great yield and share growth, consider Arbor Realty Trust (ABR -1.88%), Enbridge (ENB -0.76%) and W.P. Carey (WPC -0.92%). All three of these stocks have yields above 5% and a recent history of dividend increases.
Arbor Realty Trust is at a bargain price
Arbor is a real estate investment trust (REIT) and direct lender that specializes in mortgages, handling loans secured by healthcare, multifamily, and commercial real estate properties. Arbor doesn't have much exposure to the hospitality or retail industries, so it was pretty much unaffected by the pandemic slowdown. It has increased its dividend for nine consecutive years and more impressively, five consecutive quarters. It currently offers a dividend of $0.35 per share, equal to a yield of 7.35%.
Considering the company's financial shape, it's a bargain, with a price-to-earnings ratio (P/E) of 7. The stock is up more than 139% over the past five years, including more than 28% this year. It has grown funds from operations by more than 71% over the past five years.
Through six months, the company reported $159.9 million in revenue, up from $69 million year over year. Arbor's net income was $138.6 million compared to a loss of $15.2 million in the same period last year. The dividend is well covered, as the company paid out $0.67 per share over the past six months in dividends but had earnings per share of $1.06, a payout ratio of 58%.
Enbridge offers stability and growth
Enbridge stock is up more than 24% for the year. Despite the increase, the Canadian pipeline company is hardly overpriced with a P/E of 16.6. The company offers a dividend of $0.62 a share, bringing a yield of 6.64%.
Enbridge operates natural gas and crude oil pipelines, transporting 25% of the crude oil in North America. It also has a gas utility business and several renewable energy projects. Think of it as a toll booth for oil and gas -- it makes more money when there's more traffic, but it isn't as tied to the price of oil or natural gas as an oil or gas producing company.
The company has a strong track record of growth over the past five years and for the past 25 years, it has annually increased its dividend, including raises in each of the past five quarters. Over the past 26 years, the dividend's compound annual growth rate is 10%.
Enbridge is having a solid year. Through six months, it reported $1.16 in adjusted earnings per share, up from $1.09 year over year. The company said it expects full-year EBITDA to be between $10.85 billion and $11.62 billion, up from $10.38 billion in 2020.
The company says it is conservatively protecting its dividend by keeping dividend payouts to within 60% to 70% of distributable cash flow (DCF). In the first half of the year, it paid out $1.24 per share in dividends while it managed $2.03 per share in DCF, putting the ratio at 61%.
W.P. Carey is a Steady Eddie kind of stock
W.P. Carey is a REIT that specializes in single-tenant net leases for warehouses and industrial, office, retail, and self-storage properties. Its strength is its large, diversified portfolio, which includes 1,266 properties and more than 150 million square feet of rental space across 25 countries.
The pandemic had some impact on W.P. Carey because it leases office and retail space. However, the biggest share of its properties are in industrial (24.9%) and warehouses (23.4%), and its largest client, U-Haul, represents only 3.2% of its holdings.
The company's stock has risen more than 8% this year, more than 15% over the past three years, and more than 96% over the past decade. The company just raised its quarterly dividend from $1.05 per share to $1.052 per share, giving it a yield of 5.45%. If you're looking for dividend growth, it's hard to beat W.P. Carey; it has raised its dividend every quarter since 2001.
Thanks to its long-term leases, which have an average remaining period of 6.6 years, the company has steady cash flows. Over the past 10 years, its funds from operations have increased 331%.
W.P. Carey's second-quarter report shows its health. Its collection rate was 99%, and 98% of its facilities were occupied. It reported revenue of $314.8 million, up 11% year over year and adjusted funds from operations (AFFO) of $1.27 per diluted share, up 11.4% compared to the same period in 2020. The company's AFFO-to-dividend ratio is 82.6%, which isn't high for a REIT, especially considering the consistency of the company's cash flows.
There are no bad choices
I like all three of these stocks because their high dividends, share growth, and history of dividend growth make them strong choices right now.
W.P. Carey is the most expensive of the three with a P/E of 29.58, and its dividend yield is the lowest of the trio. But that's because it is considered a safe haven for investors, making the stock more popular and expensive. However, despite it consistently raising its dividend, its rate of growth is lower than that of the other two stocks.
Of the three, I like Arbor Realty Trust the most because it has grown its dividend the most of the three over the past five years -- 118% -- and its low payout ratio sets it up for continued dividend increases. It's also in the midst of a strong comeback year. The same can be argued for Enbridge, though it is probably the riskiest stock of the three.