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Got $10,000? Buy These 2 High-Yielding Dividend Stocks That Pay 5%

By David Jagielski – Nov 9, 2021 at 7:54AM

Key Points

  • At their current share prices, Medical Properties and Suncor offer yields that are more than triple the S&P 500's average payout.
  • Medical Properties is the safer option with a stable and recurring flow of revenue from its tenants.
  • Suncor is benefiting from a spike in oil prices and recently hiked its payout by 100%.

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Although these yields may be high, they are safe.

If you've got $10,000 that you can afford to invest, you should consider buying dividend stocks. Not only can you potentially benefit from a rise in their share prices, but their regular payouts will provide recurring income that can help strengthen your financial position.

Two dividend stocks that look particularly attractive today are Medical Properties Trust (MPW -0.15%) and Suncor Energy (SU -1.09%). They're both coming off strong earnings reports and offer yields of more than 5%.

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The case for Medical Properties

Real estate investment trusts (REIT) like Medical Properties can be attractive options for income-focused investors because they have to distribute 90% of their earnings to shareholders annually. That makes dividends automatic for them when they are profitable, which Medical Properties is.

The one danger for REITs right now is that amid the pandemic, there has been concern that some tenants may struggle to make rent payments. But Medical Properties' focus is on the healthcare space, which is more stable than the residential segment, so there's less risk for investors.

The REIT has 444 properties, more than 70% of which are acute care hospitals. Behavioral health facilities and rehabilitation hospitals account for another 20%.

Medical Properties grows by expanding its portfolio and billing more rent, which, in turn, helps increase the bottom line. A key metric that investors will want to focus on is funds from operations (FFO) -- the REIT equivalent of cash flow from operations, and the number upon which its payouts are based. For the third quarter, Medical Properties reported $390.8 million in revenue (up 19% year over year) and FFO per share of $0.44.

This stable healthcare company's quarterly dividend of $0.28 is 64% of that figure and looks fairly safe, and at current share prices yields 5.3%. That looks even more impressive considering that the S&P 500's average yield now is only 1.4%.

The case for Suncor

Suncor is a bit of a riskier investment since it operates in the oil and natural gas industry, but if you want to benefit from a surge in crude oil prices, it's one of the safer options. In four of the past five years, the energy company has reported a profit. (The lone exception was 2020, when volatile crude oil prices briefly went into negative numbers and when Suncor recorded billions of dollars in non-cash impairment charges.)

With conditions more stable now, Suncor's numbers look a lot better. Over the first nine months of 2021, it reported net earnings of 2.6 billion Canadian dollars, a significant swing from the loss of CA$4.2 billion it incurred during the same period last year. The year has been so strong, Suncor has paid down its net debt by CA$3.1 billion. And it's easy to see how, given that the oil producer generated CA$27.9 billion in revenue in 2021's first three quarters -- a whopping 51% higher than in the prior-year period thanks to rising oil prices. Overall, it has brought in more than CA$9.1 billion in cash from its operating activities year to date, which is nearly five times the CA$1.9 billion it reported a year earlier.

In light of the strong outlook, Suncor increased its dividend. And it wasn't just a modest boost: The company doubled its quarterly payouts to CA$0.42 per share. That's still well below the diluted earnings per share of CA$0.59 that it reported last quarter. 

Shareholders will now collect a yield of 5.3% -- almost identical to that of Medical Properties. While Suncor is a bit of a riskier buy, it has the potential to deliver greater returns as oil prices continue to rise; year to date, its shares are up over 50% while Medical Properties shares are down by 3%. The S&P 500, meanwhile, is up 24%.

Whether you're particularly bullish on oil and natural gas or just want some diversification into the sector, Suncor is an excellent option for income investors to consider.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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