Hot stocks that frequent the headlines can be great investments, but investors are most certainly paying a premium to get in on the action -- and hot growth stocks don't always pay off as hoped. Companies like real estate investment trusts (REITs) that pay reliable but high-yielding dividends don't often make the headlines but are still very much worthy buys.
Right now, Wall Street is sleeping on Medical Properties Trust (MPW -0.10%) and W.P. Carey (WPC -0.32%) despite them being sizzling dividend stocks. Here's a closer look at each company today and why they're great picks for income investors.
1. Medical Properties Trust
Medical Properties Trust is the largest operator of hospitals in the world, having ownership and interest in 440 acute-care hospitals, long-term care facilities, urgent care facilities, and health facilities like rehab centers and outpatient clinics across nine countries. The company, which leases its medical space to tenants on 10- to 20-year net leases, has consistently raised its dividend for nine years. Given today's low share price, which trades around 14 times its adjusted funds from operations (AFFO), it's a sizzling buy.
The past few years have certainly been challenging for Medical Properties Trust. Hospitals suffered from staff shortages and a higher number of critical-care patients thanks to the coronavirus pandemic, which put a lot of financial pressure on the company's tenants. However, despite those challenges, it has managed to see impressive growth. AFFO, an important metric for determining the profitability of a REIT, rose by 13% year over year, and net operating income (NOI) climbed 37% for the full year of 2021.
The company has an active acquisitions pipeline to help expand its portfolio, including a recent partnership with Macquarie Infrastructure Partners V, a private fund for the purchase of eight Massachusetts-based acute-care hospitals. The company seems confident about its performance and growth prospects, as it raised its dividend payout in the first quarter of 2022. It is now yielding around a 5.5% return for investors. Its payout ratio is well within standard levels, at 80%, meaning its return is a dependable one.
2. W.P. Carey
I'll be honest -- W.P. Carey isn't exactly an under-the-radar dividend stock. It frequently tops the list as one of the reliable dividend REITs for investors to choose from here at the Fool. Yet it often remains overlooked by Wall Street analysts despite its 24 years of consecutive dividend increases and steady performance.
The company is a diversified REIT, meaning it doesn't specialize in owning or operating a single asset type, like self-storage or healthcare properties. Instead, it owns a diversified portfolio of 1,304 properties primarily made up of industrial and warehouse space. It also owns offices, retail, self-storage, and a mixture of other property types on two continents. This, by nature, offers diversification to its investors, as the company can offset losses in a given industry from another asset class that may be performing admirably.
W.P. Carey has done extremely well at delivering small yet steady growth to its shareholders consistently. In 2021, revenue grew by 10.1%, funds from operations (FFO) rose by 6.1%, and its annual base rents have consistently grown between 1% and 2% each quarter compared to the year prior. Its portfolio is 98.5% occupied, with 99.8% of its rents collected in 2021.
It recently announced a pretty big acquisition of Corporate Properties Associates, a private equity firm that holds a diversified portfolio of real estate assets. The deal is projected to close in the third quarter of 2022 and cost the company $2.7 billion. The company hopes this acquisition, in addition to W.P. Carey's existing portfolio, can help further drive revenue and help it reach famed Dividend Aristocrat status, something it's been close to achieving for nearly a year now.
Dividend returns for W.P. Carey are sitting at 5.5%, which is a super-strong return in the current climate. Today's share prices are trading around 16 times its FFO, meaning it's a major value buy for the strength of its return.