Dividend-paying stocks are great income-generating investments, and it's even better to buy them while their share prices are down. The yield received is higher when shares are bought at prices much lower than their historical levels. With the downturn the market experienced in 2022, solid dividend-paying stocks are trading at much lower levels than just a year ago.
Two examples investors could consider are Innovative Industrial Properties (IIPR 0.60%) and Pfizer (PFE 1.94%). These stocks are trading near their 52-week lows, and both have much higher yields than the average on the market. Here's the rundown.
1. Innovative Industrial Properties
Innovative Industrial Properties, or IIP, is a real estate investment trust (REIT) that employs a sale-leaseback business model and focuses on medical cannabis companies. Innovative's customers are pot growers from whom it purchased real estate assets, only to lease back these properties to these companies to allow them greater financial flexibility. IIP's business has been important for U.S.-based pot growers.
Since cannabis remains illegal at the U.S. federal level, it can be challenging for marijuana companies to raise capital via traditional means, such as bank loans and credit lines. As a result, sale-leaseback programs remain popular capital-raising alternatives and Innovative is one of the rare companies that enables that funding route for cannabis growers.
The REIT's list of tenants includes some of the largest multi-state operators in the U.S., such as Trulieve Cannabis and Cresco Labs. That's partly why IIP has increased its top line at a good clip and is consistently profitable, unlike many pure-play pot growers. In 2022, the company's revenue increased by 35% year over year to $276.4 million.
Its net income was $153 million, almost 36% higher than the year-ago period. IIP has encountered difficulties that have sent its stock price tumbling to near 52-week lows. Most notably, several of its tenants have failed to pay rent. It's a problem investors should monitor, but it's worth noting that IIP's portfolio is vast and can absorb these unpaid rents without them breaking the company. IIP boasts 110 properties in 19 states and dozens of tenants.
Another risk IIP could run into is marijuana legalization at the federal level in the U.S. that would make its business obsolete -- or at least, so the bears say. But friendlier cannabis laws would also invite many more companies looking to cash in, some of which would seek ways to raise capital without dealing with the difficulties of obtaining loans from banks.
Meanwhile, IIP still has room to grow. Medical uses of cannabis are legal in 39 U.S. states and the District of Columbia, and recreational cannabis is legal in 19 states and DC. IIP does business in less than half of them, and as it expands, expect revenue and earnings to keep growing. IIP's dividend should be safe too. The company's yield is 9.5%, compared to the S&P 500's 1.74%. REITs must distribute at least 90% of their taxable income as dividends.
So investors can rest assured that IIP will continue rewarding shareholders with consistent payouts.
2. Pfizer
Pfizer is facing near-term issues with its coronavirus vaccine sales about to drop off a cliff. The good news is the market has already factored that event into its stock price. That said, the business is moving in the right direction. The company is working hard to replace its COVID-19 lineup revenue with a slew of regulatory approvals on the way. For instance, Pfizer is awaiting word from the U.S. Food and Drug Administration for a treatment for alopecia (a condition that causes hair loss), and a potential vaccine for the respiratory syncytial virus.It is also working on a promising influenza vaccine that could sidestep the shortcomings of the currently available options.
That's just the tip of the iceberg for Pfizer. The company has also been making key acquisitions to bolster its operations, the latest of which is that of oncology specialist Seagen for $43 billion in cash. The deal will strengthen Pfizer's lineup and its pipeline, as Seagen has several promising cancer treatment candidates.
So even though Pfizer's revenue and earnings will drop this year, and perhaps next year again, that's only because of difficult comparisons with the last two years, which were some of the most lucrative in the company's history. The drugmaker should also return to growth thereafter. And even more importantly, we can expect the company to continue making important moves to improve its prospects, just as it has in the past few years.
Pfizer currently offers a yield of 4.1%, also a lot higher than that of the broader market. The company has raised its payouts by a respectable 20.6% in the past five years, and the slowdown in the coronavirus market shouldn't affect its payout. Pfizer is well-positioned to reward patient income-seeking investors down the line. That makes it an outstanding dividend stock to buy today, especially as it is near its 52-week low.
