Investors seeking a blend of capital appreciation and passive income generation can find what they're looking for right now in the healthcare sector. Wall Street analysts who follow a real estate investment trust and one of the world's largest pharmaceutical companies think they aren't getting as much attention as they deserve.
In addition to yields that are way above average, the price targets investment bank analysts pinned to these stocks suggest they can climb 29% and 24% over the next 12 months.
Before you fill your portfolio with these dividend stocks, it's important to realize that investment bank analysts who set lofty price targets can simply adjust those targets downward if things don't work out later.
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Here's a closer look to see if they're a good fit for your portfolio.
Medical Properties Trust
Shares of Medical Properties Trust (MPW +0.09%), a real estate investment trust (REIT) that owns hundreds of hospitals, have fallen by about 53% this year. Wall Street analysts who follow the company think it can recover some of those losses in 2024. The consensus price target on the stock represents a 29% gain over the next 12 months.
NYSE: MPW
Key Data Points
Earlier this year, Medical Properties Trust slashed its dividend nearly in half to $0.15 per share. Its stock price has fallen so far that at recent prices, it offers a huge 11.5% yield.
Medical Properties Trust is a net lease REIT, which means its cash flows are highly reliable as long as the hospital operators it leases buildings to can pay their rent. Earlier this year, the company had to slash its payout after several tenants had difficulty making ends meet.
This REIT offers a high enough yield at recent prices to deliver market-beating gains even if the stock price never rises. Of course, its dividend program won't help you retire any sooner if management needs to slash the payout again.
In the third quarter, Medical Properties Trust recorded $0.38 per share in normalized funds from operations, a proxy for earnings used to evaluate REITs. That's more than double the amount needed to meet its dividend commitment.
While third-quarter results make this REIT look like it's on solid financial footing, it's also been selling assets to boost liquidity. Folks who are already retired and need dividend payments they can rely on probably want to pass on this stock. With interest rates likely to fall significantly in 2024, though, servicing its debt load could get much easier. For investors with a moderate risk tolerance, adding some shares to a diversified portfolio could be the right move.
Pfizer
Shares of Pfizer (PFE +0.04%) have fared better than Medical Properties Trust, but they're still down by about 39.5% this year. Wall Street's more than a little optimistic about 2024. The average price target on the stock implies a 24% gain over the next 12 months.
NYSE: PFE
Key Data Points
At recent prices, Pfizer offers a 6.1% yield. This isn't nearly as exciting as Medical Properties Trust's dividend, but it's still way above average. The average dividend-paying stock in the benchmark S&P 500 index offers a 1.5% yield.
Pfizer stock recently tumbled in response to forward-looking estimates that disappointed Wall Street. The top end of management's guided revenue range for 2024 was $1.7 billion below the average Wall Street analyst's expectation.
Pfizer's 2024 outlook was disappointing because sales of its COVID vaccine, Comirnaty, and its antiviral treatment, Paxlovid, are only expected to reach $8 billion next year. That is an inconceivable drop when you consider sales of these drugs reached a combined $56.7 billion in 2022.
Pfizer recently completed its $43 billion acquisition of Seagen, and the timing could hardly be better. The day after completing the acquisition, the FDA approved Seagen's cancer drug Padcev to treat first-line bladder cancer patients, in combination with Keytruda. The approval makes Padcev plus Keytruda the first chemotherapy-free treatment option for roughly 82,000 Americans who receive their first bladder cancer diagnosis each year.
Shares of Pfizer are trading for the relatively low price of just 14.6 times trailing earnings, which doesn't seem to account for Padcev's potential growth spurt over the next few years. That makes now look like the right time to add more shares of this high-yield dividend payer to a diversified portfolio.
