This year has been especially trying for investors. The broader market fell by 15% while certain stocks declined by 80% or more. Fortunately, as 2023 quickly approaches the market has rebounded as investors look toward a new year of opportunities.
These last few weeks of 2022 are the perfect time for investors to lock in today's bear market pricing -- especially for dividend stocks.
BX Dividend Yield data by YCharts
Two high-yield dividend stocks that look particularly appealing right now are Blackstone (BX -0.03%) and Ventas (VTR 1.48%). Here's a closer look at each company and why investors should scoop up these stocks before the end of 2022.
Blackstone is near rock-bottom pricing
Blackstone is one of the largest alternative asset management companies in the world, with more than $951 billion under management. The company's clients include institutional investors, hedge funds, and insurance companies. It invests their money in things like life sciences, business, real estate, debt equities, and other often- high return but illiquid asset classes, earning a fee for its services.
The last few years have been incredibly lucrative for the company as people sought to combat rising inflation and a declining market through alternative assets. In the past year, the company's assets under management rose 30% while fee income increased 51%.
Yet despite this incredible growth, the company is trading near its 52-week low. This is partly due to general concern over the future of the real estate market in a rising rate environment. But it's also the result of recent withdrawals from its private real estate investment trust (REIT), known as BREIT.
This REIT invests in real estate with a total of around $69 billion in net asset value. Some of the fund investors have become concerned about the slowing real estate market and recently withdrawn from the fund. Word of the redemption requests was widely reported, inciting more redemption requests from other investors. In response, the company put a limit on withdrawals, which sent Blackstone's stock down 8% in the week that followed.
The interesting thing is that BREIT is one of the most successful REITs in the market today. Not just on the private market, but for publicly traded REITs, too. It has provided a total annualized return of 15.5% over the last three years. The index for publicly traded REITs as tracked by NAREIT has provided a 1.55% return during that same time.
BREIT recently announced a move to exit its partnership with publicly traded REIT VICI Properties, which will add to its liquidity and help it take advantage of new market opportunities in the coming year.
It's also worth noting that Blackstone is extremely well versed in investing in all cycles of the market. The company was one of the biggest benefactors in the housing bust that followed the Great Recession, purchasing millions of dollars in discounted real estate. Even if the market were to deteriorate in 2023, its diversified portfolio of assets that go far beyond BREIT's real estate holdings alone will likely be just fine.
Blackstone is in an extremely favorable financial position, having enough cash on hand to pay off all debt and having more than $8 billion left for new acquisitions. It also pays an extremely attractive dividend yield of close to 6%, which is about four times higher than the S&P.
It likely won't take investors long to realize the reaction to the BREIT redemptions was blown a bit out of proportion and for Blackstone's share price to rebound. Investors who want to lock in attractive dividend returns should consider adding Blackstone to their portfolio before year-end.
Ventas could raise its dividend in the coming year
Healthcare REIT Ventas hasn't exactly been a stellar stock for investors over the past 10 years. The company, which owns and leases primarily senior housing along with other healthcare-focused real estate assets has seen its share price fall 15% during the past decade.
The last three years were especially tough on the company because of the coronavirus pandemic. The stock cut its dividend by 43% in 2020, which was hard on investors but was ultimately a smart move as it helped the REIT conserve cash and improve its balance sheet for the better.
Ventas ended the third quarter of 2022 with $2.5 billion in liquidity and around 6.9 times debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA). This is still higher than the REIT average of around 5 times, but it has more than enough money to cover near-term debt obligations and even raise its dividend in the near future. It was also enough to prompt Fitch to increase its financial rating back to "stable" earlier this year.
Its senior housing has seen net operating income (NOI) rebound nicely this past year, growing by roughly 13% in the third quarter. Its occupancy levels for both its office and senior housing operating assets is trending up, now at 84.7%.
Its dividend yield is around 3.9% right now, but it could grow in 2023. Its dividend payout ratio is about 59%, which is low by REIT standards. If Ventas continues to see a positive increase in occupancy and NOI growth, it should be more than capable of supporting a dividend increase.
Ventas also has a lot of long-term potential ahead. The REIT is just now starting to see the impacts of the aging baby boomer population. This means its senior housing properties could see a sizable uptick in demand in the next 10 to 20 years. It's trading at about 15 times its price-to-funds from operations (FFO), making it a value buy among dividend stocks today.
