2022 was a tough year for investors. My portfolio, along with those of countless other investors, took a substantial hit as share prices broadly plummeted. While it's hard to watch your stocks lose value, savvy investors know corrections and bear markets are great times to buy more shares at favorable prices.
No one can know for sure what's in store for 2023, but it seems the new year could bring more volatility and fantastic buying opportunities. Dividend stocks remain extra attractive buys because when prices fall, yields increase -- assuming the companies maintain or boost their payouts.
I added several positions in high-yield dividend stocks in 2022, but two that I'm looking forward to adding to my holdings in 2023 are Camden Property Trust (CPT +1.10%) and National Retail Properties (NNN +0.14%). Here's why you may want to buy them too.
1. Camden Property Trust
Camden Property Trust is a residential real estate investment trust (REIT) that owns, develops, and acquires luxury apartment complexes in high-growth U.S. metro markets. As of the end of the third quarter, Camden Property Trust had interest or ownership in just over 170 properties with a total of just over 58,400 apartments.
The 15 metropolitan areas the REIT operates in are within the Sunbelt, including red-hot real estate markets such as Tampa, Atlanta, Raleigh, Austin, and San Diego. It also has properties as far north as Washington, D.C., and Denver. The company has done incredibly well in its nearly 30 years of operation, returning profits to shareholders. But the last few years have been exceptional for the REIT.
Record demand for rental housing in the markets Camden operates in over the past few years has helped the stock soar. In Q3 2022, Camden grew its revenues by 11.7% year over year, thanks to new and renewing lease rates jumping by over 14%. Its adjusted funds from operations (AFFO) -- a metric that REITs use similarly to earnings per share -- grew by 25% year over year.
Its healthy performance, however, isn't reflected in its share price as of late. The growing concerns that a recession may be coming and the slowdown in the housing market have helped push its share price down by 37% this year.
NYSE: CPT
Key Data Points
These concerns aren't unwarranted. If a U.S. recession occurs in 2023, there's a good chance rental demand will falter, which would hurt the REIT's occupancy levels and rental rates. But Camden is more than able to handle some turbulence.
The company has low debt ratios and investment-grade credit ratings. It's well-positioned in top-tier markets that are massively undersupplied for housing, which should keep demand for its units stable. The REIT also benefits from serving a higher-income demographic. Rent accounts for less than 20% of its average tenant's income. That low ratio puts Camden in a safer position if its tenants suffer a loss of income because of a recession. Rental demand could falter in the near term, but the long-term need for rental housing won't subside.
The company has a robust development and redevelopment pipeline, including a single-family rental property community in the Woodlands area of Texas. The REIT's dividend yields nearly 3.4% at its current share price. Its valuation is also extremely favorable at 17 times its projected full-year FFO, making the start of 2023 a great time to invest in this high-yield dividend stock.
2. National Retail Properties
National Retail Properties is a net lease REIT that owns and leases around 3,350 single-tenant retail properties in 48 states across the country. A retail-focused stock may not sound like a smart buy in 2023, considering that discretionary retail spending is slowing. But National Retail Properties isn't a standard retail stock.
The company earns its income from long-term net leases of properties to high-quality tenants. Roughly 30% of its income is derived from essential-based convenience stores and automotive service providers. The remainder of its portfolio is diversified across such segments as full-service and limited-service restaurants, theaters, gyms, RV dealerships, home improvement stores, and general merchandise stores.
NYSE: NNN
Key Data Points
This diversification gives the company a hedge against economic pressures. If one tenant is unable to maintain its rental payments, it has a wide range of other tenants and industries to rely on. Net leases can have terms of 8 to 10 years or more, and the agreements have annual rent increases built in, which help the company grow its revenues steadily. Plus, net leases pass most of the responsibilities for the property on to the tenant, leaving the REIT less susceptible to the impacts of inflation and giving it predictable and reliable income streams.
Right now, National Retail Properties' occupancy rate is over 99%, and it hasn't fallen below 96.4% over the last 20 years. Not to mention, this REIT has a streak of 33 straight years of dividend increases -- a testament to its resilience and strength no matter the economic conditions.
Many investors favor its larger peer, the single-tenant-retail-focused REIT Realty Income. But National Retail Properties has a longer streak of dividend hikes, offers a higher yield, and has maintained a healthy balance sheet with plenty of dividend coverage. The stock is trading around 15 times its funds from operations while paying a 4.7% yield -- nearly three times the average of the S&P 500.
