3 Dividend Payers That Are Outpacing the S&P

There aren't many stocks right now that are producing a positive return. Challenging economic circumstances and the growing concern over a potential recession have put tremendous pressure on the broader market. The market has fallen 15% since last year with many stocks losing upward of 20% to 50% or more of their value.

Thankfully, there are stocks that are not just outpacing the S&P 500 this year, but far outperforming while still paying attractive dividend yields. Here's a closer look at the companies, and why these dividend payers should be on your radar for 2023.

1. Iron Mountain

Iron Mountain (IRM 1.00%) is one of the top-performing dividend stocks from this past year. The specialized real estate investment trust (REIT) has delivered a 22% annualized return with its share price growing by a whopping 16%. To boot, the stock has also managed to outpace the S&P 500 over the last three- and five-year periods.

This somewhat under-the-radar stock specializes in storing physical assets like documents, collectibles, cultural artifacts, and business data in secured warehouses. It also helps aggregate and store digital data through its fast-growing portfolio of data center facilities. The company earns its revenue by leasing space in its warehouses or data center properties and through fees generated from its asset management services.

This past year has been incredibly strong for the company. It's grown its revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the double digits. Healthy leasing momentum for its roughly 1,400 storage facilities has fueled its growth this past year, something that should continue in the coming years.

Data storage is a necessary service and considering Iron Mountain is the largest provider, it's clear why this stock should continue delivering. It's well funded with moderate debt levels that it's constantly working toward improving. Plus its continued shift towards the digital era should help it expand its services and grow its revenue consistently.

2. Agree Realty

Agree Realty (ADC 0.60%) is a net lease REIT. The company owns and leases roughly 1,800 retail properties to primarily institutional-grade tenants. Net leases are a reliable way for real estate operators to earn money. The leases pass most responsibilities on to the tenants, leaving little overhead for the landlord to oversee. They are also long-term with built-in rent escalators to provide steady income over 10 or more years.

Agree Realty is often overshadowed by its much larger peer Realty Income, but this past year investors have started to notice this up-and-coming REIT and the reliable returns it has provided over the years. The stock pays its dividends monthly and has raised its dividends each year for the past 10 years. 

The REIT's focus on top-tier tenants in high-density metropolitan areas across the country has helped it maintain healthy occupancy and high rental collection levels historically. The company isn't afraid to reposition and sell assets that are no longer performing or holding too much risk in the current economy. It uses that capital to acquire new properties, which helps drive new growth.

Its reliable track record of dividend growth, high yield of 3.5%, and the rapid expansion it is achieving has garnered attention from investors and pushed the stock up 8% this year. While the retail market is on shaky ground, Agree Realty's low debt ratio and ample cash position should help it withstand any market challenges and even leave room for opportunistic acquisitions in the future.

3. W. P. Carey

W. P. Carey (WPC 0.02%) is a diversified REIT. Unlike its peers here, it doesn't specialize in any single asset class like retail or data storage. Rather, it owns a wide mix of properties from industrial and warehouse space to offices, hotels, self-storage, and retail properties globally. The diversification of its asset and portfolio geography has helped the company achieve slow but steady growth for the past 50 years.

W. P. Carey actively grew its portfolio this past year by acquiring global net lease operator CPA:18. This helped grow its revenue and funds from operations (FFO) year over year, but W. P. Carey can also rely on the built-in rent escalators tied to 99% of its leases -- 55% of which are tied to the Consumer Price Index, which will more than offset expense increases thanks to high inflation.

Its portfolio occupancy is around 98.9%, which is incredibly high for the real estate industry. Rental rates have risen by just over 3% since last year, which isn't a huge gain given certain assets within its portfolio like industrial real estate are absolutely booming. But it's within its historical range and a sustainable rate of growth investors can rely on for the foreseeable future.

If the company raises its dividend in 2023, it would mark 25 years of consistent dividend increases. That's a dividend bump every year since it went public in 1998. This track record hasn't gone unnoticed by investors and is largely why the stock is up 4% over the past year. The REIT also boasts a healthy financial profile while maintaining healthy coverage for its 5% dividend yield.