After an absolutely brutal year, 2023 is off to a strong start. The S&P 500, the index widely regarded as the benchmark for the entire stock market, is up over 8% at this writing. No one truly knows if 2023 is the year a bull market will return, but hopes are high that the rally will continue.
That means now is the time for investors to lock in price savings, particularly with high-yield dividend stocks. Since dividend yields and pricing work inversely, buying when prices are low provides much higher yields.
Digital Realty Trust (DLR 0.63%), UMH Properties (UMH -0.38%), and Blackstone (BX -0.34%) are three high-yield dividend stocks that are still down 25% or more from their one-year high, but rebounding quickly. The share prices of all three have grown by double-digit percentages since the start of 2023, all while they provide yields double that of the S&P average.
BX Dividend Yield data by YCharts.
Here's why three Motley Fool contributors believe these dividend stocks are must-buys before the next bull market.
Digital Realty continues to grow its presence and its payouts
Marc Rapport (Digital Realty): Digital Realty is one of the major cogs in the gears that drive the internet of things, the World Wide Web, and pretty much anything that has to do with moving data these days.
This real estate investment trust (REIT) owns and operates data centers; they house hordes of computers and servers and all the infrastructure needed to provide storage, co-location, and connectivity to more than 4,000 customers, including many of the world's largest commercial enterprises.
Digital Realty now lists 303 such facilities worldwide, including 134 in North America, 114 in Europe, and the rest scattered across every continent but Antarctica. The company continues to grow through acquisition and internal expansion, and its paybacks have grown along with its presence: Digital Realty stock has more than quadrupled the S&P 500 in total return since the company's initial public offering in 2004.
The REIT has also raised its dividend for 18 straight years, and the current payout of $1.22 per quarter provides a decent yield of about 4.3%, at the $114 or so it's been trading at lately. And that price may look like a bargain in the months ahead.
While they're still down about 22% from a year ago, Digital Realty shares have gained about 13% so far in 2023 -- and that may be just the beginning of a bull run. Analysts who follow the stock give it a consensus target price of $131.73, which would be a 15% upside from current levels.
That's a nice gain. For buy-and-hold investors, the long-term prospects of such a key player in worldwide digital infrastructure -- one with a good record of dividend growth -- just add to the allure.
UMH Properties offers a high dividend and affordable housing for tenants
Kristi Waterworth (UMH Properties): Some of my favorite stocks are affordable housing or workforce housing REITs; they come in all kinds of flavors and offer all sorts of housing to average people. As a former Realtor, I love them because I know the demand for these kinds of housing is endless. And as long as REITs can make money with this business model, they will; I doubt there will ever be a lack of people who need housing in these price ranges.
However, they can also pay considerable dividends when they operate their properties well and make smart acquisitions. One stock that's absolutely been fantastic at this is UMH Properties. As of Feb. 7, its dividend yield was sitting at 4.58%. A dividend increase announced on Jan. 11 will raise the quarterly payout 2.5% to $0.205 per share, to be paid out on March 15.
Since November, UMH has closed on an additional four communities, totaling 843 developed sites and 258 acres, allowing plenty of room for expansion. Using money from its new qualified opportunity zone fund (QOZF) and other sources, UMH continues to strategically grow its footprint, as well as its rental income and income from sales of mobile homes on rented lots within its property portfolio.
With the addition of the QOZF, which was organized in 2022, UMH has found new ways to make its money stretch even further. Along with improving life for people in communities across the country, this fund will be instrumental in helping to improve the company's cash flow with tax and other incentives, as UMH essentially does exactly what it's been doing for decades.
Despite the big-picture mindset prevalent at the REIT, UMH stock is down over 25% since its high in March 2022, going from $24.85 to $18.45 per share. Of course, this has pushed up its dividend yield, making it an even better buy in this bear market than it has been historically. If you do nothing else nice for yourself this year, I'd recommend that you pick up some shares of UMH while it's still so down, and hold on to them forever.
Blackstone gained 27% in January and is poised to keep going
Liz Brumer-Smith (Blackstone): Alternative assets have become a popular way for investors to diversify their holdings. Alternative asset management company Blackstone is quickly picking up steam. Since the start of 2023, shares have rebounded 27%, erasing a big portion of their losses from last year. While the stock has a ways to go before it returns to its recent highs, I believe this upward movement will continue.
Blackstone is one of the largest alternative asset management companies in the world, managing roughly $975 billion for wealthy individuals and large companies. It invests this money in things like real estate, private equity, businesses, and public debt and equity, earning a fee for its management services.
From 2010 to 2019 the total amount of money invested in alternative assets with companies like Blackstone -- referred to as assets under management (AUM) -- grew from $4.1 trillion to $10.8 trillion, according to data and analytics provider Preqin. This record demand is certainly evident in Blackstone's portfolio. Over the last three years, the company's AUM grew by 70%, and Preqin estimates the entire alternative AUM market could reach $17 trillion by 2025.
Blackstone had a recent setback when a number of its investors requested redemptions from its private REIT, BREIT. The news got investors worried about the strength of the company, but its stock remains solid. Blackstone is extremely well funded with plenty of coverage for its dividend, currently providing an attractive dividend yield of 4.6%. It also has enough cash on hand to pay off all debt obligations and have money left over to continue investing.
Considering the stock is still down 30% from its recent high, it's a no-brainer dividend stock to buy before the bull market returns.
