3 high yield dividend stocks I would buy right now
It is becoming increasingly difficult for income-oriented investors to find good stocks with decent returns in today’s environment. The average dividend yield on the S&P 500 is down to around 1.3% due to the long market rally over the past year. Meanwhile, the performance of the 10-year US Treasury benchmark is not much higher.
However, a few high dividend stocks still stand out as attractive purchases. While the pursuit of higher returns may often require the acceptance of higher risk, this is not the case for Clearway Energy (NYSE: CWEN)(NYSE: CWEN.A), Medical Property Trust (NYSE: MPW), Where WP Carey (NYSE: WPC). Here is why I would buy any of them right now.
A powerful growth plan
Clearway Energy owns and operates a portfolio of clean energy assets including wind and solar power generation facilities, as well as natural gas power plants. The company sells the electricity it produces under long-term fixed-rate contracts at utilities and other end users. These agreements ensure a constant cash flow. It distributes 80 to 85% of these funds to shareholders via its dividend which, at the current share price, yields 4.2%.
The company uses the cash it holds (along with other sources of funding) to expand its portfolio and increase its cash flow. Clearway currently believes that it can grow enough over the next few years to support annual dividend increases in the range of 5% to 8%. It is on track to reach the top of that range this year.
Clearway has already secured several investment opportunities that should drive its growth. For example, it is a co-investor in a large portfolio of renewable energy development projects which should be put online in the coming years. In doing so, they will provide the company with an increasing flow of cash to support its dividend growth plan. This renewable energy-powered income stream makes Clearway a great buy for investors looking for yield.
Healthy dividend growth
Medical Properties Trust is a real estate investment company (REIT) focused on owning hospitals. It leases these facilities to health systems through triple-net agreements, under which the tenant assumes responsibility for all costs of maintenance, building insurance and property taxes. This allows Medical Properties to earn a stable rental income. About 60% of its cash flow is distributed in the form of dividends. At current stock prices, this payout earns 5.4%.
The REIT takes the money it keeps and combines it with other sources of funding to acquire additional hospital properties. It has already secured $ 3.6 billion in new investments in 2021, which puts it on track to increase its cash flow at a double-digit percentage rate.
This should allow Medical Properties Trust to continue increasing its payments, which it has done for eight consecutive years at a compound annual rate of 5%.
Stable like a rock
WP Carey is a diverse REIT that owns everything from warehouses and office buildings to self-storage facilities – all triple net leased to creditworthy tenants. This diversification generates stable rental income for the company, and it pays around 85% of that money through its dividend, which at the current share price brings in around 5.5%.
This REIT is also expanding its portfolio. It acquired $ 1.2 billion worth of properties this year, mostly industrial facilities and warehouses, deals that help boost its cash flow.
The company has an excellent history of dividend growth. It has increased its payout every year since its IPO in 1998. This streak looks set to continue. WP Carey’s stable rental income and strong financial profile give it the financial flexibility to continue to expand its global real estate empire.
High dividend yields are only part of the appeal
Clearway Energy, Medical Properties Trust, and WP Carey deliver well above average returns. What sets them apart from other high dividend stocks, however, is their track record and potential for dividend growth. All three have the financial flexibility to continue to expand their portfolios of cash-generating assets, which should allow them to continue to increase their payments. Their ability to provide steadily increasing income streams is why I would buy one of them right now.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.