3 high yield dividend stocks with great growth prospects
Many investors appreciate the income that dividend-paying stocks pay. Yet, too often, a dividend-paying stock offers either a high return or the prospect of growth, but not both.
Fortunately, you can do better. If you are looking for dividends with a high yield and share growth, consider Arbor Real Estate Trust (NYSE: ABR), Enbridge (NYSE: ENB) and WP Carey (NYSE: WPC). All three stocks have returns above 5% and a recent history of increasing dividends.
Arbor Realty Trust is inexpensively priced
Arbor is a real estate investment trust (REIT) and direct lender specializing in mortgage lending, processing loans secured by healthcare, multi-family and commercial real estate properties. Arbor does not have much exposure to the hospitality or retail industries, so she has not been affected by the downturn in the pandemic. It has increased its dividend for nine consecutive years and, more impressively, five consecutive quarters. It currently offers a dividend of $ 0.35 per share, or a yield of 7.35%.
Considering the financial form of the business, this is a godsend, with a price / earnings (P / E) ratio of 7. The stock has grown over 139% in the past five years, with more than 28% this year. It has increased its operating funds by over 71% over the past five years.
In six months, the company reported revenue of $ 159.9 million, up from $ 69 million year-over-year. Arbor’s net profit was $ 138.6 million, compared to a loss of $ 15.2 million in the same period last year. The dividend is well hedged, as the company has paid $ 0.67 per share in the past six months in dividends but recorded earnings per share of $ 1.06, a payout ratio of 58%.
Enbridge provides stability and growth
Enbridge stock rose more than 24% for the year. Despite the increase, the Canadian pipeline company is hardly overvalued with a P / E of 16.6. The company offers a dividend of $ 0.62 per share, bringing a yield of 6.64%.
Enbridge operates natural gas and crude oil pipelines, transporting 25% of North America’s crude oil. It also owns a gas distribution company and several renewable energy projects. Think of it as an oil and gas toll booth – it makes more money when there is more traffic, but it is not as tied to the price of oil or natural gas as a corporation. producer of oil or gas.
The company has a strong history of growth over the past five years and over the past 25 years has increased its dividend each year, including increases in each of the past five quarters. Over the past 26 years, the compound annual growth rate of the dividend has been 10%.
Enbridge is having a solid year. In the six months, it reported $ 1.16 in adjusted earnings per share, up from $ 1.09 year-on-year. The company said it expects EBITDA for the full year to be between $ 10.85 billion and $ 11.62 billion, up from $ 10.38 billion in 2020. .
The company says it is prudently protecting its dividend by keeping dividend payouts at 60-70% of distributable cash flow (DCF). In the first half, he paid $ 1.24 per share in dividends while managing $ 2.03 per share in DCF, bringing the ratio to 61%.
WP Carey is a Steady Eddie type stock
WP Carey is a REIT specializing in single-tenant net leases for warehouses and industrial, office, retail and self-storage properties. Its strength lies in its large, diversified portfolio, which includes 1,266 properties and over 150 million square feet of rental space in 25 countries.
The pandemic has had some impact on WP Carey as it rents office and retail space. However, the largest share of its properties are in industry (24.9%) and warehouses (23.4%), and its largest customer, U-Haul, accounts for only 3.2% of its assets.
The company’s shares have risen over 8% this year, over 15% in the past three years and over 96% in the past decade. The company just increased its quarterly dividend from $ 1.05 per share to $ 1.052 per share, giving it a return of 5.45%. If you’re looking for dividend growth, it’s hard to beat WP Carey; he raised his dividend every quarter since 2001.
Thanks to its emphyteutic leases, with an average residual term of 6.6 years, the company has stable cash flows. Over the past 10 years, its operating funds have increased by 331%.
WP Carey’s Q2 report shows his health. Its collection rate was 99% and 98% of its facilities were occupied. It reported revenue of $ 314.8 million, up 11% year-over-year and adjusted funds from operations (AFFO) of $ 1.27 per diluted share, up by 11.4% compared to the same period in 2020. The AFFO / dividend ratio of the company is 82.6%. which is not high for a REIT, especially given the regularity of the company’s cash flow.
There is no wrong choice
I like all three of these stocks because their high dividends, the growth of their stocks, and their history of dividend growth make them solid choices right now.
WP Carey is the most expensive of the three with a P / E of 29.58 and its dividend yield is the lowest of the trio. But that’s because it’s considered a safe haven for investors, making the stock more popular and more expensive. However, despite a constant increase in its dividend, its growth rate is lower than that of the other two stocks.
Of the three, I like Arbor Realty Trust the most because it has increased its dividend the most of the three in the last five years – 118% – and its low payout ratio sets it up for a continued increase in dividends. It’s also in the middle of a year of comeback. The same can be said for Enbridge, although it is probably the riskiest of the three.
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.