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Motley Fool Issues Rare “All In” Buy Alert
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With the S&P 500 down more than 25% so far in 2022, investors are looking for places to stash their cash that offer some stability and income which can help get them through the turbulent times.
Ultra-high-yielding dividend stocks often also have a higher risk profile to go along with their juicy yields, and that keeps some from investing. There are, however, some high-yielding dividend stocks that have a lot to offer long-term investors with regard to stability and growth, as well as yields of 6% or more at the time of this writing.
BX Dividend Yield data by YCharts.
Blackstone Inc. (BX 3.33%), EPR Properties (EPR 0.75%), and W.P. Carey (WPC 3.15%) are three such dividend stocks to buy right now. Someone with $1,000 to spend that is not needed to maintain a budget, build up an emergency fund, or pay down debt might want to take a closer look at these stocks as a possible long-term investment. Here’s why.
Having $940.8 billion in assets under management (AUM), Blackstone is one of the largest asset management companies in the world. The company earns income from its fee-related services, including the management and investment of its customers’ money and performance incentives when its fund hits a revenue target.
Its fee-related earnings (FRE) have grown by 45% in the last year, while its distributable earnings rose by 86%. As more money flows to the company while investors seek alternative investment options during the bear market, its earnings will keep growing.
Blackstone Inc. distributes the majority of its revenue to shareholders as a dividend while still maintaining a healthy payout ratio and ample cash on hand — around $10 billion. Over the last three years, its yield has moved between 2% and 5%, but right now, its dividend yield is just over 6%, thanks to recent market volatility pushing its share price down.
Since dividend yield and share prices tend to have an inverse relationship, beaten-down share prices (which we see a lot of these days) are keeping yields elevated. EPR Properties as a company has been through the wringer the past couple of years. Pandemic-related closures to restaurants, concert halls, theme parks, movie theaters, entertainment and dining, and hotels, along with countless other entertainment venues, severely hurt its earnings. But now that the world is recovering from the pandemic, so is EPR Properties.
The real estate investment trust (REIT) owns and operates 358 properties, including amusement parks, movie theaters, ski resorts, and other mostly entertainment-related venues. Its second-quarter earnings of 2022 were incredibly strong, with adjusted funds from operation (AFFO), a key metric relating to REITs, jumping 73% year over year. Admittedly, some of that growth is a reflection of depressed operations the prior year related to the pandemic.
The strong showing on AFFO does not reflect the recent news that Cineworld Group, the parent company of one of its major tenants, Regal Cinemas, filed for Chapter 11 bankruptcy protection. EPR Properties coming third-quarter earnings will shed more light on the monetary impact of this filing, which is likely to be negative. I believe EPR will be able to manage this new headwind, making it a great stock to buy and hold while earning far-above-average dividend yields.
The Cineworld bankruptcy filing as well as low investor sentiment surrounding the entertainment industry related to a looming recession pushed share prices for EPR Properties lower this year, bumping its yield close to 9% today.
W.P. Carey is a diversified net lease REIT. It offers leases on properties where the tenant is responsible for property upkeep, insurance, and taxes. W.P. Carey’s portfolio of properties is varied and caters to a wide range of industries on two continents. It owns self-storage facilities, industrial warehouses, office space, and retail properties, among others.
The company’s diverse portfolio gives it an added layer of safety in times of economic volatility. Rather than suffering major losses because one industry has a large downturn (like retail, office, and travel lodging did at the start of the pandemic), it can offset some of its losses through its diverse revenue streams.
The REIT is a slow grower and has a fantastic dividend track record, having raised its payouts 24 years in a row. Unlike its peers, its share price is only down 8% this year, pushing its dividend yield to a very safe but attractive 6.1%.
All three of these stocks are trading at favorable pricing, with share prices of $85 and under. Meaning a $1,000 investment in these three high-yielding dividend stocks could go a long way in creating income today while still holding long-term growth opportunities.
Liz Brumer-Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Blackstone Inc. The Motley Fool recommends EPR Properties and W. P. Carey. The Motley Fool has a disclosure policy.
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