It’s getting tough to find attractive dividends these days. Hundreds of companies slashed or suspended their payouts to preserve cash as COVID-19 nearly ground the global economy to a halt earlier this year. Because of that, and the subsequent rebound in the stock market, the S&P 500‘s dividend yield is a relatively paltry 1.8%.
However, there are a few compelling income producers still out there. Two that currently have my attention are MLP Enterprise Products Partners (NYSE:EPD) and REIT Medical Properties Trust (NYSE:MPW). Here’s why I’m seriously thinking about adding to my position in both right now.
A massive yield with upside ahead
Enterprise Products Partners currently yields more than 10%. It has risen to such heights primarily due to all the turmoil in the oil market this year, which has caused the MLP to lose nearly 40% of its value.
However, while market conditions remain brutal, Enterprise’s integrated and diversified business model has proven highly durable. That was evident during the third quarter as the MLP’s earnings and cash flow improved versus the year-ago period. Overall, Enterprise produced more than $1.6 billion in cash, which was enough to cover its massive distribution and nearly all its growth capital expenses.
Meanwhile, its growth spending is winding down. As a result, Enterprise is on track to produce excess cash in the coming quarters. Since it already has a strong balance sheet, the company will likely resume increasing its dividend each quarter. That would push its already monster payout even higher, making it quite attractive in today’s yield-starved investment environment.
A major yield with healthy growth ahead
Medical Properties Trust currently yields 6.2%, which is well above the S&P 500 and most other REITs. That payout is on solid ground thanks to the strength of the company’s portfolio and balance sheet.
While hospitals — which Medical Properties Trust focuses on — have been ground zero for the COVID-19 outbreak, that hasn’t impacted their ability to pay rent. The REIT has thus either collected or signed repayment agreements covering 100% of the rent it billed since the onset of the pandemic.
Instead of hurting the company, COVID-19 has helped by convincing more hospital systems that they can better serve their patients by selling their real estate and reinvesting those funds back into their networks. As a result, Medical Properties Trust has closed several acquisitions this year and has many more in the pipeline. Those future additions will help grow the REIT’s cash flow, which will enable it to keep increasing its dividend as it has in each of the last seven years. That growth potential from such a high-yielding stock suggests it should continue delivering healthy total returns, especially in light of its head-scratching 15% sell-off this year. That compelling blend of income and upside is why this high-yielding REIT is right near the top of my buy list these days.
Excellent ways to add a healthy dose of yield
The high-yielding payouts of Enterprise Products Partners and Medical Properties Trust have proven their durability this year as they’ve easily weathered the storms in the energy and real estate markets. Now is an excellent time to buy these dividends as the sell-offs in their stock prices have pushed their yields even higher. That’s why I’m considering adding another helping to my position in each one right now.