The Smartest Dividend Stocks to Buy With $1,000 Right Now
James Brumley, The Motley Fool
6 min read
Do you need more investment income, but you don't have a ton of cash to work with at this time? That's OK. Start where you are with what you've got. You can always add to any income-generating investments later, as more money becomes available.
Here's a rundown of three smart dividend stocks to buy right now, even if you've only got $1,000 to commit to these positions. Each of these companies operates a well-established business within a well-proven industry.
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1. EPR Properties
You may have never heard of EPR Properties(NYSE: EPR), but there's a good chance you've visited one of its properties. EPR is a real estate investment trust, or REIT. That means it owns rent-bearing properties and passes along the bulk of any rent-driven profits to shareholders.
REITs own all sorts of property types, ranging from office buildings to apartment complexes to shopping malls. Even by REIT standards, however, EPR is unique in a couple of ways.
One is its types of renters. EPR Properties is an experiential REIT, meaning it leases property to movie theater chains, ski resorts, hotels, spas, resort operators, and other entertainment-oriented businesses. Its list of tenants includes AMC Entertainment, Topgolf, and Six Flags, just to name a few.
The other way EPR is different from most other REITs is what its tenants are responsible for. Whereas most REITs handle costs like taxes, property maintenance, and maybe even some utilities linked to buildings they rent out, EPR Properties is a net lease. That means its tenants are responsible for most of the costs, like building improvements or additions, taxes, and insurance. This sort of landlord/tenant relationship offloads much of the risk of rental real estate onto the tenant -- an arrangement that makes sense given the kinds of businesses most of EPR's renters are in.
Sure, demand for this sort of real estate ebbs and flows. Sometimes its tenants struggle to continue making rent payments because economic headwinds are blowing. EPR's business is resilient enough to fund its dividend and support dividend growth most of the time, though. As such, it's worth holding on to through the occasional soft patch.
Newcomers will be stepping into a stake in EPR Properties while its forward-looking dividend yield stands at a healthy 7.6%.
Bank of America
Bank of America's (NYSE: BAC) forward-looking dividend yield of 2.2% obviously pales in comparison to EPR's. The bank's track record of dividend growth isn't leaps and bounds better, either.
However, what BofA lacks in terms of yield, it more than makes up for in staying power.
Bank of America isn't just a major banking name. It's the U.S.'s second-biggest bank, boasting nearly $2.6 trillion in assets. The company operates roughly 3,700 locales that serve 69 million consumers and businesses. It also owns brokerage firm Merrill Lynch, rounding out its ability to offer services to a wide range of markets.
That doesn't mean things are always easy for the mega-bank. The subprime mortgage meltdown that led to 2008-09's Great Recession, for instance, forced Bank of America to slash its dividend payment, which didn't begin growing again until 2014. Although the company's continued to raise its annual dividend ever since, economic headwinds are slowly chipping away at its business.
Loans that became delinquent by 30 days last quarter were up 19% year over year, while charge-offs jumped 65% to $1.5 billion. Net interest income fell 3% during the three-month stretch ending in September, thanks to higher costs of customers' deposits. It's the sort of challenge you'd expect in such an environment. Even if it's not an existential threat to BofA's present profitability, clearly things aren't as easy as they were just a couple of years ago.
But if you look at the bigger picture, this company's holding up just fine. It'll get through this headwind, just as it's pushed through all the previous ones. That's what the market's saying, by virtue of pushing BofA stock up to a multi-year high earlier this month.
Normally, you'd want to wait for a pullback from such a peak before stepping in. But this is one of those cases where there's still plenty of value, even at the stock's present price.
3. Altria
Last but not least, add Altria(NYSE: MO) to your list of dividend stocks to buy with $1,000 right now. You may know the company better by its former name, Philip Morris.
It's an idea that some investors might initially reject. Altria is first and foremost a cigarette company, and the war on smoking is seemingly working.
However, it's not working nearly as well as you might expect. Last quarter's total revenue was essentially even with the year-ago number, more or less matching year-to-date results. While total sales of smokable products slipped 8.4%, growth of its oral (non-smoking/chewing) tobacco business offset much of the contraction on the cigarette front. Revenue produced by its NJOY vaping brand offset the rest of the headwind, with shipments growing 15.6% during the quarter in question. All told, per-share profits edged up to the tune of 2.3% during the company's fiscal Q3, partially boosted by a generous stock-buyback program.
Altria's plans for "moving beyond smoking" seem to be panning out just fine.
Yes, there probably will come a time when there's simply not enough tobacco and vaping business to support a dividend that's not only been paid like clockwork for decades, but raised at least once in each of the past 55 years.
That day is likely to be decades down the road, though, particularly since the global smoking cessation effort is likely to continue slowing. The World Health Organization believes there will still be 1.2 billion regular smokers in 2030, only modestly down from around 1.25 billion now. Sheer population growth is also working in favor of tobacco companies like Altria, which owns familiar brands like Marlboro and Virginia Slims.
It's never going to be a growth stock by any stretch of the imagination. With a forward-looking dividend yield of 7.3% that's funded by earnings that could persist for decades, however, income investors can afford not to care about any lack of real price appreciation.
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Bank of America is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and Six Flags Entertainment. The Motley Fool recommends EPR Properties and Topgolf Callaway Brands. The Motley Fool has a disclosure policy.
