Most dividend stocks pay a pittance these days. The S&P 500's dividend yield is around 1.2%, near its lowest level in over two decades.
However, income-seeking investors have higher-yielding options, especially if they're willing to take on more risk. For example, AGNC Investment(NASDAQ: AGNC), Broadstone Net Lease(NYSE: BNL), and Medical Properties Trust(NYSE: MPW) currently offer dividends yielding between 6.4% and 13.7%. Interested? Here's a look at these monster dividend stocks.
An eye-popping income stream
AGNC Investment yields a jaw-dropping 13.7% as I write this. That payout has been remarkably consistent in recent years. The real estate investment trust (REIT) focused on owning agency-backed residential mortgage-backed securities (MBSes) has maintained its current rate for more than 58 months in a row.
The mortgage REIT invests in low-risk MBSes protected from credit risk by government agencies like Fannie Mae. However, those low-risk fixed-income investments are also low-yielding (low-to-mid-single-digit yield). Because of that, the REIT uses leverage (debt) to invest in more MBSes and boost its returns, which also increases its risk profile.
AGNC Investment is generating a high enough return to maintain its current dividend level. Given the current market conditions, the REIT believes it can continue to earn a high enough return to cover its costs and dividend. That drives its view that the payout aligns with its portfolio.
However, if market conditions unexpectedly deteriorate, the REIT might need to reduce its dividend, which it has done several times in the past. Given that risk, investors shouldn't allocate too much of their portfolio to this high-yielding REIT.
A high yield (and payout ratio)
Broadstone Net Lease currently has a 7.5% dividend yield. The REIT backs that high-yielding payout with the rental income supplied by its diversified portfolio of commercial properties. It currently gets 57.8% of its rent from industrial buildings, 13.4% from restaurants, 12.5% from retail locations, 10.5% from healthcare facilities, and 5.8% from office properties. As its name suggests, the REIT owns properties secured by net leases, which require tenants to cover all operating costs, including routine maintenance, real estate taxes, and building insurance. Because of that, it generates very stable rental income.
The company routinely invests money to build and buy additional net lease properties. Investing in build-to-suit development projects is a core aspect of its growth strategy. The REIT has committed to invest $436.3 million across several retail and industrial projects it expects to complete over the next two years. It's evaluating several other opportunities to add to its build-to-suit investment pipeline.
These investments grow Broadstone's adjusted funds from operations (FFO), which has allowed it to steadily increase its high-yielding dividend since it came public in 2020. However, it has a higher dividend payout ratio (more than 80% in the third quarter, well above the 70%-75% target range of other net lease REITs), which puts its dividend at a higher risk of a reduction if it runs into financial troubles in the future.
Slowly getting healthier
Medical Properties Trust currently pays a 6.4%-yielding dividend. The healthcare REIT has showcased the risks of investing in a stock with a higher yield over the past few years. It has cut its dividend twice due partly to tenant troubles (two of its former top tenants have filed for bankruptcy over the past two years). The REIT's tenant issues and higher interest rates put pressure on its financial situation, forcing it to sell other properties to repay debt.
However, the hospital-focused REIT's financial health is starting to improve. It replaced one bankrupt tenant with five new operators that are starting to pay rent this year. They'll pay an increasing rental rate over the next two years, reaching the fully stabilized level at the end of 2026. That growing rental income will put the REIT's higher-yielding dividend on a more sustainable foundation.
Meanwhile, Medical Properties Trust has been able to refinance some debt, which is giving it even more financial breathing room. While it's still working through one tenant bankruptcy, it's getting to the point where it has a much steadier portfolio and healthier financial profile. Because of that, the REIT could start rebuilding its high-yielding dividend in the coming years.
Big-time dividend stocks
AGNC Investment, Broadstone Net Lease, and Medical Properties Trust have big-time dividend yields. That's partly due to their higher risk profiles, which investors will need to consider before buying shares. However, they're potentially compelling ways to generate more lucrative income streams for those with a higher risk tolerance.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:if you invested $1,000 when we doubled down in 2009,you’d have $363,307!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,607!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $552,526!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Matt DiLallo has positions in Medical Properties Trust and has the following options: short March 2025 $4 puts on Medical Properties Trust. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
