Wall Street has been helping investors grow their wealth for more than a century. There's no perfect investment strategy, but one that has an incredible track record of success is buying dividend stocks.
Last year, The Hartford Fund released a lengthy report (“The Power of Dividends: Past, Present, Future'') that looked at the performance of income stocks relative to non-dividends over the past half century. Including data from Ned Davis Research, The Hartford Funds researchers note that the dividend payer achieved an annualized return of 9.18% from 1973 to 2022. Non-dividend payers, on the other hand, have been striving for a less impressive annual return of 3.95% for 50 years. .
The Hartford Fund's dividend report shows that that doesn't matter. if Dividend stocks are smart buys for patient investors.it's a problem which one Dividend stocks offer the best prospects.
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In an ideal world, income seekers would be able to earn the best yields on the market with minimal risk to their principal. But in reality, research shows that risk tends to rise in tandem with yield. This doesn't mean high-yield stocks are off-limits for income seekers, but it does mean additional scrutiny is needed to find winners.
The good news is that properly vetted companies that offer high levels of dividends can be a real powerhouse for income investors. If he wants $600 of ultra-safe dividend income in 2024, all he has to do is invest $8,000 (divided evenly in three ways) in the three ultra-high-yielding stocks below that boast an average yield of 7.51%. .
Enterprise Product Partner: Yield 7.68%
Energy companies are among the first ultra-safe ultra-high-yield stocks that can help you take home $600 in dividend income in the new year enterprise product partner (EPD 0.22%). Enterprise has increased its base annual distribution amount in each of the past 25 years.
For some investors, the idea of putting money into oil and gas stocks may not be appealing. Less than four years ago, the COVID-19 pandemic created a demand cliff for energy commodities that devastated drilling companies. Income investors may still be a little shy of energy stocks because of the events of 2020.
But Enterprise Products Partners has been able to avoid those wild swings, at least from an operational standpoint. Because Enterprise is not a drilling company. The company is a midstream energy company, meaning it is effectively an intermediary tasked with transporting and storing liquids, gases, and refined products.
What makes midstream oil and gas companies attractive to profit investors is often the structure of the contracts they enter into with drilling companies. In addition to being multi-year, these are primarily fixed-price contracts. This means that Enterprise can accurately predict its operating cash flows each year, no matter what happens to the spot price of oil.
For midstream energy companies, nothing is more important than being able to accurately measure annual cash flow. Full visibility into annual spending and cash flow gives Enterprise Products Partners' management the confidence to move forward with 12 major projects, as well as make bolt-on acquisitions. Many of these organic projects are focused on expanding the company's liquid natural gas infrastructure.
Macro factors are also working in Enterprise's favor. Demand uncertainty during the pandemic has caused global energy companies to cut capital spending. Even though life has effectively returned to normal, oil supplies remain constrained, pushing up the spot price of crude. Rising oil prices should encourage additional drilling, giving Enterprise the opportunity to obtain more favorable long-term fixed-price contracts.
LTC characteristics: Yield 7.11%
The second super high-yield stock that can help you generate $600 in very safe dividend income from your $8,000 initial investment (in 3 installments) in 2024 is a real estate investment trust (REIT) focused on senior housing . Characteristics of LTC (LTC -1.04%). LTC pays a monthly dividend and currently offers a yield of 7.1%. This is approximately five times the benchmark yield. S&P500.
Like Enterprise Products Partners, the pandemic has presented historic challenges for LTC Properties. The company serves senior housing and health care facilities, and with COVID-19 hitting seniors particularly hard, there is no real impact on occupancy rates and the ability of LTC tenants and borrowers to pay. There were concerns.
While historical challenges are not ideal, one reason LTC Properties is such a strong acquisition is its ability to weather the past four years. Successfully review master lease agreements, sell properties, transition leases to new tenants, minimize or eliminate rental arrears, and secure predictable funds from operations (FFO) from one year to the next. I am.
Apart from strategic moves by LTC's management, the Federal Reserve's monetary policy is also currently working in LTC's favor. In addition to leasing medical facilities for seniors, LTC Properties also offers mortgage and mezzanine loans. The most aggressive rate hike cycle in 40 years is driving interest income growth.
Portfolio diversification is another reason why LTC Properties continues to consistently serve income seekers. The company closed in September with 208 properties in its portfolio across 27 states. More importantly, LTC had 29 of his operating partners. Reducing his dependence on fewer long-term care providers means reducing the likelihood of his FFO interruptions in the future.
Finally, LTC Properties should benefit from an aging America. The ongoing retirement of baby boomers presents a scenario in which LTCs will be able to hold very strong rental pricing power in the coming decades.
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Innovative Industrial Real Estate: Yield 7.73%
The third super high-yield stock that can generate $600 in dividend income in 2024 from a starting investment of $8,000 (divided evenly between three stocks) is a cannabis REIT innovative industrial property (IIPR -2.15%), better known as IIP. Since introducing the dividend in 2017, IIP's quarterly dividend has increased by 1,113%.
Marijuana stocks have been an absolute hot topic for the investment community over the past three years. The election of Joe Biden as president in November 2020, combined with Democratic control of Congress during Biden's first two years in office, was expected to lead to cannabis reform at the federal level. Unfortunately, little progress has been made, resulting in widespread underperformance of pot stocks.
Thankfully, IIP is built differently. It is tasked with acquiring medical cannabis cultivation and processing facilities, which will be leased for a long period of time (expected to be 10 to 20 years).
Innovative Industrial Properties' inventory was destroyed in early 2023, and its recovery rate, which had been consistently 100%, dropped to 92%. However, thanks to the guidance of the company's management team, the review and divestiture of lease contracts increased the recovery rate, including management fees, to 97% in the quarter ended September. All his REITs have eventually faced delinquency issues, and IIP's management team has shown that they have a responsibility to resolve the delinquency issues.
Another reason innovative industrial real estate continues to grow is its lease structure. Of his 100+ real estate management portfolio at the firm, 98.5% are triple net leases. A triple-net lease requires the tenant to pay all property costs, including utilities, maintenance, property taxes, and insurance. Triple-net lease agreements provide lower rental income, but also remove potential unexpected expenses from the IIP equation.
The final point about innovative industrial property that is worthless is that it actually benefits from cannabis remaining illegal at the federal level. As long as marijuana remains an illegal drug, cannabis companies will have limited access to traditional banking services.
IIP is addressing this issue through its sale-leaseback program. It buys real estate from multi-state operators (MSOs) in need of capital and immediately leases it to the seller. This action will provide cash to MSOs and obtain long-term tenants for IIPs. So the cannabis impasse on Capitol Hill is great news for IIP.
