There are plenty of companies that pay their shareholders, but not all can claim yields of 4% or higher. Even more unique are companies that meet this high-yield threshold and look like great long-term buys as well.
To help investors find great companies to invest in — that are also top dividend stocks — we asked three Motley Fool investors for a list of such companies and they came back with Physicians Realty Trust (NYSE: DOC), Oaktree Capital Group (NYSE: OAK), and Enbridge (NYSE: ENB).
Just what the doctor ordered
Danny Vena (Physicians Realty Trust): Finding compelling dividend payers can be challenging in any environment, but after a nine-year bull market run, it can be like finding a needle in a haystack. One way to simplify that task is to turn to a special classification of tax-advantaged companies known as real estate investment trusts (REIT). In exchange for not paying corporate taxes, these companies are required to meet special conditions, including paying out 90% of their ongoing income as dividends.
One such company is Physicians Realty Trust, a healthcare REIT focused on acquiring high-quality medical office facilities and leasing them to leading healthcare providers. The company currently owns over 250 healthcare properties, the majority of which are medical offices affiliated with medical campuses and other healthcare systems, which makes them sought-after real estate for medical professionals.
About 85% of the properties in the company’s portfolio are in these prime locations, resulting in a 96.6% occupancy rate. The average remaining lease term is an impressive 8.2 years, providing exceptional stability to the portfolio. In addition, tenants are typically responsible for ongoing expenses like utilities, maintenance, property taxes, and insurance.
Physicians Realty Trust is also set to benefit from the demographic shifts occurring in the U.S. over the next several decades. Annual healthcare spending of consumers over the age of 65 is three times that of younger groups, and that older population is expected to double in the coming decades, with the strongest increases happening between now and 2030. This climbing demand for healthcare and the facilities that provide it bode well for the company’s future growth.
These factors combine to support an impressive dividend payout of 5.9%. The high-quality portfolio, strong occupancy rates, and solid lease term offer stability for investors, while the aging population should provide an ongoing path for growth for Physicians Realty Trust.
A dividend that gets better with turmoil
Jordan Wathen (Oaktree Capital Group): As a legendary distressed debt and credit manager, Oaktree Capital is one of a few high-yielding stocks that should perform better when stock and bond prices fall.
What separates Oaktree from the rest of the asset management industry is its patience. In prolonged bull markets, the company mostly twiddles its thumbs. But when asset prices plummet, as they occasionally do, Oaktree has the credibility to raise billions of dollars from institutional investors almost overnight. During the 2008 financial crisis, Oaktree raised its then-largest fund in a matter of months, putting the capital to work at an opportune time.
Over its history, its distressed debt funds have returned 22% per year (16.1% after fees). With that impressive record, it’s no surprise that Oaktree counts 75 of the largest 100 pensions, 38 state retirement plans, and over 750 corporate and endowment funds as clients.
I see Oaktree as a stock that offers real diversification potential to any income portfolio because it profits from panic. The stock trades at a single-digit multiple of its long-term earnings power, and yields about 9% based on its distributions over the last 12 months. Though dividend payments will ebb and flow with the ups and downs of the market, this is one stock that offers an impressive combination of high yields and real diversification to any income portfolio.
This oil and gas pipeline company’s high-yield keeps flowing
Chris Neiger (Enbridge): Enbridge is an energy infrastructure powerhouse whose pipelines keep oil and gas flowing across the U.S. and Canada. If you haven’t heard of Enbridge before, one of the most important things to understand about this company is that its pipelines are responsible for moving about 28% of all crude oil produced in North America.
Enbridge recently reported its first-quarter results and its adjusted earnings per share jumped to CA$0.82, up from CA$0.57 in the year-ago quarter. The company continues to benefit from some of the recent projects its brought on line, including CA$12 billion from new projects in 2017. That’s great news considering that once a new oil and gas pipeline comes on line it can generate revenue for years to come. That’s why it’s great that management has said that an additional $7 billion worth of projects are expected to come into service this year.
Enbridge pays out 65% of its cash flow in dividends and leaves the rest to invest in new projects. At the end of the first quarter, Enbridge’s management announced a 10% dividend hike — marking 23 consecutive year of increases — and that brought the company’s forward yield up 6.53%.
Its share price has tumbled about 20% over the past year, but dividend investors should be comforted by the fact the company is the leading exporter of Canadian oil to the U.S. — a position that can’t easily be overtaken — and its new projects should help keep revenue and earnings climb for years to come.
Enbridge’s shares trade at about 17 times the company’s forward earnings right now, making them attractively priced, and when you factor in its sky-high yield of 6.5%, this dividend energy stock is poised to make investors happy over the long haul.
10 stocks we like better than Enbridge
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Chris Neiger has no position in any of the stocks mentioned. Danny Vena has no position in any of the stocks mentioned. Jordan Wathen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Oaktree Capital. The Motley Fool owns shares of Enbridge. The Motley Fool has a disclosure policy.