The stock market is currently going through quite a stable phase. There have not been many volatile scenarios in the last month or so, and many stocks are trading at highly discounted prices and are up for grabs. Out of these, the first preference for investors is obviously stocks that pay out high dividends. There are many such stocks in the market right now, trading at very attractive prices. However, experts recommend the following stocks as the best of the lot as buying these stocks right now will result in investors gaining a lot in the long term.
Not impacted by market volatility
One stock that stands out in terms of its great dividend yield and consistent performance is Realty Income (O, Financial). This is a real estate investment trust that has increased its dividends for a whopping 69 quarters in a row now. At present, the dividend yield is 4.56% and the trust has been growing at an average of 17% for the last 20 years. One of the main reasons for success of Realty Income is that, all its tenants are high profile commercial retailers who have a good brand image for themselves. The average lease period of the tenants stands at a good 15 years and since these tenants are very big names in their respective industries, the occupancy ratio has always been maintained at an impressive minimum rate of 96.6% at least at any given point of time. The year 2008 was the time when all companies suffered immensely due to the recession. Even during this time, when the S&P500 Index was down by 37%, Realty Income suffered a loss of only 8.2%. Currently, due to anticipations of reduced interest rates, share prices of Realty Income are trading at attractive prices. Investors should seize this moment, as prices of this stock are expected to increase in the coming years. Let us look at the trend of share price movement of the stock for the past year.
Ever-increasing demand for healthcare
The next high yielding dividend stock that is recommended as a “Strong buy” by analysts is the dividend aristocrat, HCP Incorporation (HCP, Financial), the real estate investment trust that focuses on healthcare buildings alone. With a current dividend yield of 5.4% and a record 30 consecutive years of dividend increases, HCP is a stock that boasts of a good history and a promising future. All the properties of the trust belong to the healthcare sector (hospitals, nursing homes, laboratories, medical offices, senior living etc.). Since there is a perennial demand for the healthcare industry due to increasing number of aged people, HCP keeps getting continuous business and keeps increasing its profit margins considerably. For the last 25 years, the trust has grown at an average annual rate of 15% and it is this consistency that makes income investors come back to buying this stock again and again. The occupancy rate is close to 90% and considering the fact that these are used for medical purposes, this is a pretty good rate indeed. The best part is that these healthcare properties have a good geographical spread, which gives investors the much-needed stability. The movement of HCP’s stock prices for the last year is seen as follows:
Conclusion
Real estate investment trusts are mostly high-dividend paying stocks. As per the rule, these REITs need to pay out 90% of their earnings to shareholders. However, of all the trusts, these two are recommended by analysts, because their prices are currently quite low due to market reactions for future expectations of reduction in interest rates by the Federal Reserve. With high-quality tenants from the retail and healthcare sectors, both these trusts are sure to grow to a great extent in the future, thereby increasing shareholders’ worth to a great extent.
