PM Images The high-yield space has seen many of its holdings recover in recent weeks and months after being beaten down earlier this year. Some of my favorite stocks that I bought aggressively during the dip, like Brookfield Renewable Partners (BEP) and Brookfield Infrastructure Partners (BIP), have rebounded sharply, delivering attractive returns in a short period of time: Data by YCharts Despite this, there are still some very attractive big dividend stocks with solid dividend growth momentum that remain at suppressed valuations. In this article, I will discuss two stocks that are particularly appealing for risk-averse income-focused investors, especially retirees, and another one that is a bit more speculative for those willing to take on higher risk for higher current yield and total return potential. Realty Income (O) The first stock that I find attractively priced right now is Realty Income. It offers a 5.9% forward dividend yield and has recently pulled back from a brief rally. It remains down by 14% over the past year and nearly 25% over the past five years. Despite weak stock price performance, its dividend and FFO per share have continued to grow steadily. Its balance sheet also remains rock solid with an A-minus credit rating, and its portfolio is increasingly well diversified. The company even recently boosted its investment volume guidance, expecting 2024 investment volume to reach a whopping $3 billion, up by 50% from its previous expectation of $2 billion. This is largely fueled by an improving environment in Europe, and with the European Central Bank recently cutting interest rates, they should be further tailwinds for the business as it continues to grow in Europe. While the market has been pricing it as a slower-growing stalwart suffering from elevated interest rates, Realty Income continues to defy economic gravitational forces and generate solid growth on a per-share basis, while also providing ever-higher monthly dividends. With this kind of starting yield and low-risk profile provided by its business model and balance sheet, it is hard to argue against adding Realty Income to a retiree’s portfolio. Enbridge (ENB) Another stock facing headwinds from rising interest rates is Enbridge. With a roughly 7.5% dividend yield, nearly three decades of consecutive dividend growth, a BBB+ credit rating from S&P, hardly any commodity price exposure, and about 95% of its counterparties being investment grade, Enbridge is a dream retirement stock as it checks all the boxes of having a: 1. Defensive and Durable Business Model 2. Strong Balance Sheet 3. Safe and Growing Dividend Payout 4. Very Attractive Current Dividend Yield Moreover, its recent acquisition of regulated natural gas utilities from Dominion Energy (D) has further bolstered its regulated business, making it an even more attractive option for income-focused investors. Meanwhile, it is expected to grow its EBITDA at a ~5% CAGR for the long term and is guiding for 3-5% annualized dividend growth for the foreseeable future. EPR Properties (EPR) Last but not least, EPR Properties is a compelling opportunity for investors willing to take on a bit more risk. In particular, it offers an attractive monthly dividend with a forward yield of 8.5%. Earlier this year, management demonstrated tremendous confidence in the safety of its dividend by raising it by 3.6%, a significant increase given its already high yield. The main risk here is the potential bankruptcy of AMC Entertainment (AMC), one of EPR’s major tenants. However, the recent recovery in meme stocks has enabled AMC to issue equity, pay off debt, and reduce its bankruptcy risk somewhat. Moreover, EPR has asserted that its leases with AMC are built to withstand a tenant bankruptcy, and it is guiding for a little over 3% year-over-year adjusted funds from operation growth for 2024. EPR is also reducing its exposure to lower-quality assets through divestitures and diversifying away from theaters by acquiring different experiential and entertainment assets. With the stock trading at just a little bit over 8x AFFO, EPR offers investors significant upside potential if it can successfully navigate its elevated exposure to AMC as its three-year average P/AFFO multiple is 10.1x, its five-year average P/AFFO multiple is 11.6x, and its 10-year average P/AFFO multiple is 12.6x, indicating that shareholders could be in store for ~25%-50% upside potential from valuation multiple expansion alone if EPR can recover the confidence of the market to some degree by navigating its AMC risk. Investor Takeaway With Realty Income, Enbridge, and EPR Properties, investors gain access to quality investment-grade real asset businesses that offer very attractive current yields with payouts that are growing at or faster than the rate of inflation. Meanwhile, their stock prices remain suppressed largely due to higher-for-longer interest rates, which means that if/when this narrative shifts, they could skyrocket higher. As a result, now is an opportune time to buy these stocks, with O and ENB being more attractive for risk-averse investors, while EPR is more attractive for more aggressive investors.
sekar nallalu AMC,BEP,BEP.UN:CA,BIP,BIP.UN:CA,Cryptocurrency,D,ENB,ENB:CA,EPR,O,Samuel Smith 3 Big Dividend Growth Stocks To Buy In June 2024