Who says you can't have high dividends and long-term growth? If you're looking for steady income but aren't willing to sacrifice long-term upside potential, our contributors think EPR Properties (NYSE: EPR), Welltower (NYSE: WELL), and Brookfield Property Partners (NASDAQ: BPY) are worthy of a closer look.
A smart way to invest in the millennial generation
Matthew Frankel, CFP (EPR Properties): When it comes to large, reliable dividends, real estate investment trusts, or REITs, can be a great way to get them.
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One of my personal favorite REITs is 6.2%-yielding EPR Properties, which primarily focuses on experiential real estate. About three-fourths of the portfolio is made up of entertainment and recreational properties. This includes a large number of megaplex movie theaters, as well as properties such as golf entertainment complexes (Topgolf is a large tenant), ski resorts, and other attractions.
EPR's real estate is well positioned to capitalize on the more than 75 million millennials in the U.S. as they come of age and begin to enter their prime earning years over the next couple of decades. Millennials place much more value on experiences than previous generations did and are willing to spend money for a nicer theater experience, a top-notch ski resort, or a state-of-the-art golf experience. Just to name one example, when EPR renovates an aging megaplex theater with amenities like luxury seating and modern food and beverage options, revenue jumps by 40% on average.
The other major property type in EPR's portfolio is educational properties, which consist of charter schools, private schools, and early childhood education properties. Not only does this provide a nice element of diversification, but it also aims to take advantage of another long-tailed trend. More than 1 million students are on charter school waiting lists and enrollment is growing at a 12% annualized rate, and private schools in EPR's target price point are growing at a double-digit rate as well.
In short, EPR is a high-yielding stock with lots of upside potential over the coming decades.
Earn from the healthcare megatrend with this stock
Neha Chamaria (Welltower Inc.): If there's one sector that should benefit the most from a rapidly aging U.S. population, it's healthcare. As the largest publicly traded healthcare real estate investment trust (REIT) with a portfolio comprising nearly 1,270 properties, Welltower is, therefore, looking ahead at some strong growth catalysts. Welltower's is also a well-diversified portfolio: As of the second quarter, it got 72% of its income from senior housing properties and the rest from postacute care and outpatient medical facilities combined.
Some investors have been wary of Welltower's decelerating funds from operations (FFO) growth: Its normalized FFO per share dropped roughly 6% during the six months ended June 30. But the decline was primarily because of impairments and losses on assets disposed under the company's ongoing restructuring and deleveraging program. For the full year, Welltower expects to raise nearly $2.4 billion in sale proceeds, and the company also raised its full-year FFO outlook during its most recent quarter.
Even as it offloads noncore assets, Welltower is expanding its footprint in premier urban markets like Manhattan, Toronto, and London that offer solid growth opportunities and have high barriers to entry. In between, the company foresees massive growth potential in outpatient facilities, as REITs currently own barely 11% of the total outpatient medical real estate that's estimated to be worth almost $394 billion.
All in all, Welltower is a smart way to gain exposure to the healthcare sector, with the stock currently offering a hefty 5.2% in dividend yield.
Reel in income and upside with this real estate giant
Matt DiLallo (Brookfield Property Partners): With a dividend yield of more than 6%, Brookfield Property Partners should be an appealing option for income seekers, especially since it has all the characteristics that investors would want in a high-yield dividend stock. First of all, it generates a very stable cash flow stream backed by the leases it has secured on its vast portfolio of real estate assets, which include some of the top office and retail properties in the world. In addition to that, the company has a conservative payout ratio of 80% of its cash flow and a solid investment-grade balance sheet. Because of those factors, Brookfield's high-yield payout is on rock-solid ground.
However, what puts Brookfield over the top as one of the better high-yielding stocks to buy is its visible upside. Thanks to a combination of embedded rate increases on its leases and a multibillion-dollar property development program, Brookfield believes that it can grow its cash flow per unit at an 8% to 11% annual clip through 2021, which should enable it to increase its payout by 5% to 8% per year. On top of that, units of the real estate partnership sell for a relatively low valuation since they currently trade around $20 apiece, which is well below the $29 per unit value of its real estate holdings.
Add Brookfield's growing income stream to its upside, and this high-yield stock is a top one to consider buying for the long haul.
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Matthew DiLallo owns shares of Brookfield Property Partners. Matthew Frankel, CFP has no position in any of the stocks mentioned. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.