From Refund to Riches: 7 Stocks to Invest Your Tax Return Like a Pro
Millions of Americans will get money back from Uncle Sam. They’ll use it for entertainment, to pay down high-interest debt, build an emergency fund, pay their future selves in a retirement account, save for college, or even take the family away for a bit. Or, they can do what the pros do and make that refund money generate even more money. One way to do that is by creating passive income with stocks to invest your tax return.
Look at Realty Income (NYSE:O), for example. Also known as The Monthly Dividend Company, it pays you a monthly dividend just to hold the stock. Better, it just declared a new cash dividend of just over 25 cents, payable on April 15 to shareholders of record as of April 1. And all you have to do is hold the stock.
That’s it. Your money just made you more money.
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Even if you’re not owed a refund this year – like myself – you can still put money to work. In fact, here are a few dividend stocks to invest your tax return.
Medical Properties Trust (MPW)
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With a yield of 14.3%, Medical Properties Trust (NYSE:MPW) is a triple net lease real estate investment trust (REIT). It owns more than 430 hospitals across nine countries. Plus, its cash flow is reliable because tenants sign triple net lease agreements.
Despite issues with its Steward Health Care client, which has struggled to pay rent, the REIT’s fourth quarter FFO (funds from operations) came in at 36 cents. That was higher than a forecast of 29 cents. It also posted a revenue loss of $122.83 million from $380.49 million quarter over quarter. However, all of that negativity appears to have been priced into the REIT.
We also have to consider that MPW will benefit from an aging population. According to the Centers for Medicare and Medicaid Services, total healthcare expenses will hit $6.8 trillion by 2030 because of that. And because its properties are in the healthcare space, MPW benefits.
MPW is one of the top stocks to invest your tax return.
Innovative Industrial Properties (IIPR)
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With a yield of 7.52%, Innovative Industrial Properties (NYSE:IIPR) is a commercial mortgage real estate investment trust that provides financing to the cannabis industry with loans.
After bouncing from a low of about $70, it’s now back to $98 and could see higher highs, depending on what happens with the cannabis market.
Remember, cannabis could benefit from potential U.S. DEA rescheduling, and from any mention of federal action heading into the U.S. elections. All of which would be a positive catalyst for IIPR.
Better, IIPR just raised its dividend to $1.82, and produced solid earnings. Fourth quarter funds from operations (FFO) was $2.07, beating expectations for $2.02. Revenue of $79.2 million was also above estimates for $76.5 million. That’s also up nicely from the $70.5 million posted a year ago. It also collected 100% rent in the quarter as compared to 97% in the prior quarter.
IIPR last traded at $96.85. From here, I’d like to see it challenge prior resistance at $102.50. It’s another one of the top stocks to invest your tax return.
AGNC Investment Corp. (AGNC)
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Next up is AGNC Investment (NASDAQ:AGNC), a REIT that invests in residential mortgage backed securities, and carries a yield nearing 15%. With these securities, the principal and interest payments are guaranteed by the U.S. government, which makes the REIT even more attractive.
Also, consider that once the Federal Reserve starts cutting interest rates again, it should unlock even more value in the housing market, which would boost AGNC even more.
In addition, as noted by Seeking Alpha, “Real-estate stocks were mostly in the green in Friday midafternoon trading as President Joe Biden proposed a laundry list of actions to reduce housing costs and boost supply, citing concerns about elevated mortgage rates and a shortage of homes for sale.”
While we wait to see what happens next, we can collect AGNC’s yield.
AGNC also just declared a 12-cent monthly dividend. That’s payable on April 9 to shareholders of record as of March 29.
ProShares S&P MidCap 400 Dividend Aristocrats ETF (REGL)
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Or, if you want to diversify at a low cost, and collect yield, consider the ProShares S&P MidCap 400 Dividend Aristocrats ETF (CBOE:REGL) on pullbacks.
Since late October 2023, the REGL ETF ran from about $63 to $75.50, where it’s now technically stretched. It’s also overbought on RSI, MACD, and Williams’ %R, and is overdue for a healthy pullback. Other than that, there’s a lot to like with the REGL ETF.
For one, REGL is the only “ETF focusing exclusively on the S&P MidCap 400 Dividend Aristocrats—high-quality companies that have not just paid dividends but grown them for at least 15 consecutive years,” according to ProShares.com. Two, it currently yields about 2.31%, with quarterly distributions.
And three, it provides exposure to respectable stocks, such as Williams-Sonoma (NYSE:WSM), Lincoln Electric Holdings (NASDAQ:LECO), RPM International (NYSE:RPM), Graco (NYSE:GGG), Toro (NYSE:TTC) and NNN REIT Inc. (NYSE:NNN) — to name a few of its 46 holdings.
Agree Realty (ADC)
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Let’s also take a look at Agree Realty (NYSE:ADC), a REIT that also pays out a monthly dividend.
The company just declared a monthly cash dividend of $0.247 per share, or $2.964 annualized. That’s payable April 12, 2024 to shareholders of record at the close of business on March 28.
Earnings have been solid, too. In its fourth quarter, the REIT posted adjusted funds from operations (FFO) of $1, which met analyst expectations. Revenue of $144.2 million was better than expectations of $141.2 million.
And, according to President and CEO Joey Agree, “We remain intently focused on prudently allocating capital to drive sustainable AFFO per share growth above our previously discussed base case of over 3% growth in 2024.”
At the close of 2023, Agree Realty’s portfolio had 2,135 properties across 49 states, with 44.2 million sq. ft. of leasable area, as noted in a company press release. The portfolio was also 99.8% leased at year end, and is another one of the top stocks to invest your tax return.
Digital Realty Trust (DLR)
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Another interesting, higher-yielding REIT is Digital Realty Trust (NYSE:DLR).
With a yield of 3.42%, DLR is an essential part of the digital world, which requires data centers this REIT owns. What makes DLR even more attractive is that the artificial intelligence boom will only increase the need for more data center space moving forward.
At the moment, DLR owns a massive global data center footprint. That includes 300+ facilities, in 27 countries on six continents. It also just declared a $1.22 quarterly dividend, which is payable on March 28 to shareholders of record as of March 15.
Better, analysts at Citi recently opened a Positive Catalyst Watch on DLR, noting, “With much of the capital recycling done and DLR on track to reduce net debt leverage to meet its longer-term target, we believe DLR is in a better position for organic growth to flow through its reported financial metrics exiting 2024 and into 2025.”
AT&T (T)
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Or, look at AT&T (NYSE:T).
After a miserable few months in 2023, I first mentioned it as a beaten-down opportunity on Nov. 17. At the time, it traded at $15.60. Not long after, it would hit a high of $17.82. Now at $17.01, with a yield of 6.53%, it’s still attractive. Helping, analysts at Wolfe Research have a buy rating on the stock, with a price target of $21.
As noted by TipRanks.com, “Wolfe Research analyst Peter Supino sees AT&T as a solid, long-term investment. The analyst noted that the company is bolstering its core business, improving efficiency, and lowering debt levels. Additionally, Supino highlighted that, despite intense competition, AT&T has been able to increase the number of net postpaid phone customers in the last reported quarter.”
From its current price of $17.01, if AT&T can break above resistance around $18, I’d like to see it initially refill its bearish gap around $18.85.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.
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