2 ultra-high yield dividend stocks that billionaires are buying like crazy

By | February 27, 2024

Some people see the S&P500 index reaching new heights and worrying that they are missing out, while others worry that a crash is coming. Whatever camp you’re in, buying more dividend-paying stocks is probably the surest way to build a portfolio that can outperform over time.

Dividend payers as a class tend to outperform non-payers because these companies are already profitable on a recurring basis. Furthermore, the promise of paying out a share of profits forces managers to think further ahead and be more cautious in managing limited cash flows.

Individual investor looking at stock charts.Individual investor looking at stock charts.

Image source: Getty Images.

The difference between dividend payers and non-payers is probably more dramatic than you think. According to a study conducted by Ned Davis Research and Hartford Funds, shares of dividend-paying stocks in the S&P 500 index delivered an average annual return of 9.18% during the fifty years between 1973 and 2022. The stocks of the index’s non-paying countries returned just 3.95% per year over the same period.

These two dividend payers offer an average yield of about 12.65% at their recent share prices – more than nine times the average return of stocks in the S&P 500 index.

Reliance on medical properties

One of the most surprising ultra-high yield dividend stocks that billionaire investors hit the buy button for in the fourth quarter was Reliance on medical properties (NYSE: MPW). The Real Estate Investment Trust (REIT) owns more than 400 hospitals and related facilities in the US and eight other countries.

At recent prices, Medical Properties Trust offers a yield of 15.6%. Its generally reliable business model and huge dividend yield have prompted more than a few billionaire asset managers to pick up shares in the fourth quarter, including:

  • Israel Englander of Millennium Management (2,342,460 shares)

  • Jeff Yass of Susquehanna International Group (1,762,020 shares)

  • Ken Griffen of Citadel Advisors (1,374,795 shares)

  • Philippe Laffont of Coatue Management (1,060,830 shares)

Medical Properties Trust is not just geographically diversified. The properties are managed by 54 different operators. Cash flows must be reliable because the REIT gets virtually all of its building operators to sign long-term net leases, transferring all variable costs of building ownership, such as maintenance and taxes, to the tenant.

Demand for hospitals is generally reliable, but Medical Properties Trust had to cut its dividend last year as its largest tenant, Steward Health Care, missed rent payments. Recent asset sales will help Medical Properties Trust meet its dividend obligation in the coming quarters. Looking further ahead, this stock remains a risky choice. The REIT still relies on Steward for more than 20% of its total revenue.

The billionaires mentioned above may have bought millions of shares of this REIT in the fourth quarter, but it still represented only a small portion of their well-diversified portfolios. If you want to take a chance on this stock, make sure you follow their lead.

British-American tobacco

Billionaires were also attracted to tobacco stocks late last year. Famous money managers who increased their bets British-American tobacco (NYSE:BTI) in the fourth quarter included Ken Griffin of Citadel Advisors, who acquired 618,331 shares, and Jeff Yass of Susquehanna International Group, who acquired 204,691 shares.

At recent prices, British American Tobacco shares offer a dividend yield of 9.7%. That is a lower return than Medical Properties Trust, but the tobacco giant offers much more stability. Sales of traditional cigarettes have been declining for decades, but the total amount of nicotine consumed remains stable.

British American Tobacco’s shares have been under intense pressure since the company wrote down the value of its cigarette brands by about $31 billion last year. Fortunately for shareholders, revenue from the company’s non-combustible portfolio grew 15.6% in 2023. Adjusted for exchange rate fluctuations, total turnover increased by 1.6%.

British American Tobacco expects that by 2035 the majority of its revenue will come from non-combustible products such as e-cigarette brand Vuse. Vuse’s sales in the US market are growing rapidly and could continue to rise at a rapid pace. It is one of only three vape brands that U.S. retailers are currently allowed to sell by the Food and Drug Administration.

Should You Invest $1,000 in Medical Properties Trust Now?

Consider the following before purchasing shares in Medical Properties Trust:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Medical Properties Trust wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor service has more than tripled the return of the S&P 500 since 2002*.

View the 10 stocks

*Stock Advisor returns February 26, 2024

Cory Renauer holds positions in Medical Properties Trust. The Motley Fool recommends British American Tobacco Plc and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.

2 Ultra-High Yield Dividend Stocks Billionaires Are Buying By Hand was originally published by The Motley Fool

Leave a Reply

Your email address will not be published. Required fields are marked *