Baird Dividend Portfolio Offers Big Yields, Safety and Solid Upside Potential
Despite the constant chatter from the Federal Reserve and those on Wall Street anxious to see interest rates move higher, the reality is almost every uptick in yields brings in buyers, which in turn drives the yields back down. There are numerous reasons why, not the least of which is investors are somewhat nervous given the current developments domestically and on a global macro basis, and they see U.S. Treasury debt as the proverbial safe haven. Yields plunged yesterday as worried investors bought Treasury debt heavily.
A new research report from the Real Estate analysts at Baird updates the firm’s Common Stock Dividend Portfolio and makes some adjustments, adding two new companies while removing two. To make the list, stocks must meet this list of requirements that was in the research report:
The Baird Real Estate Research team provides a selection of nine dividend-enhanced common stocks each month for investors to consider. The criteria for consideration include Outperform-rated shares within Baird’s coverage; Average or Lower Risk suitability; a dividend yield at least 150 bps above the current 10-year Treasury yield; and an adjusted funds from operations (AFFO) payout ratio for 2017 under 100%.
Here we highlight the five highest yielding stocks in the portfolio and, again, all are rated Outperform by the analysts at Baird.
Medical Properties Trust
This stock may be offering investors the best value at current price levels. Medical Properties Trust Inc. (NYSE: MPW) acquires, develops and invests in health care facilities, and it leases health care facilities to health care operating companies and health care providers. The company also provides mortgage loans to health care operators, as well as working capital and other term loans to its tenants and borrowers.
With a growing portfolio and a versatile business model, the company continues to rank highly across Wall Street. The analysts noted that the company’s acute care hospitals rent coverage increased nicely, and the company attributed the increase to better cost controls and higher patient admissions.
Shareholders this real estate investment trust (REIT) are paid an outstanding 7.23% distribution. The Baird price target for the shares is $15, and the Wall Street consensus target is $14.09. The stock closed Wednesday at $13.28 per share.
Chesapeake Lodging Trust
This stock is trading at levels printed back in the fall and it may have substantial upside potential. Chesapeake Lodging Trust (NYSE: CHSP) is focused on investments primarily in upper-upscale hotels in various business and convention markets and, on a selective basis, select-service hotels in urban settings or other locations in the United States.
The company reported better than expected first-quarter results, and while it issued lower guidance for the current quarter, it maintained the outlook for 2017 that is currently in place. The company’s president and chief executive, James Francis, said this in the earnings release:
Although we still have not yet seen a meaningful increase in lodging demand from corporate customers, we remain cautiously optimistic that the current pro-growth political agenda will lead to an uptick in lodging demand in the quarters ahead.
Chesapeake Lodging investors are paid a very solid 7.05% distribution. Baird has a $26 price target for the shares, and the posted consensus target is $23.14. The shares closed most recently at $22.68 apiece.