Investing

8 Dividend Picks With at Least 8% Yields and Projected Upside for 2020

Jon C. Ogg

One concern that investors have in energy-based MLPs, outside of the fact that it distributes oil and gas, is that the payouts each quarter come from distributable cash flow rather than exact earnings per share like a traditional dividend. These also can come with an amped-up payment that includes a return of capital along with income, so there are some tax advantages in some years there.

At the latest earnings date, NuStar said that its distribution coverage ratio to common limited partners from continuing operations was 1.64 times for the fourth quarter of 2019 and just 1.33 times for all of 2019. That means it has ample means to keep that payment going if things remain static. Despite a chart showing that it has lost over half of its value since peaking in 2011, it has experienced a relatively stable chart pattern over the past year compared to many other MLPs. Its units also have traded slightly higher since before its most recent earnings report.

NuStar is based in San Antonio, Texas, and considers itself to be one of the largest independent liquids terminal and pipeline operators out there. The MLP operates in the United States, Mexico and Canada. Its assets are shown to be as follows: 9,900 miles of pipeline and 74 terminal and storage facilities with a combined system with about 74 million barrels of storage capacity.

Park Hotels & Resorts Inc. (NYSE: PK) counts itself as the second-largest publicly traded lodging REIT, with a diverse portfolio of 62 top hotels and resorts with “significant underlying real estate value” that have a combined tally of 34,000 rooms in prime U.S. markets. This has only been its own public entity since 2017, and its dividend has fluctuated due to year-end payouts, and the payout treatments include ordinary dividends and capital gains distributions. At face value, the yield would be over 9%, but we have to see about its 2020 guidance to determine the forward outlook.

Park Hotels & Resorts has a $5.8 billion market cap, and the $23.95 share price comes with a consensus analyst target of $25.75. Its 52-week trading range is 421.67 to $33.02, and the latest recovery is after shares dipped following the termination of its asset management head after having a consensual relationship that was against company policy.

While it operates under the names of Hilton and Doubletree, it has other portfolio names and has not been directly located in many of the areas impacted by the coronavirus so far. Park also carried about $4.1 billion in long-term debt and a total net equity value of about $6.5 billion as of last look. It is unknown just how to view the dividends for 2020 and beyond, but with a discount to the consensus target price and a big sell-off since last April, it would seem that at least some bad news already has been factored in here.

Sabra Health Care REIT Inc. (NASDAQ: SBRA) recently traded at $21.75, with a consensus target price of $22.25. Its dividend yield is 8.3%, and it has paid the same $0.45 per share quarterly dividend since early in 2018. The company had 434 real estate properties held as investments, which are over 300 skilled nursing and transitional care facilities, and the remaining properties are senior housing communities that are owned/leased and other senior housing communities that are operated by third-party property managers. The company also has specialty hospitals and has invested in loans and other financial activity in its target areas.

The REIT pays its dividend from funds from operations (FFO) rather than classic earnings numbers. The company in the third quarter of last year sold an additional 4.2 million shares of common stock to raise about $90 million. That and another $350 million in debt were both used to pay down on maturing debt and under the revolving credit facility. The company claims to continue improving on its leverage, credit metrics and cost of capital. Sabra also claimed to be entering 2020 with the strongest balance sheet since its inception.

In January of 2020, SunTrust Robinson Humphrey lowered its FFO per share estimates based on the above shares sold and the firm warned that near-term earnings growth is likely limited and that the firm is incrementally cautious on the stock to start the year. While the street is higher, SunTrust’s target price is only $20.