That’s because they frequently distribute a substantial portion of their free cash flow as dividends, giving them little flexibility to maneuver should market circumstances worsen.
Analyst predictions, however, indicate that a number of high-yielding stocks should have more than enough cushion to continue paying out large dividends over the following several years. Three real estate investment trusts (REITs): EPR Properties (EPR 0.71%), Kilroy Realty (KRC 0.84%), and Simon Property Group (SPG -0.05%) are among those with payments above 5% that stand out as secure possibilities.
There is enough space to handle a tenant problem.
The dividend yield for EPR Properties, a speciality REIT with an emphasis on experiential real estate, is now 7.7%. The business makes more than enough money to pay its $3.30 per share yearly dividend.
EPR Properties will reportedly create roughly $4.93 in adjusted funds from operations (AFFO) per share this year, according to analysts surveyed by FactSet Research Systems, giving it a 11.4% free-cash-flow yield at the current share price. Given that the S&P 500 now trades at a free-cash-flow yield of about 5%, this suggests that shares are trading at a cheap price. Analysts predict that AFFO will increase to $5.12 per share in 2024, bringing the free-cash-flow yield up to 11.9%. As a result, the dividend of the REIT has plenty of breathing room.
That safety net is welcome given that the REIT is dealing with a significant headwind that has dragged on its value and increased its yield. The parent company of movie theater operator Regal Entertainment, Cineworld Group, declared bankruptcy last October. Despite not paying rent in September, it started paying rent again the following month.
RJ Milligan, a Raymond James analyst, feels that this year will bring greater insight regarding how the two businesses’ conversations turned out. As that takes place, it ought to lessen the pressure on the stock, which is now a favorite of that analyst.
This dividend should keep on being strong.
The dividend yield for Kilroy Realty is now 5.4%. The operations of the office REIT generate more than enough cash to pay the $2.16 yearly dividend per share. The firm will generate $3.40 worth of AFFO per share this year, giving it an 8.6% free-cash-flow yield, according to analysts surveyed by FactSet. They forecast a small fall in share price to $3.38 in 2024, giving it an 8.5% free-cash-flow yield.
The epidemic hasn’t helped the need for office space, but Kilroy’s buildings are holding up better than others in the industry; at the end of last year, its portfolio was 92.9% rented.
This dividend stock will remain popular.
The dividend yield for Simon Property Group is now 5.7%. Additionally, the mall REIT generates more than enough cash to pay its $7.20 yearly dividend, which the business has boosted by 9.1% over the previous year. The REIT will generate around $11.08 worth of AFFO per share this year, giving it an 8.8% free-cash-flow yield, according to analysts surveyed by FactSet. They forecast that price to increase to $11.39 per share in 2024, bringing its future free-cash-flow yield up to 9.1%.
Consumers prefer to purchase at malls and outlet centers despite the growing popularity of e-commerce. The REIT’s U.S. malls and premium stores had a 5.6% increase in sales per square foot last year, which increased demand for space in its properties. Simon Property Group inked leases for 14 million square feet last year, increasing occupancy at its malls and upscale stores in the United States by 1.5% to 94.9% while driving up rates by 2.3%.
The REIT should continue to generate a ton of cash to maintain its hefty payout as further development projects get launched.
These large rewards seem secure.
Big profits are available from EPR Properties, Kilroy Realty, and Simon Property Group. Their lower values, as seen by their comparatively high free-cash-flow yields, are partially to blame for this.