“The real investor… will do better if he forgets the stock market and pays attention to his dividend yields and to the bottom line of his companies.” – Benjamin Graham
Taking this quote to heart, here are two companies with high dividend yields and improving businesses or future growth potential that income investors should pay very close attention to: United Parcel Service (NYSE:UPS)And LTC Properties Inc. (NYSE:LTC).
Return to growth
UPS is one of the largest companies in the world. It offers a range of logistics solutions for customers in more than 200 countries and territories. While Wall Street may have lower expectations for UPS right now, that doesn’t mean income investors should shy away from a stock that offers a solid dividend and could rebound in the near term. The stock has lagged broader markets as customers have switched to cheaper shipping options, hurting the company’s financials.
In fact, consolidated revenues fell 1.1% in the second quarter compared to the prior year, but consolidated operating profit fell a whopping 30.1% compared to the second quarter of 2023. Adjusted diluted earnings per share also fell by a brutal 29.5%.
But something else happened that should pique investor interest: The second quarter could prove to be a turning point, as UPS returned to volume growth in the U.S. for the first time in nine quarters. While one quarter doesn’t show a trend, it’s certainly a change of pace worth noting going forward.
UPS also made a move in July to acquire Estafeta, a leading Mexican courier company. The acquisition is expected to close by the end of 2024 and will boost UPS’s business as Mexico’s role in global trade continues to grow.
UPS has returned to growth and made significant acquisitions. It offers a dividend yield of 4.8% and has maintained or increased its dividend every year since its initial public offering in 1999. That makes it a solid dividend stock to buy as it positions itself for a recovery.
Aging population
LTC Properties is a real estate investment trust (REIT) that invests in senior housing and healthcare real estate through leasing transactions, mortgage loans and other investments. It has made itself an intriguing option for income investing as it maintained monthly dividends during the COVID-19 pandemic, when most healthcare REITs cut their dividends.
LTC Properties has a long-standing leadership team with decades of experience in the healthcare real estate industry, and has recorded 233 consecutive monthly dividend payments. It also offers a conservative and strong balance sheet with debt maturities that match the portfolio’s cash flow and maturities – meaning investors can sleep easier at night.
However, it is the growth that makes this income investment interesting. It specializes in senior housing and skilled nursing facilities, and it’s worth noting that the U.S. population is aging. More than 4.1 million Americans will turn 65 each year through 2027, creating high demand for LTC properties. In addition, the U.S. adult population aged 85 or older is expected to continue growing rapidly; in 2035 this number will reach 11 million and exceed 17 million in 2050.
While income investors wait for the aging population to drive demand for LTC properties, the company will pay a healthy 6.2% dividend yield, making it a smart income source for investors.
Buy now?
UPS offers a potential turnaround story as the company returns to volume growth in the US, offering investors a near 5% dividend yield as they wait for the financial sector to return to growth. LTC Properties has a bright future as the U.S. population ages and demand for senior and nurse housing increases, and its 6.2% dividend yield is just the icing on the cake. Both stocks appear to be excellent options with a high dividend yield and could rise significantly in the future.
Should You Invest $1,000 in LTC Properties Now?
Please consider the following before purchasing shares in LTC Properties:
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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.
2 High Yield Dividend Stocks Set to Soar was originally published by The Motley Fool