With the stock market at all-time highs and interest rates still at all-time lows, high-yield stocks are more attractive than ever. Historically, dividends have made up a huge portion of total returns experienced by investors. But be warned: Often a stock offers investors above-average dividend payouts for a reason.
Fortunately, there are high-yield dividend stocks that offer sharp investors the safety and dividend income required to qualify as a true high-yield dividend stock worth buying. Below are the key details on why Pembina Pipeline (PBA -0.12%), Physicians Realty Trust (BLX 0.94%), and Bladex (BLX 0.94%) are unknown high-yield stocks worthy of investors' attention.
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Heading north for high yield
Sean O'Reilly (Pembina Pipeline): When searching for investment ideas, it's easy to go right for stocks that everyone knows. Unfortunately, the best investments are often in stocks that the public hasn't caught on to yet. Though not a household name, Pembina Pipeline Corporation is a stock all investors looking for yield should get to know. Based in Calgary, Alberta, Pembina is a midstream (think pipelines and storage) operator with a market capitalization of $17 billion. Its fortune is tied directly to that of Western Canadian and North Dakotan oil regions.
While this reliance on more expensive crude will make some investors nervous, Pembina's customers beg to differ. Major exploration and production companies like Suncor Energy, Cenovus Energy, and Canadian Natural Resources continue to pour money into the Pacific Northwest. They're doing this because efficiency gains continue to chip away at oil production costs. As oil continues to flow from the Northwest, Pembina Pipeline will benefit.
The most significant factor that will drive value for investors is Pembina's pending merger with infrastructure company Veresen. Once the $9.7 billion (including debt) combination is complete, Pembina will be one of the largest energy midstream operators in Canada.
The Veresen merger will add increased diversification to an already thriving enterprise. Pembina recorded record volumes of oil and gas in the second quarter. Cash flow from operations surged 29% year over year. It also brought 2.8 billion worth of new projects online, which will fuel profits well into the future. In spite of its success, Pembina's shares are still some 30% off their highs of 2014. With a dividend yield of over 5%, any investor in search of high-yield stocks should dive in and check out Pembina Pipeline.
Great income with lots of growth potential
Matt Frankel (Physicians Realty Trust): There are some excellent income and growth opportunities in the real estate sector, and one of my favorite little-known high-yield REITs is Physicians Realty Trust.
Physicians Realty Trust owns over 250 healthcare properties, primarily medical offices, with about 11.4 million square feet of leasable space. The company's general business model is to leverage its knowledge of the healthcare industry, as well as its relationships with physicians and health systems, to find the best long-term investment opportunities.
Healthcare real estate has some fantastic growth opportunities in the coming decades. The senior citizen population in the U.S. is expected to roughly double by 2060 with the ongoing retirement and aging of the baby boomer generation, and older Americans not only use healthcare facilities more often, but spend more when they do.
Physicians Realty Trust has grown its portfolio aggressively since its 2013 IPO, and management doesn't have any plans to stop anytime soon. And, in addition to being a compelling growth opportunity over the next few decades, the company pays an impressive 5.2% dividend yield. A healthy combination of growth and income can make you rich over time, and Physicians Realty Trust could be an excellent way to add both to your portfolio.
A Latin American trade bank
Brian Feroldi (Bladex): U.S. stock markets have been on fire for years. That has caused valuations of many stocks to become stretched. For that reason, I think it makes a great deal of sense to look for strong companies that exist outside our borders. If that sounds like a winning idea to you, then I suggest you get to know Banco Latinoamericano de Comercio Exterior, or Bladex for short.
Bladex is a trade bank based out of Panama. The bank was set up a few decades ago by Latin American governments to help finance trade in the region. Bladex provides local importers and exporters with short-term financing and letters of credit that help them to grow their business.
What impresses me so much about Bladex's businesses is that it has cranked out a profit annually for more than a decade. That's an impressive achievement since this time period includes the great recession and a lot of recent upheaval in countries like Venezuela, Colombia, and Brazil.
How has Bladex pulled this off? The answer lies in the short-term nature of its lending. This allows Bladex to pull back on lending activity in countries that are heading for trouble and put its funds to work elsewhere. Once the all-clear sounds, Bladex can move that money back into the region to take advantage of renewed economic growth.
With a strong business model in place that cranks out profits, Bladex management's team can afford to pass on the lion's share of its net income to shareholders in the form of a generous dividend. Shares currently yield 5.4% and the dividend only consumes 74% of profits, so the yield looks safe to me.
And yet, despite its history of success and strong business model, investors can buy Bladex's stock right now for less than 1.2 times book value. If you are looking for yield, value, and long-term growth potential, I'd suggest that you give Bladex a closer look.
