Most dividend stocks have rallied this year. That's one reason why the dividend yield on the S&P 500 is below 1.3% these days, its lowest level in two decades.
However, while most dividend stocks are higher, compressing their yields, Wall Street has missed a few top-notch dividend stocks, which are surprisingly lower this year. It seems to have overlooked two in particular: Atlantica Sustainable Infrastructure (AY) and Medical Properties Trust (MPW -0.80%).
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A powerful dividend growth plan
Shares of Atlantica are down about 15% from their high point earlier this year. Because of that, the infrastructure company's dividend yield has risen to an attractive 4.3%.
That slumping stock price doesn't make any sense. For starters, Atlantica grew its cash available for distribution (CAFD) by nearly 13% during the first half of the year. Meanwhile, the company continued making progress on its strategic growth plan, acquiring two more renewable energy assets in recent months. In June, it bought a portfolio of four wind assets in the U.S. for $197 million and the third-largest U.S. geothermal power plant for $170 million in April.
Both acquisitions will supply a steady stream of cash flow backed by long-term power purchase agreements. That adds to its growing portfolio of sustainable infrastructure assets supported by long-term fixed-rate contracts.
Those investments kept the company on track with its long-term growth plan. Atlantica is targeting to invest $300 million per year, which should support 5% to 8% annual CAFD per share growth through 2024. Given the trillions of dollars needed to transition the global economy to more sustainable energy sources, the company shouldn't have any problem finding investment opportunities.
That should support the company's ability to continue growing its dividend. Since 2018, Atlantica has increased its payout at a 12% compound annual rate. When combined with Atlantica's focus on sustainability, that strong dividend history makes it an excellent option for income-focused investors.
A healthy dividend growth strategy
Medical Properties Trust's stock price is down about 7% from its recent high. That has pushed the healthcare REIT's dividend yield up to 5.3%.
That lower value is also a head-scratcher. This year, the REIT has acquired billions of dollars' worth of hospitals, which has helped grow its normalized funds from operations (FFO) at a double-digit per share rate compared to the prior-year period.
Medical Properties Trust also showcased the value of its portfolio by agreeing to a joint venture with a private equity fund. The deal valued eight hospitals in Massachusetts at $1.78 billion, 48% more than it paid for the properties in 2016. In addition to unlocking a portion of the value of its portfolio, that transaction will provide the company with more cash to continue expanding its portfolio.
Medical Properties Trust's acquisition-driven growth strategy has paid big dividends for investors over the years. The REIT has increased its payout in each of the last eight years. More recently, it has grown the dividend at a 4.2% annual pace since the end of 2018.
That upward trend should continue, since Medical Properties Trust has no shortage of acquisition opportunities. Despite being the world's second-largest non-governmental hospital owner, the company estimates that between $500 billion and $750 billion of U.S. hospital real estate remains owner-operated, giving it a large investment pool.
Wall Street is napping on these dividend stocks
Wall Street didn't even notice that Atlantica Sustainable Infrastructure and Medical Properties Trust continued executing their growth plans this year. Because of that, they trade at even higher dividend yields, given the decline in their stock prices. That makes them look like even more compelling investment opportunities for dividend seekers considering their higher yields, track records, and growth prospects.
