The best dividend stocks are not just the ones that offer big payments right now. After all, big dividends are nice … but pretty meaningless if your high dividend stocks also give you very low share performance.
Similarly, what good are big dividends now if they don’t last? If a company has high dividends today but reduces or eliminates those payments in the future, that’s not the kind of stock you want to invest in.
So when looking for the best dividend stocks, investors need to focus on both the current dividend opportunities and the prospect of big payments down the road, too.
And to me, there’s no better investment for income — both now and over the long-term — than healthcare REITs.
Best Dividend Stocks — Healthcare REITs
One of my favorite long-term investing trends is the demographic shift taking place in America.
There are few sure things in life, but getting older is one of them … and as the Baby Boomer generation continues to get grayer, the demographic transformation of America will also transform many industries, particularly across health care.
A great way to play this trend is via high-yield real estate investment trusts that focus on care for the elderly. REITs, because of their special status with the IRS, must return 90% of income back to shareholders — meaning a mandate for big dividends and a big share of any profits. So as Boomers age and the businesses that support them grow, you are likely to see these stocks grow their dividends, too.
That makes these picks the best dividend stocks for the long-term.
So why buy healthare REITs now? Well, despite the rather obvious nature of this demographics trade, it has been a rough road for many stocks in the space over the last few years. Investors were steadily going “risk on” since 2011, buying high-growth technology companies and overlooking sleepy dividend payers that weren’t in a sexy business like cloud computing or 3D printing.
But in 2014, as the stock market has gotten rocky, the best dividend stocks have risen to the top. The risk-off environment and a hunger for yield amid falling Treasury rates has re-energized interest in healthcare REITs and provided a nice tailwind.
So what are the best dividend stocks in the healthcare REIT sector?
The first is Ventas (VTR). Ventas controls some 700 senior-housing facilities, 400 skilled-nursing facilities and 250 medical-office buildings across the U.S. The stock is up 20% or so this year thanks to the “risk off” environment, but even after the run-up, VTR stock yields 4.3%.