Who doesn’t enjoy receiving big dividends? However, just like investing in any other stock, you should try to buy big dividend stocks on the cheap to get the best value for your buck.
Let’s find out.
NorthWest Healthcare Properties
NorthWest Healthcare Properties is a global healthcare real estate investment trust (REIT) that generates rental income from a portfolio of medical office properties and hospital properties. It owns these properties throughout major markets of Canada, Brazil, Germany, Australia, and New Zealand.
NorthWest’s asset type is stable by nature and is characterized by a high occupancy of nearly 97% and a long weighted average lease term expiry of about 12 years, which make its cash flow generation very stable.
It’s convenient for income investors to get a monthly cash distribution from NorthWest. The healthcare REIT offers a yield of 6.9%, which is very juicy. However, in reality, the stock has run up and is trading at near its five-year high at writing.
In the most recent quarter, the company estimates a normalized net asset value per unit of $12 on the stock. As of writing, NorthWest trades at $11.59 per unit, which represents a discount of only 3.4%. So, the stock is, at best, trading at a fair valuation.
It would be more prudent for interested investors to wait for the stock to dip to $10.75 per unit or lower for a bigger margin of safety before buying shares.
Brookfield Renewable Partners
Brookfield Renewable Partners is a great play for green and clean energy. It operates one of the largest renewable power platforms in the world and pays a big dividend doing it. About 76% of its power generation is hydroelectric.
Brookfield Renewable’s portfolio has a capacity of 17,400 MW; it has 879 power-generating facilities across 25 markets in 15 countries.
Brookfield Renewable generates about 90% of cash flows that have long-term contracts with credit-worthy counterparties, which makes its cash flow generation very stable.
Since 2012, the company has increased its cash distribution at a compound annual growth rate of 6%. Going forward, management aims for cash distribution growth of 5-9% per year.
Brookfield Renewable offers a quarterly cash distribution of US$0.515 per unit (US$2.06 when annualized). This equates to a yield of 6.5%, which is very juicy. However, the stock has run up lately.
It would be more prudent for interested investors to wait for a pullback to $39 per unit or lower before buying shares.
The stocks of both NorthWest Healthcare Properties and Brookfield Renewable Partners have appreciated meaningfully lately. Despite their enticing yields of more than 6%, it’s in investors’ best interests to wait for a dip before buying to improve the risk-reward ratio in their favour. Consider these dividend stocks today instead.
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Fool contributor Kay Ng has no position in any of the stocks mentioned.