The market has recovered from the COVID-19 bear market, but some stocks still trade at crazy valuations. One dividend stock in particular looks too good to pass up. It has a 12% dividend yield and could more than double in price over the next 12 months.
If you’re willing to take a little risk, this could be the best opportunity of 2020. If conditions align, you could generate a quick 100% gain. But even if the upside takes time, you’ll be kept warm with a market-leading dividend yield.
Dividend stocks don’t normally have this much near-term upside. This is truly a limited-time opportunity.
This stock is special
Brookfield Property Partners L.P. (TSX:BPY.UN)(NASDAQ:BPY) owns some of the best real estate in the world. Examples include First Canadian Place in Toronto, Brookfield Place in New York City, Canary Wharf in London, and Potsdamer Platz in Berlin.
These assets are irreplaceable. They’re iconic building in high-density areas. While economic swings may temporarily impact their value, over the long term, these properties will retain and grow their worth.
Of course, all of these building have rent-paying tenants, allowing Brookfield to be such an impressive dividend stock. The company has raised the payout every year since it went public.
The dividend was last increased in late February despite the onset of the COVID-19 pandemic. It hasn’t been reduced. The next payment will be made at the end of June.
Although the dividend has been maintained, the stock price has been crushed.
Around 40% of Brookfield’s assets are deemed office space, with another 40% being retail. Office tenants continue to pay, but retail payments have fallen off a cliff. Many of the storefronts are still closed.
Shares currently trade at half their pre-pandemic valuation, pushing the dividend yield up to 12%. Before the crisis, shares yielded just 6%.
Management has reaffirmed that the company will remain a reliable dividend stock, despite the recent pressures.
“There’s a short sharp impact right now over the next couple of months as a number of our retailers struggle to pay their rent. Everybody else is paying their rent, though. So from a liquidity perspective, that’s really where our cash flows are impacted in the short term,” CEO Brian Kingston recently said.
“While a prolonged economic contraction would impact cash flow in the longer term, we continue to have more than sufficient resources to pay our stated quarterly dividend,” he concluded.
Buy this dividend stock?
There’s certainly elevated risk here, but that’s the price of securing a 12% dividend yield at half-price. If you think the worst of the coronavirus is behind us, this company should top your buy list.
When looking at Brookfield’s liquidity, which includes cash on hand and existing lines of credit, there really is no concern regarding the dividend. The only question is how long the downturn will last.
If conditions continue to improve, the dividend will remain stable. The stock price, meanwhile, should skyrocket. There’s 100% upside here, and that’s assuming shares still trade at a discount to book value.
You’ll need patience, but this looks like a great dividend stock for risk-tolerant investors.
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The Motley Fool recommends Brookfield Property Partners LP. Fool contributor Ryan Vanzo has no position in any stocks mentioned.