High dividend yields and high expectations for share appreciation? Some investors think you have to choose one or the other. However, they don’t have to be mutually exclusive.
There are more stocks with attractive dividends and growth prospects than you might realize. For example, analysts think that these three could be especially huge winners over the next 12 months, with shares forecast to soar by 21% to 92%.
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1. Devon Energy
Devon Energy (NYSE: DVN) basically has two dividends rolled into one. There’s a fixed component that the oil company has committed to pay. In addition, it distributes a variable component based on its excess free cash flow. The company’s fixed-plus-variable dividend currently yields nearly 9.4%.
This stock was sizzling hot in 2021 and 2022, delivering gains of 179% and 40%, respectively. So far in 2023, though, Devon’s sizzle has fizzled and shares have fallen by a double-digit percentage.
However, good news could be on the way. The consensus 12-month price target for Devon reflects an upside potential of around 21%. Analysts appear to be betting that oil prices will rise. That could be a smart bet, especially considering that Saudi Arabia and other OPEC+ members recently announced production cuts.
Higher oil prices wouldn’t just provide a catalyst for Devon’s share price; they’d also likely boost the company’s dividend. The higher oil prices are, the more excess free cash flow the company has. And the more excess free cash flow it has, the more money it will use to fund the variable portion of its dividend.
2. Medical Properties Trust
If you’re really looking for the “ultra” in ultra-high-yield dividend stocks, check out Medical Properties Trust (NYSE: MPW) (MPT). The hospital real estate investment trust (REIT) offers a dividend that yields more than 13.9% at the current share price.
One main reason why MPT’s yield is so high is that its share price has fallen a lot. So far this year, the REIT’s shares are down by almost 25%. And MPT stock plunged 53% in 2022.
But some on Wall Street think that MPT can rebound. The average analysts’ 12-month price target for the stock is 46% above the current share price. However, there’s a wide range of views among analysts about MPT’s prospects.
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The financial outlook for hospital operators, in general, appears to be improving. MPT remains confident that it will recover most of the money it’s owed by one of its top tenants, Prospect Medical, which is behind on rent payments this year. It’s possible that the worst could be over for the beleaguered REIT.
3. Innovative Industrial Properties
Speaking of beleaguered REITs, Innovative Industrial Properties (NYSE: IIPR) (IIP) falls into that category as well. IIP leases properties to U.S. cannabis businesses. Its stock has plummeted more than 30% year to date after sinking 61% in 2022.
However, IIP has at least a couple of things going for it. Analysts believe the stock can bounce back in a huge way. The average price target for IIP reflects an upside potential of 92%. Even the most pessimistic analyst surveyed by Refinitiv set a 12-month price target that’s 42% higher than the current share price.
Another big plus for IIP is its dividend. The REIT’s yield currently stands at nearly 10.6%. IIP also has a great track record of dividend increases, with its payouts growing by nearly 70% over the last three years.
The primary challenge for IIP is the ongoing difficult environment for the U.S. cannabis industry. A cannabis supply glut has impeded growth for the REIT’s tenants, and caused some of them financial difficulties. Once the sector’s supply-and-demand imbalance is resolved, though, IIP and its tenants could have strong long-term growth prospects.
