Looking for high dividend yields and good prospects for extraordinary share price growth? That's a combination hard to find in the same stock. Investors often have to trade off juicy yields for lower growth and vice versa.
But hard isn't the same thing as impossible. Wall Street thinks these ultra-high-yield dividend stocks could skyrocket 32% to 85% over the next 12 months.
1. Energy Transfer LP
Energy Transfer LP(NYSE: ET) ranks as one of the leading midstream energy companies in the U.S. It operates nearly 125,000 miles of pipeline across the country that transport crude oil, natural gas liquids (NGLs), and refined petrochemical products.
The company pays a distribution that currently yields 9.6%. Energy Transfer can easily afford such a generous distribution. In the third quarter of 2023, it generated excess cash flow after distribution payouts of roughly $1 billion. The midstream energy company expects to grow its distribution by 3% to 5% per year.
Energy Transfer's stock has performed pretty well so far in 2023. Wall Street thinks it can go even higher. The consensus 12-month price target reflects an upside potential of 32%.
Analysts are overwhelmingly bullish about the stock. Of the 16 analysts surveyed by LSEG in October, half recommend Energy Transfer as a strong buy with the other half rating the stock as a buy.
2. Innovative Industrial Properties
Innovative Industrial Properties(NYSE: IIPR) (IIP) is the only cannabis-focused real estate investment trust (REIT) that trades on the New York Stock Exchange. It owns 108 properties in 19 states, with 98.5% of those properties leased to cannabis operators. Multi-state operators make up around 90% of IIP's annualized base rent.
The cannabis REIT's dividend yield stands at nearly 9.6%. IIP has increased its dividend payout by more than 5x over the last five years, although the dividend has held steady since late 2022.
Challenges for some of its cannabis operator tenants have served as a damper for IIP in 2022 and 2023. Some of those tenants have missed rent payments. As a result, IIP's share price has tumbled more than 25% year to date.
However, analysts remain optimistic about the REIT's prospects. The average 12-month price target for the stock is roughly 45% higher than IIP's current share price.
3. Medical Properties Trust
Medical Properties Trust(NYSE: MPW) (MPT) is a much different kind of REIT than IIP. It's one of the largest owners of hospital real estate in the world with around 440 facilities in the U.S., Europe, and South America.
Earlier this year, MPT reduced its dividend payout. Even with that cut, though, its dividend yield tops 12.9%.
There's a not-so-great reason for this high yield. MPT stock has plunged nearly 60% year to date. A big chunk of that decline has come since the company announced its dividend cut in August.
The average analysts' 12-month price target reflects a whopping 85% upside potential for MPT stock. However, analysts aren't all on the same page. Of the 14 analysts surveyed by LSEG in November, only six rated MPT as a buy or strong buy. Another five recommended holding the beaten-down stock. Two rated it as an underperform, and one recommended selling MPT.
Is Wall Street right?
I don't know if Wall Street's price targets will prove to be anywhere close to right for any of these stocks. However, I do think that all three stocks should be able to move higher over the next 12 months barring a major stock market downturn.
Energy Transfer is expanding its pipeline significantly. It recently closed on the acquisition of Crestwood Equity Partners. I think that the company's distribution should be reliable, too.
Innovative Industrial Properties and Medical Properties Trust aren't stocks for the faint of heart. Both REITs face headwinds that won't subside overnight. I suspect, though, that the worst is over for these companies.
Risk-averse investors will probably be better off avoiding all three stocks. But for those willing to endure considerable volatility in exchange for ultra-high dividend yields, my view is that Energy Transfer, Innovative Industrial Properties, and Medical Properties Trust are worth a hard look at their current valuations.
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Keith Speights has positions in Innovative Industrial Properties and Medical Properties Trust. The Motley Fool has positions in and recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.