There are a number of ways for investors to make money on Wall Street. However, Dividend stocks stand head and shoulders above their colleague.
In 2013, JP Morgan Asset Management published a report comparing the performance of companies that paid and increased their dividends over a four-decade period (1972-2012) with non-dividend stocks. The result? Dividend paying stocks delivered and average annual profit of 9.5% over 40 years. In comparison, the non-dividend-bearing companies achieved an annualized return of a meager 1.6% over the same period.
Since dividend stocks are often profitable and proven, they are the ideal way for long-term investors to use their money in any economic environment.
If you’re looking for market-leading dividend stocks – that is, companies that generate a return that of the broader ones. is superior S&P 500 – Which can generate significant wealth and income, the following four have the potential to double your money by 2026.
AGNC Investment Corp .: 8.8% return
For most of the last decade, mortgage real estate investment trusts (REITs) have been Wall Street’s underdogs. But with certain economic factors now working in their favor, the next five years will be could be particularly cheap for an extremely high-yielding stock like AGNC Investment Corp. (NASDAQ: AGNC).
For mortgage REITs, pretty much nothing is more important than interest rates. This is because mortgage REITs borrow money at short-term borrowing rates in order to use that capital to purchase mortgage-backed securities (MBSs) that offer higher long-term returns. AGNC and its competitors are constantly looking for ways to maximize the difference between the average return on assets it holds and the average cost of borrowing. This difference is known as the net interest margin.
The great thing for investors is that the mortgage REIT space is transparent. When the yield curve flattens out (that is, the gap between short-term and long-term returns narrows) or when the Federal Reserve changes monetary policy quickly, mortgage REITs like AGNC do poorly. Conversely, companies like AGNC thrive when the yield curve steepens and the Fed announces its moves in an orderly fashion. We are 100% in the latter scenario right now and will likely stay in that scenario for years to come.
When the US economy takes hold, we should witness one slow but steady expansion the net interest margin of AGNC. Coupled with the use of leverage to increase profitability, AGNC Investment has a good chance of generating serious income for shareholders and a modest average annual return on its shares through 2026.
Innovative industrial real estate: 2.3% return
Try this for size: A Marijuana stock it pays off.
While it is unusual for a high-growth company to pay a dividend, it is perfectly normal for a REIT to distribute most of its profits to its shareholders in the form of a dividend. This is exactly the case with the cannabis-focused REIT Innovative industrial real estate (NYSE: IIPR).
Innovative Industrial Properties, or IIP for short, is acquiring medical marijuana-focused cultivation and processing facilities with the aim of leasing them for extended periods of time. While acquisitions are IIP’s primary source of growth, investors should keep in mind that inflation-driven rent increases and a property management fee based on the annual rental price are passed on to tenants annually. Thus, a modest organic growth component is integrated into the operating model.
As of mid-August, IIP owned 74 properties with 6.9 million square feet of lettable space in 18 states. The more important number is that 100% of this area has been rented, with a weighted average rental period of 16.6 years. It should take less than half of that time for the company to fully repay the capital invested.
The icing on the cake for Innovative Industrial Properties is that the lack of cannabis banking reform in the US has worked in their favor. The companys Sale-leaseback program is particularly popular with multi-state operators.
It’s a fast-growing income stock that could double your money by 2026.
Viatris: 3% yield
Another market-leading dividend stock with all the tools it needs to double investor money by 2026 is the pharmaceutical company Viatris (NASDAQ: VTRS). If the name doesn’t ring, it’s because it was formed from the combination of less than a year ago Pfizer‘s established pharmaceutical division Upjohn and the generic drug manufacturer Mylan.
As a combined company, Viatris is expected to perform better and to be able to achieve more from a growth perspective than Upjohn and Mylan would ever have been able to do as a stand-alone company. While joining forces left the company with approximately $ 26 billion in debt, a quarter of that debt ($ 6.5 billion) is expected to will be paid off by the end of 2023. Once its debt levels get below $ 20 billion, the company may consider share buybacks and will almost certainly invest in new drug development.
Another thing that is being overlooked about Viatris is the key role it will play in the generics space. Since generics have significantly lower margins than branded drugs, volume is important. With the list prices of branded drugs soaring, it only makes sense that the use of generic drugs will increase over time. Patients and insurers will try to cut costs, as will generic drug developers are the obvious beneficiaries.
Viatris is dirt cheap too, which could be a selling point for value investors. It has generated $ 2 billion in operating cash flow over the past 12 months and can be purchased for less than four times projected earnings per share in 2021. If you set a return of 3%, you have a recipe for success.
Annaly Capital Management: 10.1% return
No list of market-leading dividend stocks is ever complete without one Annaly Capital Management (NYSE: NLY)I believe it is Top Ultra High Yield Dividend Stock Income seekers can buy. Between its double-digit yield and its upside potential, this mortgage REIT is capable of doubling investors’ money by 2026.
As I described with AGNC Investment, mortgage REITs are in the sweet spot of their growth cycle. Pretty much every decade-long economic recovery has steepened the yield curve. As long-term returns rise, Annaly should be able to earn a higher average return on the MBS she has purchased. At the same time, short-term borrowing costs should remain unchanged or rise more slowly. This is a formula for widening the net interest margin.
Another key factor in Annaly’s (and AGNC’s) success is its focus on agency-backed securities. These are assets that are secured by the federal government in the event of a default. As of June 30, $ 66.5 billion of the $ 69 billion in securities held were Agency MBSs. While this added protection will lower the returns on these securities, it also allows the company to use leverage to increase its profit potential.
Since its inception in 1997, Annaly distributed more than $ 20 billion in dividends to shareholders. It also has an average return of around 10% over the past two decades. It’s a good bet to consistently deliver for your shareholders until at least the middle of the decade.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.