Top stocks with at least 7% dividend? The fool rightly asks: does it even exist? Of course, we must not forget that such opportunities at least have their risks. Otherwise, there are hardly any such reviews.
However, there are now two top stocks that give a dividend of at least 7%. These are BASF (WKN: BASF11) and Medicinal properties (WKN: A0ETK5). Let’s look at their basic characteristics and valuations. As well as the risk that the market is currently focused on.
Top share with 7.49% dividend yield: Medical Properties
Medical Properties is a first potential top stock that is yielding a yield of 7.49% right now. At least that’s what we get when we extrapolate to the current quarterly dividend of $ 0.29 for the full year and compare it to a stock price of $ 15.48.
Otherwise, the overall rating is good value. Medical Properties’ last fund from operations per. share was $ 0.47. Or to put it another way: the price-FFO ratio is also in the value range with a value of 8.2. On the one hand, it is clear that the market is pricing REITs more pessimistically due to interest rate hikes. And the dividend yield increases correspondingly, which may well be an option.
But what is the risk of this top stock with a dividend as high as 7.49%? To me, that is clearly net debt of $ 11.2 billion. Theoretically, it took ten years and the full funds from the operation to pay off the debt. This shows that the burden is not exactly small. But manageable?
After all, there is a buffer in the payout ratio that should protect the dividend. So this top stock with a dividend of 7.49% is a bit of a bid that US interest rates should not rise too fast. But if it goes up, high returns can lurk.
BASF: Is the worst case of energy coming?
BASF is also a top share with a dividend of just over 7%. Based on a payout of EUR 3.40 per share and a share price of 42.22 EUR, the value is even 8.05%. In fact, we could therefore rename the article to this stock.
But what is the chance? To put it very simply: that the worries are exaggerated. If the management is operationally stable or can only perform with a moderate slowdown and keeps the dividend constant, the distribution will give an almost market-beating return. A price-to-earnings ratio of 7 based on 2021 figures is also very cheap.
However, the broad market prices something else with BASF shares: That energy and fossil fuels become scarce. Russia is currently shutting down the natural gas tap. In the worst case, this can lead to production losses. Management is probably working on a contingency plan that can at least reduce the risk or cost in case of doubt.
How acute the risk is can be an interesting question. But looking at this top stock with a dividend of more than 8%, I have another question: How sustainable is this cause? I think if we look back over the years, there is a chance that operational normality will return sooner or later.
The article on Top Shares with at least a 7% dividend was first published on The Motley Fool Germany.
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Vincent owns shares in BASF and Medical Properties. The Motley Fool does not own any of the listed shares.
Broget Fool Germany 2022