Top stocks that should not have a dividend of 5% (or 6%!)

There are certain top stocks for which the dividend yield as a fundamental indicator already shows: They are too cheap. A high value mixed with a sustainable payout ratio and a defensive business model can do just that. But you certainly know what makes a dividend stock attractive.

Vonovia (WKN: A1ML7J) and Innovative industrial properties (NASDAQ: AMZN) are at least such top stocks. I mean, they should not have a 5% dividend. Or: In a case even 6% in the meantime, which is really high!

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Vonovia: Top share with a dividend of over 5%!

Vonovia is one of the top stocks, which currently has a dividend of more than 5%. With a current share price of EUR 30.59 and a recently paid dividend of EUR 1.66 per share. share, the value is even 5.42%. A relatively high value. The DAX Group is all about residential properties.

With half a million units, the starting position is relatively high and also defensive. Investors at Vonovia are apparently plagued by the relatively high level of debt. Rising interest rates, the theory goes, can damage the operating base and lead to a poorer financial result. Yes, there is a risk too. But is it not overrated?

In the end, the top stock Vonovia with a dividend of 5% is also priced with a price-to-FFO ratio of probably below 11. This is relatively cheap and hides the opportunity for me. Actually, it is not surprising that management has financed its own real estate with a credit leverage. Of course, the central bank must not raise interest rates too much too quickly, but this can be stated as a foolish investor.

Innovative industrial properties: Even 6%!

The top share Innovative Industrial Properties currently has a dividend of 6%. At least if we compare the company’s current quarterly dividend of $ 1.75 with the stock price of $ 110.65. Even for a real estate investment fund, it is not a small amount. But not for this REIT in particular.

After all, Innovative Industrial Properties is known for its strong growth. The funds from the operation per. share for the most recent quarter rose 38% year over year. While the yield, although unchanged in this quarter, increased 16.7% in the previous quarter. Clear double-digit growth rates and 6% dividends? Somehow it’s not quite right for me. Whereby in part it is short sellers who have pushed the share price down.

The top share is also valued at a price-to-FFO ratio of 13.5 on an adjusted basis. Another favorable assessment. After all, growth continues this quarter. Finally, management has continued to purchase additional properties, which should lead to increases in sales and funds from operations.

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Vincent owns shares in Innovative Industrial Properties and Vonovia. The Motley Fool owns shares in and recommends Innovative Industrial Properties.

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