At any given time, you can find at least a handful of dividend-paying stocks offering ultra-high yields. Unfortunately, the stock market rarely allows dividend yields to rise this high unless there is reason to expect trouble ahead for the underlying companies.
Since 1928, the S&P500 the index generated a total return which is equivalent to 9.7% per year, on average. Thousands of hedge fund managers attempt to surpass that figure, but relatively few do so consistently enough to grow their personal wealth beyond $1 billion.
In the first quarter of this year, a handful of billionaire investors bet heavily on Medical Properties Trust (NYSE:MPW) And AGNC Investment (NASDAQ:AGNC). Both of these stocks offer yields above 11%, so the billionaires who bought them could realize market-beating returns if the underlying companies could sustain their payouts over the long term.
Let’s take a closer look at the ultra-high-yielding dividend stocks that billionaires are snapping up to see if ordinary investors can count on them to continue meeting their dividend obligations.
1. Medical Property Trust
Medical Properties Trust shares are down about 49% from their late 2023 high. The market reacted as you would expect to the company’s dividend cut of 48% last year, as well than a series of shocking news regarding his biggest source of income.
Medical Properties Trust offers a whopping 11.9% dividend yield at recent prices. The company posted heavy losses in the first quarter, but many billionaires bought piles of shares in the hope that the company could get out of the mess it’s in. John Overdeck and Two Sigma Investments initiated a new position with 2.58 million shares. Susquehanna’s Jeff Yass more than doubled his position by acquiring 2.34 million shares in the first quarter.
Medical Properties Trust is a real estate investment trust (REIT) specializing in hospitals and other acute care facilities. Its cash flow should be reliable because it is a net lease REIT that does not operate its properties. Unfortunately, its largest operator, Steward Health Care, filed for bankruptcy on May 6 after failing to pay rent on various facilities for several quarters.
It’s possible that Medical Properties Trust will maintain its dividend payout, but it seems unlikely. At the end of 2023, the REIT counted on Steward for more than 20% of its total rental income.
Yass and Overdeck have purchased millions of shares of Medical Properties Trust, but those positions represent less than 1% of their total portfolio. If you insist on following the billionaires in this high-risk stock, limit your exposure to an amount you can easily afford to lose, as they did.
2. AGNC Investment
AGNC Investment is a mortgage REIT that pays dividends every month. At recent prices, the stock offers a staggering 14.6% yield.
Eager to secure huge monthly dividend payments, David Siegel and Two Sigma Investments opened a new position with 3.08 million shares during the first quarter. Israel Englander and Millennium Management also opened a new position by acquiring 1.57 million shares.
AGNC Investment borrows at relatively low short-term rates and uses the capital to purchase longer-term mortgage-backed securities that hopefully provide a much higher return. Investors don’t have to worry much about individual bankruptcies because more than 98% of its portfolio assets are guaranteed by a government agency.
This mortgage REIT is not very sensitive to the actions of individual borrowers, but rapidly rising interest rates have significantly reduced the value of its assets in 2022. Siegel and Englander should expect the Federal Reserve to lower rates. rates or at least keep them stable over the next period. several months. If they’re right, this stock will most likely deliver market-beating gains for people buying at recent prices.
Unfortunately, there is no guarantee that the Federal Reserve will not have to raise rates further, which could make it much more difficult for AGNC to maintain its payments. Again, if you want to follow the billionaires who bought this stock in the first quarter, it’s best to limit your exposure.
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Cory Renauer holds positions within Medical Properties Trust. The Motley Fool has no position in any of the securities mentioned. The Motley Fool has a disclosure policy.
2 Ultra-High-Yielding Dividend Stocks With Yields Above 11% That Billionaires Are Buying Hand in Hand was originally published by The Motley Fool
