3 Dividend Stocks to Double Right Now

The recent 50 basis point rate cut by the Federal Reserve is a double-edged sword for investors. They probably like that he’s doing more economic projects, which should boost profits and the stock price. However, investors hoping to earn more from bank deposits and fixed income instruments are likely to find that they now earn less from interest.

Still, both phenomena work in favor of dividend stocks. Not only will stock prices rise, but such stocks, which tend to produce lower average cash returns than fixed income investments, suddenly become more attractive income investments. These phenomena should work in favor of higher yielding stocks such as Real estate income (A 0.03%), Innovative industrial properties (IPI) (IIPR 1.19%)and AT&T (T 0.49%).

Real estate income

Realty Income is a real estate investment trust (REIT) specializing in single-tenant properties leased on a net lease basis. Under these agreements, the tenant pays for maintenance, insurance and property taxes.

These properties also happen to be attractive to many of the top consumer businesses, with Walmart, Planet Fitnessand Wynn Resorts among many of their most famous clients.

Moreover, even in a higher interest rate environment, Realty Income continued to develop properties. It added more than 2,000 properties last year through the acquisition of Spirit Realty, bringing the total number of properties to about 15,500. This allowed it to grow profits and increase its monthly dividend during this time. At $3.16 per share annually, new shareholders earn a dividend yield of 5.1%.

Unfortunately, investors have continued to punish stocks amid higher interest costs, and the stock is still trading below its pre-pandemic highs.

However, the recent rate cut is on track to provide significant relief from those high interest costs, which have weighed on profit growth. Now, with falling interest rates allowing the company to cut that expense, it could give Realty Income the catalyst it needs to inspire a long-awaited stock price recovery.

Innovative industrial properties

IIP is an unusual REIT that serves a unique set of clients: growers of medical cannabis. As an owner, he is very insulated from the volatility of the industry he serves. However, because it provides the type of properties needed for its industry to succeed, it plays a critical role in the industry.

However, in the past few years, problems in his industry have caught up as customers have started to miss rent payments. Fortunately, IIP proved adept enough to find new tenants or sell properties as several clients were unable to pay.

Now, it looks like he’s on the road to recovery. The stock is up more than 65% in the past year. That doesn’t include the dividend, which has increased at least once a year since it began in 2017. The annual payout of $7.60 per share yields 5.6%.

In addition, his side of the industry could benefit if a proposed rescheduling of cannabis in the US wins approval. The Schedule III designation makes FDA-approved cannabis products legal with a prescription, a move that could be hugely beneficial to IIP customers and ultimately the medical marijuana stock.

AT&T

At first glance, AT&T looks more like a dividend stock avoid. Earlier in the decade, he admitted to costly missteps in buying DirecTV and the company then known as Time Warner. Although he later spun off those businesses, the losses from those deals left a massive debt load. That prompted AT&T to end a 35-year streak of annual dividend increases, slashing its payout by more than 45 percent.

However, its annual dividend of $1.11 per share gives its investors 5.2%. Investors who have held these shares over the past 12 months have gained an additional 40% due to the rising share price.

Why the return? First, AT&T has a large market share amid intense competition from its two main partners, Verizon Communications and T-Mobile. Demand also rose for top-tier unlimited plans, helping it attract 419,000 postpaid phone additions in the second quarter alone.

Image source: Statista.

Additionally, with the 5G upgrade cycle underway, AT&T has had to spend less on capital expenditures than it did in 2022, helping profits grow.

Ultimately, it is unlikely to need to cut its dividend. Its $19 billion in free cash flow over the past year helped it cover $8 billion in dividend costs over that period. Over the same period, total debt fell by $12 billion to $131 billion. So even as debt reduction strengthens its balance sheet, its business improvement should benefit both growth and income investors.