High-Yield, High-Potential: 3 Dividend Stocks That Could Explode

Thanks to their years of increasing dividends, I've always liked dividend stocks, especially those on the Dividend Kings and Aristocrats lists. The issue with those companies is that their dividend yield is often lower than I’d like. So, I sometimes look beyond my “go-to watchlist” for higher-yielding opportunities that pique my interest.

The thing is, a high yield can be dangerous. "Sometimes a company that has a very high dividend yield will at some point cut it as the drop in the stock price is likely the main reason for the high yield”, says Peter Boockvar, CIO at Bleakley Financial Group. Indeed, it’s not hard to find examples of companies that had a high dividend, only to have it cut later on.

Today, I'll walk you through my process of finding high-yield opportunities. I’ll use Barchart’s Stock Screener to spot promising names outside the Aristocrats and Kings.

How I Came Up With The Following Stocks

For this analysis, I’ve used my pre-built watchlist for High Dividend Stocks (I have a watchlist for various categories, including Dividend Kings, Aristocrats, High-Growth, etc.) and set the following filters:

• Number of Analysts: I strongly believe the more analysts covering the stock, the more visibility and credibility it gains in the market. So, I always set the number of analysts as 16+ or “very high.” The higher, the better. 
• Current Analyst Rating: This is my way of knowing what experts “think” about the stocks. I set it to 4 and above to get results of companies with a moderate to strong buy rating only.
• Annual Dividend Yield: I left this blank so I can sort it later.

After hitting “see results,” I was left with 10 companies, which I organized from highest to lowest dividend yield: Onemain Holdings, Gaming & Leisure, and Healthpeak Properties. 

Now that I got my screen, let’s start with the highest-yielding dividend stock to buy right now:

Onemain Holdings (OMF)

OneMain Holdings is a financial services company that helps its customers get loans when they may not qualify for traditional bank credit or what we call the “nonprime" market. The company’s primary offering includes personal loans, auto financing, and credit cards called BrightWay and BrightWay+.

OneMain’s forward dividend is $4.16, translating to an 8.23% yield. However, their payout ratio is a tad on the high side at 83.93%.

Wall Street Analysts are also bullish on OneMain. 16 analysts track the stock and give it a consensus moderate buy rating (4.19 out of 5).  

Gaming & Leisure (GLPI)

Next on my list is Gaming and Leisure Properties. This is a REIT that owns properties and leases them to casino companies. Their portfolio covers ~67 gaming facilities in 20 states.

Just recently, Gaming and Leisure acquired casino properties in Kansas and Shreveport City from Bally’s Corporation in a lease-back transaction worth $395 million (to Bally’s credit) and secured a new Master Lease with the Bally’s that will generate $32.2 million in annual rent. 

If a lease-back transaction sounds confusing, think of it like selling your home to a landlord and then renting it back from them. You get to unlock all the capital in the home for your own uses, while the landlord benefits from any capital appreciation on the property- which is important, and you’ll see why in a moment.

Gaming and Leisure pays a forward annual dividend of $3.04, which translates to a yield of just over 6% - that’s pretty high compared to its peers in the sector. Moreover, investors may note their 105.18% payout ratio. This is not out of the question because, as a REIT, Gaming and Leisure must pay at least 90% of their net earnings to shareholders (which would make their payout ratio >90%). While I wouldn’t be expecting a cut, I also wouldn’t expect any increases any time soon.

That said, GLPI stock has a consensus moderate buy rating among 20 analysts - at least in part thanks to the company’s appreciating real estate assets. A high target price of $61 was set, suggesting a 19.65% upside potential from the stock’s current levels.

Healthpeak Properties (DOC)

The last name on our list is also a real estate investment company, Healthpeak Properties. The company has medical facilities throughout the U.S. - laboratories, outpatient medical centers, and retirement communities. All of its properties provide ample space for scientific and medical work. For example, its outpatient medical buildings include doctor’s offices and treatment spaces, while its retirement communities offer care for seniors.

They company’s forward dividend currently sits at $1.22 per share, which translates to an attractive forward yield of 6.03%. 

Healthpeak Properties recently merged with Physicians Realty Trust, which together now manages over 52 million square feet of medical properties - and this appears to have excited analysts. Indeed, 19 Wall Street analysts have a consensus moderate buy rating on DOC stock, scoring an average 4.37 out of 5. There also appears to be significant potential in the stock; its high target of $29 reflects a potential 43.4% upside potential from DOC’s current price levels.

Final Thoughts

These three companies offer compelling income opportunities, and again, their dividend profile fits well with my income-generating approach.

However, dividend investing isn't SOLELY about chasing high yields? We also need to know the quality of companies you’re planning to invest in. And ask yourself: Do they have strong fundamentals? What’s their growth potential? How’s the valuation? And, how could a recession affect the company.