Cory Renauer, The Motley Fool
5 min read
In This Article:
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Stocks that pay high yields generally don't raise their payouts very quickly.
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Prologis, MPLX, and McCormick are three dividend growth stocks with yields that are more than double the market average at recent prices.
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Patient investors could receive double-digit percentage yields from these stocks down the road.
High-yield dividend stocks are great, but you know what's even better? High-yield dividends that can grow rapidly.
Prologis (NYSE: PLD), MPLX (NYSE: MPLX), and McCormick (NYSE: MKC) present investors with an unusual opportunity. They've been offering yields that are more than double the market average, plus they tend to raise their payouts rapidly. Here's why there's a good chance they'll generate a double-digit yield on cost for investors who buy now and hold over the long run.
Prologis is the largest owner of logistics-related real estate on the planet and offers a 3.6% yield at recent prices. At the end of March, it owned or had investments in a stunning 1.3 billion square feet of logistics real estate.
Prologis has one of the best credit ratings of any real estate investment trust (REIT), which enables it to borrow at interest rates its tenants can only dream of. For many businesses that own their logistics infrastructure, selling a building to Prologis and leasing it back is a great option for raising capital.
Amazon rents more space from Prologis than any other tenant. At just 5% of total rent, though, this REIT could maintain its dividend payout even if the everything store suddenly becomes the hardly anything store. A slew of businesses fueling the e-commerce transition enabled Prologis to raise its dividend payout by an impressive 11.7% annually over the past five years.
Sale-leaseback deals are already popular in the U.S., but this form of financing is still catching on in international markets. Currently, less than 30% of Prologis' net operating income is derived from international markets. Ex-U.S. operations playing catch-up could allow this REIT to continue its long history of big dividend payout raises.
MPLX is a midstream energy business that pushes heaps of gas and crude oil through its growing pipeline operation. Until 2012, it was part of Marathon Petroleum, and the oil refining giant still buys a lot of the crude flowing through its pipes.
MPLX is an income-seeking investor's dream come true because the revenue its pipelines generate is relatively reliable. Extra visibility regarding demand through its Marathon Petroleum tie-up gives it an advantage that translates to rapid dividend raises.
