More than 4,000 stocks that trade on U.S. exchanges pay dividends. But some of them offer dividend yields that are far more attractive than most in the group.
Two outliers that especially stand out are midstream energy company Enterprise Products Partners (EPD +0.59%) and healthcare real estate investment trust (REIT) Medical Properties Trust (MPW +1.57%). Enterprise's dividend yield currently stands at nearly 7.3%, while Medical Properties Trust's dividend yields over 13.8%.
Which of these two high-yield dividend stocks is the better pick? Here's how Enterprise Products Partners and Medical Properties Trust compare.
The case for Enterprise Products Partners
Income investors like strong track records of dividend growth. Enterprise Products Partners boasts 24 years of consecutive distribution increases. Its distribution has increased by a compound annual growth rate (CAGR) of around 7%.
There are plenty of reasons to be confident about Enterprise's ability to continue funding its attractive distribution program. For one thing, the company's adjusted free cash flow per unit has grown by a CAGR of 32% since 2017. During this same period, its leverage ratio has declined from 4.1x to 2.9x, giving Enterprise added financial flexibility.
NYSE: EPD
Key Data Points
Enterprise Products Partners has been able to deliver for investors, even with significant volatility in oil and gas prices, because the company's revenue doesn't hinge on these commodity prices. Enterprise operates more than 50,000 miles of pipeline plus other midstream assets that generate consistent cash flow, regardless of the swings in oil and gas prices.
Will the transition from fossil fuels to renewable energy sources put Enterprise's juicy distribution in jeopardy? Not anytime soon. A growing global population will continue to drive higher energy usage. Even with the tremendous increase in the use of renewable energy, the demand for oil and gas is likely to also grow.
The case for Medical Properties Trust
You won't find many stocks with a higher dividend yield than Medical Properties Trust. The healthcare REIT has increased its dividend by 71% cumulatively since its initial public offering in 2005.
The big question for Medical Properties Trust is, how sustainable is its dividend at current levels? One of the company's top tenants, Prospect Medical, is behind on its rent payments. In addition, higher interest rates could push interest expenses higher in the future when Medical Properties Trust has to refinance its debt.
NYSE: MPW
Key Data Points
However, investors probably don't have to worry about dividend cuts in the near term. The low end of Medical Properties Trust's guidance for 2023 is more than enough to cover its dividend. The financial outlook for the company's tenants also appears to be improving overall.
Medical Properties Trust owns 444 hospital facilities in 10 countries. The company thinks that these hospitals are solid long-term investments because of the value they provide to their local communities. Even when hospital operators face financial difficulties, Medical Properties Trust fully expects to be able to find competent replacement tenants -- and has done so in the past.
Better high-yield dividend stock?
I own both of these high-yield dividend stocks. I think that both will continue to pay attractive dividends for a long time to come. However, if I had to pick one of them, it would be Enterprise Products Partners.
Sure, Medical Properties Trust's dividend yield is exceptionally high. My view, though, is that the stock comes with a higher level of risk than Enterprise Products Partners. While I'm cautiously optimistic about Medical Properties Trust's prospects, it's possible that one or more tenants could cause additional problems for the REIT.
In the meantime, Enterprise Products Partners continues to perform well across the board. The picture for the midstream energy company might look different in 20 years. But for now, I think Enterprise ranks as one of the best high-yield dividend stocks on the market.
