3 High-Yield Dividend Stocks to Buy in September

By Markets Fool.com

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With interest rates at historic lows, yield-hungry investors are looking elsewhere for income. Unfortunately, too many get blinded by the allure of high-yield stocks, only to learn the hard way that most high yields are a sign of trouble. I say "most" because we've found some pretty compelling dividends that are much safer than those investors typically see when the yield gets above 4%.

Piping a high-yield stock into your portfolio

Tyler Crowe:It's not that often that you can find a dividend stock that yields 7.1% and won't keep you up at night. One opportunity has come up in the form of pipeline company Holly Energy Partners (NYSE: HEP). Even though the Holly has continued its streak of raising its dividend every quarter since it went public back in 2004, Wall Street seems to be pricing this stock as though it's like so many other pipeline and energy logistics companies.

One of the things that sets Holly Energy Partners apart is its very steady business model. A lot of companies in the oil and gas pipeline industry like to lock in a high percentage of their operating profits with fixed-fee service contracts. For Holly Energy Partners, 100% of its operational profits come from these fixed-fee contracts, and a wide majority of them are protected with minimum commitments. This makes the company's cash flow very predictable from quarter to quarter and gives management an easier job of balancing growth, prudent financial management, and paying out a high yield to investors.

Shares of Holly Energy Partners aren't trading at the highest dividend yield of 2016, but today's yield is well above the average from the past 5 years. In a time when so many investors are hungry for a relatively reliable yield, it looks as though September is a good month to consider buying shares of Holly Energy Partners.

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Don't overlook this high-yield pharma stock

George Budwell: When it comes to high-yield dividends in the healthcare sector, there aren't many names that are all that appealing, quite frankly. The British pharma giant GlaxoSmithKline (NYSE: GSK) and its nearly 5% dividend, though, may be worth considering right now.

Glaxo's shares have been under pressure over the last few years due to the potential entrance of generics for its flagship COPD medicine Advair in the U.S. perhaps as early as next year. The short story is that the loss of patent protection for Advair'sDiskus inhaler device could pave the path for generic rivals to enter the market in the near term. And indeed, Mylanhas alreadyfiled for approval with the FDA for its generic Advair earlier this year, with a regulatory decision expected by March 28, 2017.

While the threat of generic Advair shouldn't be taken lightly, the real issue is whether or not this risk factor is being overblown at this point. After all, Glaxo's management has already lowered Advair's price to keep payers happy, possibly blunting the impact of generics. And generic rivals like Mylan aren't planning on killing the market by starting a pricing war, meaning that Advair's sales may not fall that much farther once generics do enter the market.

Another key issue to understand is Glaxo has been seeing a spike in sales of Breo Ellipta -- Advair's heir apparent -- in recent quarters as a result of improving coverage and a label expansion for asthma patients aged 18 or older. As such, Glaxo's respiratory franchise appears to have finally hit an inflection point, implying that the worst may be over for this beaten-down pharma stock.

Get a healthy dose of income with this REIT

Matt DiLallo: Medical Properties Trust (NYSE: MPW) is a real estate investment trust (REIT) that specializes in owning hospital properties in the U.S. and Europe. Because of how important hospitals are to the healthcare sector, operators tend to pay their rent on time and stay tenants a long time. That leads to very predictable income for Medical Properties Trust, which it sends back to investors via a pretty healthy 6% dividend.

While a dividend that high is typically a sign of stress, that's not the case at Medical Properties Trust. Instead, its payout is on very solid ground. During the second quarter, for example, the company's normalized funds from operations (FFO) increased by 7% to $0.32 per share. However, the company only paid out $0.23 per share in dividends, which resulted in a very healthy payout ratio of 72%. For perspective, that is a stronger ratio than the 75% normalized FFO payout ratio of leading healthcare REIT Welltower. In addition to that low payout ratio, Medical Properties Trust now has a sector-leading leverage ratio of just 5.4 times debt-to-EBITDA after it sold several assets this year to bolster its balance sheet.

With a strong balance sheet and coverage ratio, Medical Properties Trust is poised to accelerate asset, cash flow, and dividend growth going forward. The company currently has $1.5 billion of liquidity to capture the accretive opportunities it has in its ever-expanding pipeline. That means that its already high yield appears poised to go even higher, making it a great income stock to buy this September.

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George Budwell has no position in any stocks mentioned. Matt DiLallo owns shares of Medical Properties Trust. Tyler Crowe has no position in any stocks mentioned. The Motley Fool recommends Mylan and Welltower. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.