Finding dividend stocks that provide the right amount of growth, long-term stability, and consistent yields can be difficult. But they aren't impossible to find, if you know where to look.
To help you track down a few of these companies for your portfolio, we reached out to some Motley Fool contributors for dividend stock ideas. They came back with Uniti Group (NASDAQ: UNIT), AbbVie (NYSE: ABBV), and American Tower (NYSE: AMT). Here's why.
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The best telecom REIT you've never heard of
Anders Bylund (Uniti Group): This real estate investment trust currently has a 12.6% dividend yield, which is often a red flag. Extremely high yields tend to come with very low share prices, which in turn is a healthy market reaction to deeply troubled business operations.
But maybe pigs do fly after all. This huge yield seems to stem from a misunderstanding, not some profound insight about impending doom.
It's true that Uniti is tethered to another company that really does deserve plenty of crimson-flag-waving. Regional telecom Windstream Holdings (NASDAQ: WIN) reported a $2.1 billion net loss over the last four quarters, along with roughly breakeven free cash flow and negative EBITDA (earnings before interest, taxes, depreciation, and amortization) profit. Uniti is the new embodiment of Windstream's former network infrastructure operations, which were spun out as a stand-alone business three years ago. Since then, Windstream's future has only darkened, while Uniti has been edging away from its old parent company in many ways.
Sometimes, Uniti is punished for Windstream's sins. But it's obvious to me that Uniti walked away from the 2015 separation with the better deal. What we see today is a struggling telecom that spun out its most valuable and effective operations in a Hail Mary attempt to gain some financial stability. In the future, I fully expect Windstream to either go bankrupt or agree to a pennies-on-the-dollar buyout, just to salvage a tiny bit of shareholder and debt-writer value. When that happens, Uniti will go on supplying its services through some 4.8 million miles of fiber-optic network strands and 700 wireless towers, but to a whole new set of clients.
If and when that day comes, Uniti shares will take another big hit as many investors expect the dying Windstream to drag this company down behind it. Maybe I'll buy more shares at that point, because Uniti's long-term story is solid.
And in the meantime, you can't beat that ultragenerous dividend yield.
A top income stock that's in the bargain bin
Todd Campbell (AbbVie): If you typically don't invest in healthcare, you might not know that shares in the biopharma giant AbbVie fell out of favor last month, following disappointing news on its solid-tumor cancer drug, Rova-T.
AbbVie had hoped definitive midstage trial data for Rova-T could allow it to file for accelerated approval from the Food and Drug Administration, but unfortunately, the data wasn't good enough for that to happen. Instead, the company will need to wait until results from future trials are available before it submits Rova-T for approval, and that could mean a wait of a year or more.
The setback caused AbbVie's shares to fall by more than 20%, but it's far from a deal-breaker for the company. Importantly, the sell-off could be creating a great opportunity to add this top dividend stock to your income portfolios.
AbbVie inherited Abbott Labs' dividend track record when it was spun off in 2013, so it's considered a Dividend Aristocrat. It appears to take that badge of honor seriously, because its quarterly dividend has increased to $0.96 from $0.40 since its initial public offering.
Following the drop in its shares, its forward dividend yield has increased to almost 4%. That's a healthy dividend for any company, but what really makes AbbVie an interesting buy is that its dividend could continue climbing because of double-digit revenue growth. In Q1 2018, sales grew 21% year over year. And since generic biosimilars to its best-seller, Humira, aren't expected in the U.S. until 2023, there's plenty of opportunity for investors to own AbbVie and pocket increasingly larger dividend checks.
A company sending a strong signal to dividend investors
Chris Neiger (American Tower): American Tower may not be a household name, but its business is as ubiquitous as it can get. The company owns more than 160,000 cell tower sites throughout the U.S. and across the globe, and rents out the space to wireless carriers. This means that in the U.S. the top wireless service providers pay American Tower to put up signals on its towers, and when they need more capacity -- and carriers always do -- they have to fork over more money to American Tower.
The demand for wireless data is poised to increase: From 2016 to 2021, mobile data usage is expected to jump 700%. American Tower benefits by entering into long-term lease agreements; the stability from those contracts allows the company to earn about 99% of its sales from recurring revenue.
The great news for dividend investors is that American Tower is a real estate investment trust (REIT), which means that the majority of its net income is paid out as dividends. So as data usage grows -- and revenue and income increase -- so do the company's dividends.
American Tower can experience up and downs in sales and earnings just like any other company, and in the first quarter its revenue climbed 7.8% year over year, but earnings fell 8.8%. But that shouldn't discourage investors. Management expects full-year 2018 sales to increase by 6% and net earnings to rise by 13% year over year, both at the midpoint of guidance.
The company should also benefit from the ongoing wireless evolution, including the upcoming 5G standard. Carriers are already testing 5G, and as they ramp up usage they'll have to update and expand their signals on cell towers.
American Tower pays a forward yield of 2.19% right now, and has raised its dividend for a modest, but not insignificant, six consecutive years. If you're looking for a bet on the future of wireless communication -- and want a reliable dividend too -- you may want to consider this towering tech play.
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The Motley Fool owns shares of and recommends American Tower. The Motley Fool has the following options: short October 2018 $135 calls on American Tower and long January 2019 $80 calls on American Tower. The Motley Fool has a disclosure policy.