Dividend Investing 2017: 3 Stocks to Put on Your Radar

If you're a dividend lover, there are a few things to look for in the stocks you may be eyeing to buy. For one thing, you want not only a high dividend yield but one that has the potential to grow over time, allowing your income stream to keep pace with inflation. And you want a margin of safety. In other words, you don't want the next recession to cause dividend cuts and a plunging stock price. With that in mind, here are three great dividend stocks to keep in mind for the new year.

Image source: Getty Images.

Keep this niche lender in mind for 2017

While I already own the stock, New York Community Bancorp (NYSE: NYCB) is back at the top of my watch list for 2017 -- after falling 3% in 2016 -- for a specific reason. The main reason the stock underperformed the market for the past year or so was that most experts had an unfavorable outlook of the bank's pending merger with Astoria Financial. Well, the merger agreement was recently terminated, and the stock went down again, possibly thanks to uncertainty surrounding the bank's future.

It was easy to understand why many investors weren't fans of the Astoria merger. Thanks to its niche of lending on rent-controlled New York City apartment buildings, NYCB has operated more efficiently and profitably than most peers, and has one of the safest asset portfolios of any bank in the U.S. Just look at the bank's default and charge-off rates compared to the industry averages during tough times.

Image source: New York Community Bancorp.

Astoria isn't nearly as efficient of an operation as NYCB. In fact, Astoria's efficiency ratio has been about 30 percentage points higher than that of NYCB (lower is better). This led to fears that NYCB would be giving up its main competitive advantage by diluting its asset portfolio and efficient operations.

As a whole, banks have benefited from the election of Donald Trump for several reasons. First, the market was already projecting interest rate growth over the coming years, and Trump's pro-growth plans add fuel to that fire. As a group, banks have been operating at historically low margins for some time, and rising interest rates could be a big boost to profitability. In addition, Trump has pledged to roll back banking regulations, such as Dodd-Frank, which could result in savings in compliance costs and make it easier for banks to do business. If this happens, the $50 billion asset threshold NYCB has been avoiding for years could become not such a big deal.

Now that the Astoria merger is dead, NYCB can get back to doing what it does best -- running a top-notch operation in a profitable niche market. And with a 4.3% dividend yield, you'll get paid nicely while you wait for the dust to settle.

Healthcare real estate: Recession-resistant and high dividends

I'm a big fan of healthcare real estate as a long-term investment. In fact, I own several healthcare real estate investment trusts already. As we head into 2017, I'm considering adding Ventas (NYSE: VTR).

Healthcare real estate is an inherently defensive investment. Think about it: In a recession, what can't people cut back on? Healthcare is at the top of the list. In addition, the healthcare real estate market is extremely fragmented, and with less than 15% of all healthcare real estate owned by REITs, there is a lot of room for consolidation, which is exactly what I expect to happen over the coming decade or so.

Not only is there existing opportunity, but the market is growing, especially for properties like Ventas owns. The 75-and-older age group is growing three times as fast as the overall population, and since more than half of Ventas' properties are senior housing, there should be plenty of growth ahead.

So, why Ventas? For one thing, Ventas is one of the largest REITs in the business, which gives it an advantage when it comes to consolidation and growth. Also, Ventas has a more diverse portfolio than most peers, both in terms of property types and operating partners. Most of the company's properties are private pay (not dependent on government reimbursements), and are in high-barrier markets with affluent residents.

Image source: Ventas.

With the stock down 17% over the past six months or so, now could be a good time to look at this stock and its 4.9% dividend yield.

The right kind of retail

I've written about freestanding retail REIT Realty Income (NYSE: O) many times over the years -- here's one example of a more detailed look at the company and its business. There's good reason I spend so much time on the company. In my opinion, even though its 4.1% yield is the lowest of these three stocks, it is one of the best dividend stocks in the market from a long-term perspective.

Like Ventas, Realty Income has several characteristics that make it a rather defensive and recession-resistant stock. For one thing, the company's tenants sign long-term leases with 15- to 20-year initial terms, creating minimal turnover. So, if a major recession were to hit, say, next year, the vast majority of Realty Income's income would be completely secure. Plus, these are triple-net leases, which means the tenants cover the variable costs of taxes, insurance, and maintenance on the properties.

In addition, most of Realty Income's tenants are inherently recession- and competition-resistant. These are businesses like dollar stores and warehouse clubs that actually tend to do better in recessions, drug stores that sell things people need, and service-based businesses like movie theaters that people have to physically go to.

The caveat is that the stability can work against investors in prosperous times. For example, if a tenant's lease calls for 2% annual rent increases and the market rate increases by 5%, Realty Income could find itself with a portfolio of tenants paying below-market rent. However, the defensive nature and time-tested growth strategy more than make up for this risk.

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Matthew Frankel owns shares of New York Community Bancorp and Realty Income. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.