2 Ultra-High-Yield Dividend Stocks with Over 11% Returns Billionaires Are Investing In
Billionaire Investors Are Snapping Up Shares in Medical Properties Trust and AGNC Investment
Investors often seek out dividend-paying stocks that offer exceptionally high yields. However, these high yields can sometimes indicate potential challenges for the companies involved.
Historically, the S&P 500 index has averaged an annual return of 9.7% since 1928. While many hedge fund managers strive to outperform this benchmark, only a few consistently achieve this and build fortunes exceeding $1 billion.
In the first quarter of this year, a select group of billionaire investors made substantial investments in Medical Properties Trust (NYSE: MPW) and AGNC Investment (NASDAQ: AGNC). These stocks offer yields above 11%, presenting an opportunity for significant returns if their dividends remain stable.
Here’s a closer examination of these high-yield dividend stocks and whether everyday investors can depend on them for ongoing dividend payments.
1. Medical Properties Trust
Medical Properties Trust’s stock has plummeted about 49% from its peak in late 2023. This decline follows the company’s 48% dividend reduction last year and a series of unsettling news about its primary revenue source.
Despite these challenges, Medical Properties Trust currently offers an impressive 11.9% dividend yield. Although the company reported significant losses in the first quarter, several billionaire investors are optimistic about its recovery. John Overdeck and Two Sigma Investments initiated a new position with 2.58 million shares, while Jeff Yass from Susquehanna more than doubled his holdings by acquiring 2.34 million shares.
Medical Properties Trust is a real estate investment trust (REIT) specializing in hospitals and other acute care facilities. Its cash flows are typically reliable because it operates under a net lease structure, meaning it does not manage the properties directly. However, its largest operator, Steward Health Care, filed for bankruptcy on May 6 after missing rent payments for several quarters.
While there is a slim chance Medical Properties Trust could sustain its dividend payouts, this seems unlikely given that Steward accounted for over 20% of its total rental revenue at the end of 2023.
Both Yass and Overdeck’s investments in Medical Properties Trust represent less than 1% of their portfolios. If you choose to follow their lead, it is wise to limit your exposure to an amount you can afford to lose.
2. AGNC Investment
AGNC Investment is a mortgage REIT renowned for its monthly dividend payments. At current prices, the stock boasts a remarkable 14.6% yield.
David Siegel and Two Sigma Investments recognized this opportunity, opening a new position with 3.08 million shares in the first quarter. Israel Englander and Millennium Management also acquired a new position with 1.57 million shares.
AGNC Investment borrows funds at relatively low short-term rates and uses the capital to purchase longer-term mortgage-backed securities that offer higher yields. Over 98% of AGNC’s portfolio is backed by government agencies, reducing the risk from individual borrower defaults.
However, the value of AGNC’s assets decreased significantly in 2022 due to rising interest rates. Siegel and Englander likely anticipate the Federal Reserve to lower or stabilize rates in the coming months. If their prediction is correct, AGNC could deliver substantial returns for those purchasing at current prices.
Nonetheless, there is no certainty that the Federal Reserve won’t increase rates further, which could make it challenging for AGNC to maintain its high payout. As with Medical Properties Trust, it is prudent to limit your investment in AGNC to a manageable level if you decide to follow these billionaire investors' strategies.
