Panic, panic and panic…
I love it!
Three of my favorite high-yielding quality companies are on sale!
Silicon Valley Bank (SIVB), the 16th largest bank in the US, has collapsed not so long ago, and investors are still assessing what the total damage will be. On the other hand, a not-so-great CPI report came in last week, and the probability of a 0.50-basis point interest rate hike is increasing. Yet, a pause in interest rate hikes might also not be so unexpected, as banks are falling like flies. If there is one thing that investors don’t like, it is uncertainty.
However, smart investors love volatility in the market, as it creates great entrances in great businesses. Lower prices are a great mitigator of risk, since the cheaper you can buy a stock, the less downside risk there is. Of course, this only counts when the business does not go out of business. Therefore, I am currently buying the industry leaders – those that are strong enough to weather most storms.
VICI is a one-of-a-kind experimental real estate investment trust (REIT). The company owns a large part of the Las Vegas strip, including some of the most popular and well-known buildings worldwide. Next to Las Vegas, they own properties all over the east side of America and Canada.
In addition, VICI holds ownership in hotel rooms, gaming space, convention space, golf courses… Although 46.6% of rent comes from Las Vegas, the diversification in experimental properties is growing.
The CEO, Edward Pitoniak, mentioned in the latest earnings call:
And we also have to be very mindful if we’re in consumer discretionary, which we are as to what a tenant’s performance might be under different operating scenarios, should we see soft landing, hard landing, prolonged soft, prolonged hard landing. We also have — need to be mindful of inflation. But we obviously do enjoy versus many of our REIT peers, certainly net lease REIT peers, the advantage of some CPI protections that definitely benefit our investors this year in 2023.
50% of VICI’s properties have CPI (consumer price index) protection with an escalation clause in 2023. For the long term, a whopping 96% of rent roll has CPI protection. So, whichever way inflation and interest rates go, VICI’s triple net leases are relatively safe.
By issuing shares, the company creates capital to invest in properties that will generate more money over time. They have been very effective over the last years, as adjusted funds from operations grew by 39.15%.
Shareholders are reaping the rewards with stock appreciation and dividend growth. Over the last 4 years, the dividend has been increased by an average of 8-9% CAGR. Even throughout 2020, where a lot of companies cut or suspended their dividend, the company was able to increase dividend, which shows the strength of the business and properties. The current dividend yield is standing at 5%.
For more insight, check out Brad Thomas’s latest article on VICI.
Blackstone is globally one of the largest alternative asset managers with $975 billion in assets under management. The company grew its popularity by outstanding performance in the private equity and real estate business. The sentiment in real estate has been turning quite bearish over the last months, and since Blackstone owns a lot of real estate, it wasn’t spared from the sell-off either. Surprisingly, its assets under management have still been growing from the stock market peak of 2021, which is impressive knowing there have been a lot of outflows across the board elsewhere.
Further, cash is king in downturns, and Blackstone definitely has some dry powder ready to buy the dip. Performance revenues dipped as the overall market went down, but with great purchases now, the stock is set to rebound well into the next upward market cycle.
Blackstone’s dividend is variable and runs together with earnings. However, the overall trend is going up, and you should expect dividend increases over the following years – of course, as long as we do not end up in a massive bear market. The dividend yield is currently 5.3%.
A free cash flow yield of 9.59% is getting attractive for investors as it nears the previous highs. Right now might be a great time to start a position in one of the best asset managers in the world, I did.
For more insight check out Paul Franke’s latest article on BX.
Fidelity National Financial is a title insurance and settlement services provider for the real estate and mortgage industry. The company is not just any title insurance company – it has a 32% market share, which makes it the largest in America.
Fidelity has been hit the most out of all three, and this has to do with higher mortgage rates. The Fed has been raising interest rates from 0% back in 2020 to 4.75%, and consequently, mortgage rates have been going up as well. Higher mortgage rates give people less incentive to buy a new home, due to an increase in monthly payments needed for homeownership. In my latest article, I warned investors of this negative catalyst:
Nevertheless, it is too early to cheer, the January CPI report came out hotter than expected. Year over year, the core consumer price index number climbed 5.6% vs 5.5% expected. Even, month over month CPI saw a rise of 0.5%. Therefore, we should expect some more interest rate hikes of 0.25% and a pause in rate hikes might have to wait a bit longer. This is not a positive catalyst for Fidelity Nation Financial, as a large percentage of revenue depends on the title insurance of new purchased homes.
Nonetheless, the failures of the banks can bring the Fed to their senses to lower or stop interest rate hikes for some time. Meaning a possible decrease in mortgage rates and new positive momentum for Fidelity.
At 6.23x price-to-earnings, this stock is a bargain. Additionally, the 5.16% dividend yield will help you wait for a rebound in stock appreciation. Over the last 10 years, dividend grew by at least 15.4% CAGR, and that makes this stock a compounder for your portfolio.
There will always be panic in the world and in the stock market. If we want to outperform the market, it is our job as investors to take the discounts in companies that will survive the next decade. The above-mentioned companies have high cash flow, credit ratings, high dividend and a good chance of stock appreciation. Sifting through the noise is one of the most important skills of a successful investor. I am patiently buying shares in all three stocks, not rushing anything but averaging down. Hitting the exact bottom will be hard, as the uncertainty remains for now. The interest rate decision today can take some of that away.
Give me some feedback below and let me know your favorite high-yield stocks which you are buying now.
Thank you for reading and happy investing!
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