Income stocks may not have the sizzle of biotech or EVs, but there are significant advantages to including a selection of conservative, dividend paying ideas in your portfolio – including stability in a volatile market, overall portfolio diversification and, of course, steady income. In our MoneyShow Top Picks 2022 report, several advisors look to dividend-payers — from REITs to MLPs — as their best ideas for the coming year.

Brett Owens, Contrarian Outlook

Medical Properties Trust (MPW) is an ideal income-producing stock to own as the Federal Reserve pauses its money printing. The shares yield 4.8% and have the potential to return up to 9.8% per year. In a market that is likely to be a “hot mess,” MPW should be a popular destination during flights to safety. 

Years ago, easy financing didn’t exist for hospitals. If someone wanted to build a hospital, their only option was a traditional corporate loan package. Ed Aldag founded MPW in 2002 to tackle this problem.

Now MPW doesn’t run hospitals. It invests in them. The company provides capital to the operators, particularly proven ones. In turn, they use the money to improve their facilities, upgrade their technology, hire more staff, and expand their complex. MPW’s portfolio is made up of 444 properties that are run by 54 different operators. These locations are spread across 32 states and nine countries.

Operators like partnering with Ed’s team because they get to keep running the show. MPW, in turn, earns a return on its investment capital. And we like partnering with Ed because he pays generous dividends. MPW is structured as a REIT, which gives the company a tax-advantaged status assuming it meets one requirement: It pays most of its profits to shareholders.

Over time, MPW’s stock price rises with its dividend. Thanks to 4% to 5% yearly payout increases, we have an additional 4% to 5% of price upside “baked in.” Which means we can expect to earn 8.8% to 9.8% per year from MPW. It’s the perfect stock for a potentially terrible 2022.

Jason Williams, Wealth Daily

For a favorite speculative pick for 2022, I want to focus on a stock I think would be a perfect fit for those of you looking to build up a nest egg that will provide income when you need it. It’s a little speculative because of current conditions, but it’s almost guaranteed to perk back up and deliver solid gains and steady payouts for decades to come.

It’s Park Hotels & Resorts (PK), and it’s a real estate investment trust. I know what you’re thinking. REITs aren’t speculative. But this one kind of is. It’s a hotel owner and people are having some trouble traveling be it due to fear of infection, government restrictions, or just canceled flights. That’s leading to some trouble with its tenant operators.

And that also led it to suspend its dividend payment back in early 2020. But the management team has been busy cleaning up the balance sheet and strengthening the company’s financial position. Now, the company’s months away from hitting a breakeven point. After that, it won’t be long before those dividends are reinstated. And if they come back where they left off (which is a good bet), they’ll deliver a double-digit yield to investors who buy at current levels under $20.

Shares could also easily get back to pre-pandemic levels in the mid-$30’s. Park has a quality portfolio of luxury resorts in desirable locations. It’s pretty much a sure thing people will want to stay at its hotels when they’re ready to get back out there again. So, a $40 share price isn’t out of the question at all

Marty Fridson, Fridson/Forbes Income Securities Investor

CBRE Clarion Real Estate Income Fund (IGR) is a closed-end fund trading below our fair value estimate of $12.00. Its investment objective is high current income, with capital appreciation as a secondary objective.

The fund invests at least 80% of total assets in income-producing real estate securities. IGR can invest up to 25% of its assets in preferred shares of global real estate companies.

The fund is well diversified geographically and by property sector. As of 10/31/21, real estate sector diversification was led by Residential (16.55%), Industrial (15.28%), Retail (13.82%), Diversified (9.89%), Self-Storage (9.84%), and Towers (9.51%).

IGR’s top five holdings at 10/31/21, all common stocks, were American Tower (7.46%), Simon Property (6.52%), ProLogis (5.49%), Duke Realty (4.86%), and Crown Castle International (4.41%).  

Distributions have accounted for 50%-75% of return of capital over the last three years, although that mix may change. This investment is suitable for low- to medium-risk portfolios.

Joe Duarte, In the Money Options

In uncertain markets, it pays off to look for stable companies with the potential for growth. And if the Federal Reserve makes good on its promise to raise interest rates three times in 2022 after its tapering of QE runs its course, American Tower Corp. (AMT) — our favorite idea for the coming year — will certainly fit the bill.

This phone tower and mobile infrastructure real estate leader is worth owning both on the basis of its dividend yield as well its long term potential. 

In addition, below the surface, AMT is a rare REIT; one with potential growth based on its business niche; it provides the land for mobile carriers to place their towers — generating income from large, deep pocketed corporate clients.

And business looks to be in excellent shape, all around the world. In the most recent earnings call, AMT noted expectations for extended multi-year growth based on accelerated expenditures by all carriers in the U.S. as the 5G rollout continues as well as aggressive network capacity expansion by all carriers around the world leading to company building as many tower sites in the next two years as it has built in the last five years

AMT’s management is expecting that as cloud use emerges, their tower sites will increasingly become, not just radio transmission signal sites, but also mobile computing stations able to improve cloud-based operations for carriers. And as this develops, it will increase AMT’s revenue and earnings potential. (Disclosure: Joe Duarte owns shares of AMT as of this writing.)

Rida Morwa, High Dividend Opportunities

Oxford Lane Capital (OXLC) is our Top Pick for more conservative income-minded investors in 2022; it carries a yield of +10% and is an income investor’s dream. OXLC is a Collateralized Loan Obligation, CLO, closed-end fund. This means two important things for income investors right out of the gate. The first is that as a CEF Oxford Lane must pay us 90% of its taxable earnings.

Secondly, it invests in a type of assets that we cannot buy on our own. CLOs are a bundle of loans that payout interest in a waterfall pattern to “tranche” holders. These loans are senior and secured, which means they rate first in the event of a default and are secured by all the assets in the company, providing a high degree of safety. So why do we love Oxford Lane for income?

Oxford Lane has exposure to 165 different CLOs, all generating them attractive income. The company has been fast growing, fully covering their monthly distribution. It has already announced hiking its distribution effective January 2022. We expect the potential for another distribution increase as Oxford Lane has multiple investments set to pay them new income as 2022 progresses.

The stock is very cheap at the current prices. Today, it’s still one of the best opportunities in the market. The stock at the current price is very much undervalued and offers a unique buying opportunity. This could be one of your biggest winners in your high yield portfolio!

Bob Ciura, Sure Passive Income Newsletter

While dividend growth stocks can be riskier than steady blue chip dividend payers, they can also outperform with dividends and share price appreciation. Innovative Industrial Properties (IIPR) operates as a REIT, in the cannabis industry.

Cannabis remains illegal on the federal level, which brings an elevated risk profile. However, the rapid growth of the cannabis industry has provided Innovative Industrial with impressive growth, and shareholders with excellent returns.

There is plenty of growth up ahead for the REIT. As medical cannabis legalization continues across the U.S., the company keeps growing through acquisitions of new properties. As of December 14th, IIPR owned 103 properties located in 19 states, representing a total of approximately 7.7 million rentable square feet.

With the U.S. cannabis industry still in its infancy, there remains huge potential for IIPR to keep growing. Innovative Industrial has consistently raised its quarterly dividend quarter-over-quarter over the past few quarters. The latest increase to $1.50 represented a 7% quarter-over-quarter increase and a 28% increase from the same quarterly payout in the previous year. IIPR has a low dividend yield compared to other REITs, but the stock more than makes up for this with impressive dividend growth and excellent capital appreciation.

Tim Plaehn, The Dividend Hunter

ONEOK (OKE) — my top conservative idea for 2022 — is an energy infrastructure company strictly focused on natural gas and NGLs; I see it as the highest quality company and stock in the energy midstream sector.

ONEOK is a classic dividend growth stock. From 2000 through 2020, the OKE dividend grew by a 14% annual compound growth rate. Dividend growth, plus an attractive dividend yield, provides one of the most reliable paths to great long-term total returns.

However, throughout the pandemic, ONEOK stopped increasing the dividend. The company went from a payout boost every quarter to no dividend increases since January 2020. That being said, unlike many midstream companies, ONEOK did not cut its dividend in the early days of the pandemic.

ONEOK results and profits have grown over the last two years. For 2020, EBITDA increased over 2019 by 6%, to $2.724 billion. In early 2021, the company forecasted 2021 EBITDA of $3.05 billion. Now, as we get ready to close out 2021, the full-year guidance has climbed to $3.325 billion to $3.425 billion. The midpoint provides 24% profit growth over 2020.

Think about that. ONEOK EBITDA grew by 30% through the pandemic, and the company has not increased the dividend for the two years. I am confident the company will return to a dividend growth profile in 2022, possibly with a substantial dividend increase when the next payout is declared in January. OKE currently yields 6.4%. Couple that yield with significant dividend growth in 2022, and you have a stock set up for great total returns next year.

Robert Rapier, Investing Daily’s Utility Forecaster

Enterprise Products Partners (EPD) is one of the largest publicly traded midstream (i.e., pipeline and storage) companies in the world. It is also the largest master limited partnership (MLP) and one of the largest energy companies by market cap.

The company has about 50,000 miles of natural gas, NGL, crude oil, refined products, and petrochemical pipelines. Its operations are concentrated in Texas, but its pipelines spread across the U.S. The company’s pipelines are connected to about 90% of all refineries East of the Rockies.

EPD’s diversification has helped it withstand the cyclical natural of the oil and gas business. EPD launched its initial public offering (IPO) in 1998, so it has operating during the oil price crash of 2008, the natural gas price slump that began in 2010, the oil price crash that began in 2014, and the COVID-induced oil price crash of 2020. Throughout that turmoil, EPD raised its distribution every year, and covered it conservatively with existing cash flow.

Note, an MLP it is structured differently than a corporation. When you get a distribution, it will be mostly classified as a “Return of capital.” I want to reiterate that its payout is conservatively covered with cash flow which makes it’s a great addition to an income portfolio.

Kelley Wright, Investment Quality Trends

Omnicom Group, Inc. (OMC) is a global advertising and marketing services company, and one of the world’s largest corporate communications companies.

The company has quite a reach, serving more than 5,000 clients in over 100 countries.

Operationally, OMC is three independent global agency networks: the BBDO Worldwide Network; the DDB Worldwide Network; and the TBWA Worldwide Network. Each agency network has its own clients, and the networks compete against each other in the same markets.

Under the hood as we call it, OMC has strong cash flow with Return on Invested Capital and Free Cash Flow Yield of 14.70% and 12.30% respectively.

The stock also sports the IQ Trends “G” designation for outstanding dividend growth of at least a 10% annual increase over the last 12 years. Why the market has this stock priced as if there will be no profit growth is astounding.

Historically, Omnicom Group is Undervalued at a dividend yield of 3.60%, which based on the current dividend of $2.80 equates to $78 per share. Trading recently around $73 per share, the stock offers excellent good value.

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