3 dividend-paying stocks for the new real estate boom


Dear Reader,

The Cleveland Browns are playing in the postseason for the first time since 2002. However, this almost didn’t happen due to a COVID-19 outbreak at their training facility.

The Browns never missed a moment of practice time. Instead of hitting the field, players and coaches huddled together Zoom (ZM). And they won their matchup with the Pittsburgh Steelers that made that 17-year win possible.

Even if the Browns fail to make it to the Super Bowl on February 7, their MVP moves will go down in history as a mark of these unusual times.

The remote working revolution is here to stay

Remote work is not ideal for professional footballers, whose work requires extreme physical contact. But in the off-season they can live practically anywhere.

Due to the pandemic, other companies are more willing to give their employees a virtual skin in the foreseeable future.

This is giving tech stocks – including video conferencing, cloud software, and hardware upgrade trades – a good run.

For the next big win round, contact the “home team” …

Work from home

Because they can work with an internet connection from anywhere, many millennials – who are 26 to 40 years old – are fleeing expensive cities like New York City, San Francisco, and Chicago.

But not everyone is buying a bigger house in the suburbs. Instead, some workers rent short-term furnished apartments.

San Francisco-based furnished apartment renter Sonder says stays longer than 14 days now make up 60% of the company’s business. That’s less than 25% before the pandemic.

While Sonder is still private, the largest company in furnished apartment space is Airbnb Inc. (ABNB), recently went public:

The company’s platform is home to 5.7 million active entries and booked nearly 250 million guests in 2019. Given the ongoing boom in remote working, I expect Airbnb to continue benefiting from it.

If you build it, there will be profits

There are still a lot of people buying real estate. And they pay the best dollar for it.

While house prices typically fall during recessions, the opposite happened in 2020.

Source: Federal Reserve Bank of St. Louis

This fact sent housing stocks through the roof. For example the SPDR S & P Homebuilders ETF (XHB) has increased by 86% since March.

And this trend is driven by the thousand year old home buying …

This generation has been struggling with home ownership for years. High student loan debt, rising property prices and a weak labor market have restricted home buying.

This is especially true given that many millennials lived in big cities (which are where most of the high-paying jobs are). And buying a house near a big city is next to impossible.

Now that millennials can keep their jobs but work remotely, they are shifting their growing salaries to less competitive housing markets.

This growing trend is paying off

My proprietary Dividend Sustainability Index (DSI) helps me separate the “safe” dividend payers from the “unsafe” dividend payers. With 2020 seeing the most dividend cuts since the global financial crisis, knowing that your dividend is safe is more important than ever.

And any of those stocks that stay at home would be worth a place in your long-term portfolio …

  • Whirlpool (WHR) is at the top of my purchase list.

The company is one of the largest home appliance companies in the world, making everything from washing machines to freezers.

Even better, however, is the company’s dividend yield.

WHR pays a solid 2.4% return with a low payout ratio.

When you add solid free cash flow and low debt, WHR made a profit on the DSI 96/100.

  • Home Depot (HD) serves a dual purpose as a real estate and technology game.

The company is the world’s largest hardware store. HD has a solid physical presence with 2,300 warehouses while being the fifth largest e-commerce company in the US.

The company has increased its dividend payout every year since 2009.

And with my DSI giving HD’s 2.1% dividend yield a value of 100/100, there is no doubt that management will continue to increase payouts in the years to come.

  • Leggett & Platt (LEG) would stay in fashion for a long time.

While the company is known for its tech components and furniture, I know it as a dividend aristocrat. That said, it has increased its dividend for more than 25 straight years.

I don’t expect this trend to end anytime soon. The company’s strong free cash flow and dividend history earned him a DSI of 90/100. This means that LEG’s 3.6% dividend yield is suitable for any high-income investor’s portfolio.

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