It can be a roller-coaster ride of emotion to invest in meme stocks like AMC Entertainment or Bed Bath & Beyond — and it probably isn’t the best financial decision. Amid the market’s decline of around 9% in the past 12 months, both of the meme trader favorites have plummeted, with Bed Bath & Beyond falling by 62% and AMC by 77%.
If you’re more interested in becoming wealthier over time than in getting rich quick — and you probably should be — it’s a better idea to park your money in something like a dividend stock. In particular, there are two monster dividend payers that are much better options than AMC or Bed Bath & Beyond for the long haul.
Let’s take a walk down real estate investment trust (REIT) lane and look at them more closely.
1. Alexandria Real Estate
When biotech and pharma companies need to rent move-in ready laboratory space for research or manufacturing purposes, Alexandria Real Estate Equities (ARE -0.90%) is the go-to landlord. With more than 41.1 million rentable square feet of space, its buildings are located in biomedical hubs like Boston, San Diego, and San Francisco.
Since it has a high occupancy rate of 98.4% for its operating properties that weren’t just acquired, it’s safe to say that it doesn’t have any trouble finding tenants. And with a roster of tenants like Modern, Pfizerand even Apple, There’s not much chance of a default.
In the second quarter, it raised its rents by 33.9% on a cash pandemic basis, a bit higher than its-era norm. Its ability to continually demand higher rents for its limited space indicates that tenants are more likely to be competing for space than they are to be trying to negotiate a lower fee. That’s a very positive trend because it’ll support a continually higher dividend payout.
On that note, over the last 10 years, Alexandria hiked its dividend by 122%, and its forward dividend yield is currently just shy of 3%. On a yearly basis, that works out to be an annual increase of 6.8%, which is quite good.
Over the long term, investors can probably count on increases at that pace to continue, especially as the biomedical sector grows and demand for laboratory floor space increases. And while there’s no guarantee that the company will outperform the market, you can probably also count on it outperforming AMC and other meme stocks that don’t have reliable business models.
2. Medical Properties Trust
Medical Properties Trust (MPW -0.37%) buys and leases out (can you guess?) hospitals and clinical spaces. It also invests in its tenants via loans and equity stakes, helping to both attract them and retain them once they’re settled. Its weighted average lease length is a whopping 17.7 years, meaning that its long-duration tenants don’t need to be replaced very frequently.
Because its hospitals are licensed by municipal authorities on the basis of buildings rather than the businesses operating inside, its real estate is more valuable than the structures alone. Furthermore, the licensing means that it has a regulatory moat that prevents competitors from simply constructing cheaper property and poaching tenants. So even if there’s not much chance for Medical Properties Trust to grow rapidly, it can count on its renters to stick around even amid its 4.4% average annual rent escalations.
Those favorable dynamics have been quite rewarding for shareholders. Since going public in mid-2005, Medical Properties Trust has grown the total return of its shares at a compound annual rate of nearly 10.8%. And since late 2012, the REIT has increased its dividend by 45%, and it yields above 7.7%.
Importantly, the business is still buying up new properties to plant the seeds of future growth; in Q2 alone, it acquired two hospitals in the US, three radiotherapy clinics in Spain, and one hospital in Colombia. That should pave the way for the dividend to keep rising over time, all while handily avoiding the excessive volatility of meme stocks.
Alex Carchidi has positions in Apple. The Motley Fool has positions in and recommends Alexandria Real Estate Equities and Apple. The Motley Fool recommends Moderna Inc. and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.