4 Dividend Stocks With Good Prospects and 4% Yields

These four stocks are super cheap with good earnings prospects, but still have dividend yields of about 4% or so. They trade with low price/earnings (P/E) valuations, positive earnings growth prospects for next year, and dividends that their earnings can afford. They are:

• Edison Int'l (EIX) - an electric utility company with a 3.98% dividend yield and a forward P/E of 14.6 times with good earnings growth (+7.0%).
• Medical Properties Trust (MPW) - This REIT invests in hospital facilities that it leases to medical operators, with a 6.44% yield, 4.4% growth prospects in 2023, and a 9.3x multiple.
• Northrim BanCorp (NRIM) - an Alaskan bank with an 8.5x P/E, a 3.84% dividend yield, and 27% growth forecasts for 2023.
• Verizon (VZ) - a 5G wireless operator with a 4.99% dividend yield and a forward P/E of just 9 times, with earnings forecast to rise 3.33% in 2023.

These four bargain dividend stocks have dividend yields of about 4%, positive earnings prospects, and low valuations. This is what value investors look for. They like getting paid while waiting for the stocks to move higher to their intrinsic value.

Each of these stocks can cover its dividends and have positive earnings prospects with low P/E valuations. Investors in these stocks have the ability to survive inflation and a positive recession.

As a result, some of the stocks probably make good candidates to buy and also short out-of-the-money calls. This is called covered call investing. here is a good example.

Medical Properties Trust - Covered Calls

MPW is a hospital REIT. It has 431 hospital facilities and 43,000 licensed beds in nine countries. MPW stock has good earnings prospects and shows a 6.44% dividend yield, paid quarterly, with its $1.16 annual dividend. It has also had nine consecutive years of dividend growth.

The company highlighted in its first-quarter earnings conference call, that it has inflation-protected leases for hospital facilities. So it won’t be hurt by inflation by passion on escalating price increases in rent to its hospital operators.

Analysts forecast $1.83 in funds from operations (FFO) this year and 4.4% higher at $1.91 next year. This puts the stock at $18.02 on a forward earnings multiple of 9.3 times.

One way to play this is to buy the stock and then sell out-of-the-money calls for some extra yield.  This allows the investor to receive premiums monthly. If the stock rises to the higher strike price, they also get a small capital gain. Then they do it again or sell a covered call of another stock.

For example,  Barchart shows that on June 3, the $20 strike price July 15 calls trade at 10 cents at the midpoint.

This allows the investor to receive $10 per call based on the purchase of $1,774 on June 3, or a monthly yield of 0.56%. That works out to an annualized return of 6.93% on a compounded basis. That effectively doubles the yield of the investment over the next year. If the stock falls, you can pick a lower strike price. Just keep in mind that if the stock rises you may get called and you will sell the stock at the price of the strike price. In general, that is a good problem to have, although it is an opportunity cost risk.