I Am Locking In 2 Fat +7% Yields As Interest Rates Fall

Investment Insights - The article discusses two investment picks: Healthcare Realty Trust (HR) and British American Tobacco (BAT), highlighting their strong dividend yields and growth potential [4][11]. Healthcare Realty Trust (HR) - HR is a Real Estate Investment Trust (REIT) focused on medical office buildings, owning 673 properties primarily near leading hospital campuses [4]. - For Q2 2024, HR reported FFO/share of $0.38, covering its$0.31/share quarterly dividend, with NOI growth exceeding expectations [4][8]. - The REIT projects year-over-year NOI growth of 4.5% to 5.5% in the second half of 2024 [4]. - Strong leasing activity was noted, with over 400,000 sq ft of new leases signed for the fourth consecutive quarter, and a record new lease pipeline of 1.9 million sq ft [5]. - HR's occupancy rate improved to 85.5% from 79.3% year-over-year, with projections to reach 87% in the second half of 2024 [6]. - NOI growth was reported at 3.5% YoY in Q2, with total multi-tenant NOI growing 3.9% YoY, both at the high end of guidance [7]. - The dividend is now fully covered, with a projected normalized FFO of $1.53 to$1.55/share for FY 2024, resulting in a 79% payout ratio [8]. - HR's joint venture with KKR & Co. has generated $400 million in proceeds year-to-date, with expectations of over$1 billion for the full year [9]. - The company ended Q2 with a leverage ratio of 6.4x and plans to reduce leverage further by FY 2024 [10]. British American Tobacco (BAT) - BAT is the largest global tobacco company, with a current yield of 8.2% and stock trading approximately 24% above its recent low [11][18]. - The company reported 1.4 million new smokeless product consumers in 1H 2024, totaling 26.4 million, with new category revenue reaching £1.7 billion, representing 17.9% of group revenue [13]. - BAT's e-cigarette brand Vuse holds a 40.9% market share in leading markets, with smokeless products constituting 20% of total U.S. revenues in 1H 2024 [15]. - Despite lower combustible revenues in the U.S., BAT's strong growth in other regions has cushioned the impact [16]. - The company maintains a strong liquidity position with an average debt maturity of 9.2 years and a fixed debt profile of 84% [17]. - BAT has initiated a share repurchase program, planning to buy back £700 million worth of shares in 2024 and £900 million in 2025 [18]. - The tobacco industry is characterized by its ability to pass on higher prices to consumers, ensuring resilience against economic pressures [18]. Conclusion - HR is positioned to benefit from the growing demand for healthcare and limited supply of medical office buildings, while BAT is adapting to a smokeless future, both providing solid dividend sources for investors [19].