5 megatrend plays offering big payouts
These companies offer long-term growth and immediate income.
By Alyssa Oursler
Another quarter, another earnings season.
Keeping up with earnings season's rapid-fire releases can be exhausting, and figuring out what to do with those numbers can be just as challenging. It's all too easy to get caught up in the expectations game, whether it's being scared off by a subpar quarter or thinking a stock's short-term growth will last forever.
Unless you're a day trader, though, many earnings-related headlines are just noise. If you're investing for retirement or have any kind of longer-term time horizon, a more useful exercise would be to simply take a step back and consider what kind of big-picture changes are coming. Then put your money toward companies that fit in that big picture.
But while investing in megatrends is a popular and sound strategy (InvestorPlace), many folks are too impatient to wait for the long-term payoff. Luckily, plenty of companies set to cash in on megatrends also currently reward shareholders in the short-term via dividends.
Let's take a look at five of them:
Dividend yield as of 7/8: 3.6%
Our first megatrend isn't pretty, but it is pretty inevitable.
To put it simply, humans make a lot of stuff, but many of us also throw a lot away. In 2011 alone, Americans generated about 250 million tons of trash -- or an average of 4.4 pounds of waste per person per day.
The good news: That's slightly less than the total generated in 2005, while a larger chunk of it was recycled.
But whether we are piling garbage into landfills or recycling our soda cans, Waste Management (WM) is often the one providing the service, and thus pocketing the profits. The Houston company is the largest environmental solutions provider in North America, serving all 50 states and D.C., Canada and Puerto Rico.
Income investors will note that WM has been paying a dividend since 1998 and has increased that payout every year since 2004. Its current 37-cent dividend makes for a 3.6% yield -- and that's something you won't want to throw away.
Middlesex Water Company
Dividend yield as of 7/8: 3.7%
The global population just keeps on growing (InvestorPlace) ... and water consumption is growing even faster (InvestorPlace). Unfortunately, even though the earth is covered with water, less than 3% of that is actually freshwater.
That sure makes it tough to hydrate everyone. The UN estimates that 1.8 billion people will be living in countries or regions with absolute water scarcity by 2025, while two-thirds of the world population will be under stress conditions.
Basically, thinking in simple supply-and-demand terms, safe and clean water looks poised to be one of the world's hottest commodities.
While there are plenty of ways to play this reality (InvestorPlace), regional water utility Middlesex Water Co. (MSEX) offers one of the most refreshing payouts. The company has paid a dividend since 1998 and has increased its quarterly check every year since 2004.
MSEX's current quarterly 19-cent payout makes for a nice 3.7% yield that investors should be eager to slurp up.
Eli Lilly & Co.
Dividend yield as of 7/8: 3.9%
America's population is aging rapidly, and our health problems are booming across the age spectrum.
That's where Big Pharma comes in.
A recent study from the Mayo Clinic showed that nearly 70% of Americans are on at least one prescription drug, while more than half are on at least two prescriptions. One big player in that arena is Eli Lilly & Co. (LLY) -- the company that first mass-produced penicillin, the polio vaccine and insulin.
The next big thing for Lilly could be its diabetes drug dulaglutide, which has shown better results in recent late-stage trials than rival drugs from Bristol-Myers Squibb (BMY) and Merck (MRK). That's a big breakthrough, considering estimates that more than 25 million folks in America alone have diabetes, while nearly 2 million new cases were reported in 2010. A second Lilly drug, empagliflozin, has also shown success when used with insulin.
To top it off, Eli Lily has been rewarding income investors for more than a century. While its dividend growth isn't great -- LLY recently announced that it will maintain its quarterly 49-cent dividend, or the same rate it has paid since 2009 -- that still gives Eli Lilly shares a yield of nearly 3.9% at current prices.
Dividend yield as of 7/8: 4.2%
So far, this list has been admittedly American-centric. However, some of the biggest growth opportunities of all are overseas in emerging markets.
I'm not talking about the usual BRIC nations, either. Russia's economy remains ugly under Putin's iron fist; China is still suffering from a slower growth, while Brazil and India have both been trimming growth forecasts.
Instead, investors have been eyeing Africa -- and for good reason (InvestorPlace). While the continent faces its share of challenges, average growth is expected to come in over 5% this year, with low-income countries growing at around 6.6%.
If you want a piece of that booming pie, African company MTN Group (MTNOY) is an appealing and high-yielding option. The company is the continent's leading telecommunications provider, operating in 21 countries across the region. It also has exposure to the Middle East. Last year, that presence translated to revenue growth of 11%, subscriber growth of 15% and earnings growth of 7%.
While it's easy to be skeptical about a 4% yield from an African telecom, MTN has increased its annual payout every year since 2009, usually doling out two dividends each year. Based on its past two payouts, that gives you a yield north of 4%.
Senior Housing Properties Trust
Dividend yield as of 7/8: 6%
For our final stock, let's look back at that expanding elderly population.
See, not only do we have more and more old folks, but the aforementioned Big Pharma is also keeping them alive longer. As a result, aging boomers eventually will need various types of care -- care they can find in senior housing communities.
That's a drum InvestorPlace editor Jeff Reeves has been beating for some time (InvestorPlace). Late last year, he noted that the aging boomer generation provides huge investment opportunities -- especially in senior housing REITs.
One promising and obvious option: Senior Housing Properties Trust (SNH). The company owns about 370 properties nationwide, and nearly three-quarters of them are senior living communities (hence the name).
The beautiful thing about REITs is that in return for their tax-advantaged status, they are required by law to pay out at least 90% of taxable income to shareholders in the form of dividends. The result? SNH currently tops this list with a yield just under 6%.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities. Follow her on Twitter: @alyssaoursler.
More from InvestorPlace
So... Long Term Trends: Waste management, water shortages, meds, old people?
Oh boy. Can't hardly wait...
Too bad Waste Management can't be bothered to pay its highly skilled Master Mechanics enough to support a small family and a once affordable mortgage.
Just so everyone understands upon whose back this profit is built, in 2012, after three years of very minimal raises, Waste Management couldn't be bothered to give any laborers who assure the profit a raise. I'm fairly certain, however, that Waste Management's CEO did not suffer the same fate.
We are now losing our house because the profit and the shareholder was more important to Waste Management than paying the Highly Skilled Master Mechanic breadwinner his worth.
I want everyone to understand that before they decide to invest in WM because of this article. Waste Management does not pay its Master Mechanics their worth. These men, and, a few women are who keep their trucks safe for the road.
My spouse is now fixing up the dump we are forced to move into AND working 9-12 hour days to keep big trucks safe on the road. Why? Because his wage no longer can keep up our minimal number of self generated bills AND this once affordable mortgage. His job is forcing us into foreclosure along with US Banks unwillingness to work with us a year ago when I called for help, in addition to the investor contact disappearing on my when I offered my solution.
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These companies won't soar like other plays in the sector, but they make for great income sources.
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