Billionaire money managers didn't exactly go overboard buying U.S. stocks in the first quarter of 2023, but a select few high-yield dividend stocks (those with yields greater than 5%) did attract interest from some of the world's best investors during the opening months of 2023. The most likely reason is that high-yield dividend stocks tend to outperform the broader markets over the long run.
Which high-yield dividend stocks attracted significant interest from billionaire superinvestors in the first quarter of 2023? Kenneth Griffin's hedge fund Citadel Advisors purchased additional shares of both the healthcare real estate investment trust (REIT) Medical Properties Trust(NYSE: MPW) and online pet retailer PetMed Express(NASDAQ: PETS) during the three-month period. Read on to find out more about these two top passive income stocks.
Medical Properties Trust: 15.7% annualized yield
Medical Properties Trust offers leasing and financing services for healthcare facilities across the globe. Its diverse roster of tenants includes acute care hospitals, behavioral health facilities, and inpatient rehabilitation hospitals. This healthcare REIT has been part of Citadel's holdings since the third quarter of 2008, according to whalewisdom.com. In the first quarter of 2023, Griffin's hedge fund purchased another 2.8 million shares of the company, per Citadel's latest 13F filings with the Securities and Exchange Commission.
Is Medical Properties Trust's sky-high yield safe? Although medical facilities have historically been reliable tenants due to the stability of their underlying business, Medical Properties Trust has run into problems collecting rent from its two largest tenants -- Steward Health Care and Prospect Medical Holdings. What's more, rising interest rates have made it more difficult for healthcare REITs in general to expand their operations. As a result of these dual headwinds, Medical Properties Trust's trailing, 12-month payout ratio has ballooned to an unsightly 232%.
What's the bottom line? If you're willing to take the long view with this high-yield healthcare REIT, it might be worth picking up a few shares right now and slowly adding to your position over time. After all, the demand for healthcare facilities will only grow over time due to the aging global population, and the healthcare REIT industry should eventually stabilize within the next two to three years. These two tailwinds, in fact, are probably why Citadel continued to gobble up shares even in the face of the company's recent struggles with tenant delinquencies.
PetMed Express: 7.7% annualized yield
PetMed Express is an online pet supply and wellness company. Established in 1996, the company claims to have approximately 11 million customers across the United States. Citadel has owned this e-commerce play since the fourth quarter of 2012. In Q1, the Griffin-led fund purchased another 226,800 shares of PetMed Express, giving it a nearly 3% stake in the online pet supplier.
Although Citadel's 10-year holding period has coincided with a monstrous 161.5% total return on capital for shareholders (including dividends), PetMed's stock has struggled in recent years. The company's stock has been on the decline since 2017 due to the entrance of newer competitors like Chewy, along with pushback from some animal care clinics over online prescriptions. PetMed's management is attempting to reverse this trend through its recent acquisition of PetCare Rx and strategic initiatives in pet telemedicine.
Is PetMed stock worth buying? It all depends on your view of management's ability to return the company to consistent growth. While PetMed's 7.7% annualized yield is indeed attractive, there's no guarantee that the company will be able to fend off relative newcomers to the online pet supply and wellness space. It might be best to wait until the company's newly implemented growth initiatives bear fruit before buying shares.
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George Budwell has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy. The Motley Fool has a disclosure policy.
