I want to propose you a new way of dividend investing, a little bit more aggressive than the regular version, but still with a strong focus on capital preservation. While I was doing some screening and research I found some interesting opportunities in high yield dividend stocks.
I would recommend allocating a small portion of your portfolio to a good company paying a high dividend with a beta near or under 1. The idea is to get a stock that will compensate you more, for less risk. The S&P 500 and Dow components are paying on average less than 2% dividend. I will consider that everything you get over that 2% is a premium -- but with a beta at under 1, you are not taking risk for that premium.
Let say your buy a stock with a dividend of 5% and a beta of 1. Your stock should give you the same return as the benchmark, but your higher dividend will bring you an excess return of 3%. It is a good time to put that concept in play with some uncertainty about the economy and the market. With a 5% dividend you have a nice margin of safety. It is nice in theory but can it work in practice? When you take a closer look you find that most of the companies are paying more then what they earn. But I still managed to find good non-REIT prospects:
Unitil Corp. (NYSE:UTL) engage in the retail distribution of electricity in the southeastern seacoast and capital city areas of New Hampshire. It also distributes electricity and natural gas in the greater Fitchburg area of north central Massachusetts.
YIELD : 5.7%, Beta: 0.32
First Commonwealth Financial Corp. (NYSE:FCF) operates as the holding company for First Commonwealth Bank (NYSE:FCB), which offers various financial services and retail banking services in western and central Pennsylvania.
YIELD : 5.25%, Beta: 0.74
Bassett Furniture Industries Inc. (NASDAQ:BSET) engages in the manufacture, marketing, and retail of branded home furnishings in the United States, Canada, and internationally.
YIELD : 5.00%, Beta: 1.39
Duquesne Light Holdings Inc. (DQE) through its subsidiary, Duquesne Light Company, engages in the supply, transmission, and distribution of electric energy.
YIELD : 5.10%, Beta: 1.21
Consolidated Edison Inc. (NYSE:ED) through its subsidiaries, provides energy-related products and services to its customers in the United States.
YIELD : 4.95%, Beta: .30
Disclosure: Author holds no position in stocks mentioned