The stock market has been surging, and the bulls have been feasting while the bears appear to have been kept in check. Despite this optimism, many investors are starting to wonder if 2014 will eventually lead to some profit taking that will be hard to resist. The following five stocks are worth taking a look at to help diversify any portfolio, including healthy dividends to ensure that money can be made even if the market starts to move sideways. Metals, energy, and real estate can all become investor safe havens when the bears start to roar. Here are some examples of safer plays one might want to consider when diversifying or looking for a little less risk in a portfolio.
Silvercorp Metals (SVM) - $2.49 a share / 3.90% yield
Profile - Silvercorp Metals is engaged in acquiring, exploring, and developing precious metal and base-metal mines, and mining operations in China and Canada. Silvercorp owns and operates four silver-lead-zinc mines in the Henan province of China, as well as having interest in silver-gold-lead-zinc mines in the same province. Silvercorp also owns three other mines, two of which are in other areas of China, and the third in the British Columbia province of Canada. The company is currently working on developing the GC mining project in southern China, that it hopes will be its next productive operating mine.
Precious metals have taken a hit lately and so have Silvercorp's shares. The current valuation of $2.49 a share is well below the 52-week high of $4.95 a share, and the 1-year analyst target of $3.70. This current valuation presents a good opportunity to jump aboard. Silvercorp's revenue from 2012-2013 did slip as expenses went up, but there was still enough profit ($42 million) to sustain the current dividend yield of 3.90%. Silvercorp has a market cap of $425 million that might not seem like a value right now with precious metal prices so low, but any uptick in these precious metal commodities will make the company look like a bargain. It still performs well enough in this current environment, and does continue to offer shareholders a decent dividend. This allows the company to move with the price of precious metals, while still providing the protection of a dividend as a hedge against any volatility experienced with the metals themselves.
Silvercorp statistics and significant events:
- P/E - N/A
- EPS - -$0.16
- Dividend Yield - 3.90%
- 52-week low - $2.18
- 52-week high - $4.95
- 200-day moving average - $2.97
- 52-week change - -57.36%
- Slivercorp comes out of fraud allegations by short-seller Jon Carnes, and British Columbia Securities Commission alleges fraud by Carnes.
Sure there is plenty of risk in this stock, but the price is right, the world is getting smaller, and precious metal reserves are shrinking, which only bodes well for Silvercorp's future. Silvercorp has shed almost 50% of its value, and another dip below $2.40 a share might be the impetus for more investors to jump on board.
High-Crush Partners LP (HCLP) - $35.26 a share / 5.40% yield
Profile - High-Crush Partners is a producer of sand that is used as a proppant to aid in the recovery rates of hydrocarbon extraction from oil and natural gas wells. High-Crush has interests in sand reserves, processing facilities, and transportation facilities with integrated rail infrastructure. These monocrystalline Northern white sands located primarily in Wisconsin and a few other areas of the Midwestern region of the US, are highly valued as a proppant or "frac sand". High-Crush Partners, located in Wisconsin, is one of the few producers in the region with rail transportation capabilities.
High-Crush Partners is an important player in the domestic energy marketplace. Its sands are used in all major US shale basins, and with plenty of emphasis on domestic oil production. High-Crush remains an important consideration for investors looking for entry into the energy sector. HCLP's stock has shown steady growth in 2013 with a 52-week change of 115%, that is well above the S&P change of 25.27% during the same period. Revenues in the third quarter of 2013 increased over 60% from the second quarter ($45.3 million from $27.1 million), accompanied by a steady increase in profit. This is a growing company that is profitable, has increased shareholder equity as well as cash reserves over the last four quarters, and comes with a healthy dividend yield currently over 5% (at 5.40%). The PEG ratio is at 0.49, and growth is likely to continue, especially with mounting pressure to continue tapping domestic energy reserves. The market cap has shot up over $1 billion ($1.02 billion), and the payout ratio is at a whopping 432%, so the only question to consider is whether or not High-Crush has attracted more interest than the positive numbers warrant.
High-Crush statistics and significant events:
- P/E - 19.62
- EPS - $1.80
- Dividend Yield - 5.4%
- 52-week low - $15.00
- 52-week high - $38.75
- 200-day moving average - $27.83
- Analyst opinions - 4 buy, 1 strong buy, 3 holds
The biggest fear with High-Crush is how much fuel is left in the tank to continue the positive performance for investors. The dividend is also pretty high for the profit that is being realized. Any play here is going to be more about long-term growth and less about quarter-to-quarter performance. There seem to be plenty of prospects for growth, investor interest, and a dividend that adds icing to the cake, but waiting for a little dip might be the sound play here.
American Capital Agency Corp (AGNC) - $20.14 a share / 13.30% yield
Profile - American Capital Agency Corp operates as a real estate investment trust (REIT) investing in residential mortgage pass-through securities, and collateralized mortgage loans. American Capital Agency investments, including principal and interest payments, are guaranteed by the US government or US government-sponsored entities. American Capital Agency uses short-term loans structured as repurchase agreements to fund its investments.
American Capital Agency Corp was formed in 2008, and has been operating as a REIT specializing in government-backed securities since its inception. The company has been victimized by investors who have been reacting to the threats of the FED tapering quantitative easing efforts, and the potential rise in interest rates that might be looming on the horizon. These events will more than likely make it harder for American Capital Agency to turn a profit, as well as hamper its ability to obtain low interest loans to acquire more securities. This has led to the decline in the current valuation of AGNC shares that are close to the 52-week low of $18.84 a share, and well off the 52-week high of $33.31. Dividend reductions have been significant as well, and right now the question is whether the bleeding has stopped or if things can get even worse.
American Capital Agency Corp Statistics and significant events:
- P/E - 3.47
- EPS - $5.81
- Dividend Yield - 13.30%
- 52-week low - $18.84
- 52-week high - $33.31
- 200-day moving average - $21.82
- Mean analyst target price - $22.83
The third quarter of 2013 was rough on AGNC, but its shares plunged more significantly between May and June, which might just indicate that the low point has already been achieved. This makes AGNC a compelling buy with a nice dividend, and plenty of potential for the shares to rise. The securities are government-backed, and the market for residential and commercial properties has shrunk following the recession, affording investors in AGNC a little protection from risk.
Chimera Investment Corp (CIM) - $3.03 a share / 11.50% yield
Profile - Chimera Investment Corp is a real estate investment trust (REIT) that invests in residential mortgage-backed securities (RMBS), and mortgage loans, commercial mortgage loans, real estate-related securities, and various other classes of assets. Chimera also engages in transactions with residential mortgage originators to re-underwrite residential mortgage loans owned by such entities structuring the securitization, and purchasing the resulting mezzanine and subordinate non-agency RMBS. Similar transactions by Chimera include acquiring originally AAA-rated non-agency RMBS, and re-securitizing them.
Chimera Investment makes this list not only because of the dividend yield of 11.50%, but also because of its relative strength in share prices throughout the 52-week range. Given a low of $2.71 and high of $3.34, the current valuation of $3.03 a share is right in the middle of this range. This is a consistent performer, that is not subject to a great amount of movement, making it a relatively safe investment and a good consideration for protection from a bear market. The 200-day moving average of $3.00 a share and 50-day moving average of $3.06 a share provide additional proof of the remarkable consistency of Chimera's shares. The beta of CIM's shares is 1.01, which is very much in line with the overall performance of the market. Couple this stability with that double-digit dividend, and it is hard to deny Chimera's potential.
Chimera statistics and significant events:
- P/E - 9.50
- EPS - $0.32
- Dividend Yield - 11.50%
- 52-week low - $2.71
- 52-week high - $3.34
- 200-day moving average - $3.00
- Quarterly earnings growth - 84.10%
REITs with little to no government-backed securities are very risky investments, but Chimera seems to be defying logic with its steady performance. An 11.5% return certainly offers some good protection from any negative movement, but Chimera's stability is certainly what makes the stock a compelling story. It is well worth taking a good look at if the shares dip below $2.95, as recent history provides evidence that the price more than likely will not drop too much more.
Seadrill Limited (NYSE:SDRL) - $40.74 a share / 9.40% yield
Profile - Seadrill Limited is a provider of offshore drilling equipment, and services for the oil and gas industry. It operates worldwide providing floaters, jack-up rigs, and tender rigs, including services spanning from drilling to well maintenance. Seadrill Limited primarily focuses its drilling operations in mid-, deep-, and ultra-deep waters, with the capability of drilling in calm to extremely rough seas.
Seadrill has several reasons to make this list, but the dividend yield just under 10% and the share price lead the way. This is further buffeted by third quarter results that more or less met expectations, with net income of $315 million and earnings per share of $.61. Although profits decreased in the third quarter compared to the second quarter ($471 from $507 million), the revenues increased ($1.280 from $1.268 billion). The company also managed to attain a 50.1% ownership stake in Sevan Drilling, with plans to acquire all outstanding shares (initiated August 2013). The third quarter results were positive enough to warrant a $.04 dividend increase, to raise the quarterly dividend to $.95 a share. Its total assets are listed at just under $25 billion following the third quarter results. These are solid numbers, considering Seadrill's current valuation and market cap of $19.11 billion.
Seadrill statistics and significant events:
- P/E - 8.23
- EPS - $4.95
- Dividend Yield - 9.40%
- Analysts Wunderlich (Sept 4th) and Global Hunter Securities (Oct 3rd) both initiated "buy" recommendations
- 52-week low - $34.57
- 52-week high - $48.09
- 200-day moving average - $43.78
The analyst recommendations went virtually unnoticed, and the share price appears to be at a good entry point for investors looking for a nice dividend. The marketplace has plenty of demand, giving Seadrill's shares plenty of room to rise. A bear market would certainly push more investors into commodities, energy, and utilities for safety reasons, and will only make Seadrill a more compelling story.
Safety in the stock market is never guaranteed, but some stocks can offer a degree of safety while providing some income with nice dividend payouts. These five issues have nice dividends to offer investors along with varying degrees of safety if the bears start to control the market dynamics. Now might be a good time to look for some ways to diversify a portfolio and ensure that it makes some money at the same time.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.