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Financial stocks haven’t been appealing to dividend lovers recently. In our article, we showed that the high dividend yielding financial stocks performed better than low dividend yielding financial stocks in the last 52-week period. However, most of these mega-cap financials don’t have high dividend yields that are attractive for dividend investors.

We believe there are still attractive dividend opportunities within the financial sector. Some industries, like credit services, may contain high dividend yielding stocks that dividend seekers may love, although the average dividend yield of the stocks in these industries are still low compared to other industries. We prefer high dividend stocks since they generally perform better. We are also concerned about the Fed’s inflationary policy and want to protect ourselves against inflation by defensive investing in high dividend yielding stocks.

We compiled a list of 33 credit services stocks (the industry classifications are sourced from Yahoo) and ranked them based on their 12-month dividend yields. The stocks with dividends and no dividends, and their performances, are shown below.

STOCKS WITH DIVIDEND YIELDS

Dividend Yield

YTD Return

52-week Return

FIFTH STREET FINANCE CORP

FSC

9.3%

6.5%

6.37%

MEDALLION FINANCIAL CORP

TAXI

6.5%

15.4%

22.88%

WHITE RIVER CAPITAL INC

RVR

5.3%

17.6%

43.30%

ADVANCE AMERICA CASH ADV CTRS IN

AEA

4.2%

6.3%

36.95%

MICROFINANCIAL INC

MFI

3.6%

40.4%

53.19%

CASH STORE FINANCIAL SVCS INC

CSFS

3.1%

-5.5%

-5.08%

NELNET INC

NNI

3.1%

-3.8%

21.36%

FEDERAL AGRICULTURAL MORT CORP

AGM

1.1%

17.3%

10.60%

EQUIFAX INC

EFX

1.1%

6.9%

16.83%

CAPITALSOURCE INC

CSE

0.6%

-11.8%

29.67%

DISCOVER FINANCIAL SERVICES

DFS

0.5%

30.8%

63.27%

CAPITAL ONE FINANCIAL CORP

COF

0.4%

24.7%

18.82%

CASH AMERICA INTERNATIONAL INC

CSH

0.3%

29.6%

32.83%

AVERAGE

13.4%

27.0%

STOCKS WITH NO DIVIDEND YIELDS

Dividend Yield

YTD Return

52-week Return

ASSET ACCEPTANCE CAPITAL CORP

AACC

0.0%

-21.4%

-34.27%

ALLIANCE DATA SYSTEMS CORP

ADS

0.0%

30.9%

21.59%

CREDIT ACCEPTANCE CORP

CACC

0.0%

24.5%

74.0%

COMPUCREDIT HOLDINGS

CCRT

0.0%

-46.7%

-40.76%

CONSUMER PORTFOLIO SVCS INC

CPSS

0.0%

-2.5%

-34.09%

DOLLAR FINANCIAL CORP

DLLR

0.0%

21.5%

53.95%

ENCORE CAPITAL GROUP INC

ECPG

0.0%

30.5%

44.75%

FIRST CASH FINANCIAL SVCS INC

FCFS

0.0%

24.7%

78.49%

FIRST MARBLEHEAD CORP

FMD

0.0%

-15.2%

-42.68%

GLOBAL CASH ACCESS HOLDINGS INC

GCA

0.0%

-0.6%

-60.72%

INTERVEST BANCSHARES CORP

IBCA

0.0%

8.9%

-46.83%

MANHATTAN BRIDGE CAPITAL INC

LOAN

0.0%

21.3%

17.56%

NEWSTAR FINANCIAL INC

NEWS

0.0%

-4.4%

25.90%

NICHOLAS FINANCIAL INC

NICK

0.0%

25.3%

41.92%

PHH CORP

PHH

0.0%

-3.9%

0.50%

PRIMUS GUARANTY LTD

PRS

0.0%

-5.9%

7.17%

S L M CORP

SLM

0.0%

30.1%

41.33%

SECURITY NATIONAL FINANCIAL CORP

SNFCA

0.0%

-25.0%

-42.31%

S P BANCORP INC

SPBC

0.0%

22.6%

22.34%

WORLD ACCEPTANCE CORP

WRLD

0.0%

28.1%

93.37%

AVERAGE

7.1%

11.1%

In the last 52-week period, the average return of the 13 dividend yielding credit services stocks was 27% vs. 11.1% for the second group of 20 stocks with no dividend yields. Only CSFS in the first group had negative returns in the past 12 months, while seven stocks (AACC, CCRT, CPSS, FMD, GCA, IBCA, SNFCA) of the second group had a negative performance in the same period. The performance of the first group was also better since the beginning of this year. The average Year-To-Date return of the first group is 13.4%, outperforming the second group by more than 6 percentage points. Five credit services stocks with the highest dividend yields are as follows:

1. Fifth Street Finance Corp ((NASDAQ:FSC)): Fifth Street Finance Corp. is a lending and investment finance corporation specializing in small and mid-sized companies. FSC has a high dividend yield of 9.3% and returned 6.37% during the past 12 months. FSC recently traded at $12.62 and returned 6.5% year-to-date. The stock has a market cap of $841.34M and P/E Ratio of 18.75. David Einhorn’s Greenlight Capital had $28 million in FSC at the end of December.

2. Medallion Financial Corp. ((NASDAQ:TAXI)): Medallion Financial Corp. is a lending company specializing in taxi medallion lending and commercial lending. TAXI recently traded at $9.41 and has a high dividend yield of 6.5%. TAXI returned 22.88% to its investors during the past 12 months, while it gained 15.4% year-to-date. The stock has a market cap of $164.37M and P/E ratio of 14.70. Jim Simons’ Renaissance, Murray Stahl’s Horizon Asset Management and Whitney Tilson’s T2 Partners had small positions in TAXI at the end of December.

3. White River Capital Inc. ((NYSEMKT:RVR)): White River Capital Inc. is a financial services company specializing in automobile financing. RVR has a 5.3% dividend yield and returned 43.30% during the past 12 months. RVR recently traded at $18.85 and gained 17.6% since the beginning of the year. The stock has a market cap of $69.99M and P/E ratio of 10.24. Chuck Akre’s Akre Capital had a small investment in RVR at the end of last year.

4. Advance America, Cash Advance Centers Inc. ((NYSE:AEA)): Advance America, Cash Advance Centers Inc. is a U.S. firm providing consumer financial services to its clients. AEA recently traded at $6.05 and has a dividend yield of 4.2%. AEA returned 36.95% during the past 12 months, while it gained 6.3% since the beginning of this year. The stock has a market cap of $376.99M and P/E ratio of 9.31. D.E. Shaw, Whitebox Advisors and AQR Capital are among the hedge funds that are bullish about AEA.

5. MicroFinancial Inc. ((NASDAQ:MFI)): MicroFinancial Inc. is a financial services company providing leasing and micro-financing. MFI has a 3.6% dividend yield and returned 53.19% during the past 12 months. The stock also performed well in 2011, gaining 40.4% year-to-date. MFI recently traded at $5.75. The stock has a market cap of $81.83M and P/E ratio of 12.23.

Source: Investing in High Dividend Credit Services Stocks