Original: Creating an Aggressive Dynamic Dividend Portfolio
The creation of an aggressive dividend portfolio can do wonders for your stock market interest and your pocket book. Often times however, a high-yield stock offers a high yield because of obvious risks or concerns. If one uses discipline to separate the wheat from the chaff, the approach can offer regular high-yield dividends. In this article I'll go through a few names to put extra cash in versus the 0% interest in my Interactive Brokers brokerage account!
Aggressive Dynamic Dividend Goal Portfolio
I want 10 names, or more, for this portfolio. The yield is important, but I want a high-yield portfolio with an average yield in excess of 8% per year. This is a dynamic portfolio, so names will be added and subtracted over the next 12 months.
I honestly want ideas that work, meet the sniff test, and will send me cash money as dividends. In other words, stocks that are working and pay cash. Everything else is a myth or hype.
American Capital Agency Corp (AGNC)
Treasury bills, Treasury bonds, repurchase agreements all have lower yields now that the debt ceiling is behind us. American Capital Agency should continue to pay $1.40 per share quarterly dividend. The yield is 19.3% based upon a $5.60 annual dividend and a $29 stock price.
Apollo Investment Corporation (AINV)
Apollo is a Business Development Corporation (BDC) which is focused upon senior loans and subordinated debt positions. Here is a breakdown of AINV's portfolio as of June 30th:
Apollo announced August 3rd confirmation of a 28-cent dividend. The quarterly conference call is scheduled for August 4th. A 28-cent quarterly payment has been consistent since September, 2009. AINV offers a 11.8% annual dividend yield based upon a $9.50 stock price.
BP Prudhoe Bay Royalty Trust (BPT)
BP Prudhoe continues to produce oil out of the beautiful state of Alaska. The trust pays quarterly dividends based upon the WTI pricing. Production is dropping gradually as most U.S. trusts do. Prices remain firm, and BPT stock price remains strong. A strong trust providing a continual distribution is perfect in my book.
Let me be clear: This is a trade. If I notice BPT's production numbers begin dropping significantly, than I will not hold the name. If WTI pricing increases, than I will be pleased. If BP finds additional reserves, in any form, and the life span can be extended than that will be topping on my ice cream.
Collectors Universe (CLCT)
Coin collectors know the importance of Collectors Universe. If you want to ensure a coin is real and what the correct condition is, than a PCGS (Collectors Universe coin grading service) grading is necessary.
Coin collectors remain a vibrant group of folks in every city. The desire for a quality U.S. coin in mint condition is desired by many collectors. Prices have dropped as discretionary spending has decreased, but the desire for the best coins in the best condition remains.
Enerplus Corporation (ERF)
Enerplus offers a 7.1% annual dividend yield. The corporation - versus a prior trust setup - pays a monthly dividend. There is the currency conversion issue to be cognizant of. I recall the Loonie trading at 65% of a US dollar. Canada has proved the value of a country with a strong currency and a vibrant economy. The August dividend is 18-cents Canadian, which equates to a 19-cents U.S. dollar. The Canadian/U.S. currency ratio is 0.9474.
The US is on the losing end of its currency valuation. This is the only reason for investors to focus upon Canada, Australia, Brazil as potential stock market and currency hedges to their US dollar positions.
Fifth Street Finance (FSC)
FSC offers investors a 11.9% annual dividend yield. The company is a BDC which provides a monthly dividend. Investors must be aware of the economic risks if management invests in the wrong sectors or industries.
Gabelli Global (GGN)
GGN is a closed end fund paying a 14 cent a month dividend. The security is vulnerable to commodity prices. The basic income structure of this income structure is owning a commodity stock and selling monthly income dividends against the long commodity position.
Hatteras Financial Corp (HTS)
Hatteras pays a 14% yield based upon a $27.48 stock price. Although this yield is a full 6% below AGNC, I respect the HTS management team. My interpretation of managements' business model is a focus upon a bit more risk control and less leverage.
In a difficult economic environment, HTS continues to deliver consistent quarterly dividend results. I look for any weakness in the armor, but am pleasantly surprised to this day.
Linn Energy (LINE)
Linn Energy has become a personal reliable name in the master limited partnership (MLP) space. Management's focus upon a conservative business model has been consistent and reliable. The business model is based upon a reliable long-lasting oil and natural gas reserve life. The production sites are now wildcat in nature, but highly predictable in output and lifespan. The yield is a compelling 6.5% with tax benefits due to its MLP structure.
MV Oil Trust (MVO)
I consider MVO around $40 a good price. The yield remains an attractive 9% plus upside if crude goes north. An overweight position is not appropriate as oil investors know commodities prices can take wide swings.
CVR Partners (UAN)
CVR Partners is a partnership offering close to a 10% distribution yield. The stock is vulnerable to commodity prices, as fertilizer pricing can be impacted based upon supply and demand.
I'll take a position in all the above names, in a small account at InteractiveBrokers.com, and add and remove names accordingly.