Investing in Mid-Cap Financials With High Dividend Yields

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 |  Includes: ALL, AMP, AVB, BBT, BXP, DFS, FITB, HCN, HCP, HIG, HST, ICE, IVZ, KEY, KIM, LNC, MTB, NTRS, NYX, PCL, PFG, PGR, PLD, SLM, STI, TROW, UNM, VTR, WY, XL
by: Insider Monkey

In a previous article, we showed that most mega-cap S&P500 financials didn’t have high dividend yields attractive enough for dividend investors. Although high dividend financial stocks have performed better than low dividend financial stocks since the beginning of this year, dividend lovers may not find these large-cap high dividend stocks appealing.

We believe there are better dividend opportunities within a financial sector. Mid-cap S&P500 financial stocks have higher dividend yields than large-cap financial stocks. We prefer high dividend stocks since they generally perform better and increase their dividend payments over five to 10 years. We also believe investors should consider picking higher dividend stocks when they seek protection against inflation in the current monetary environment.

Below, we provide a list of 30 S&P500 financial stocks -- the sector classifications are sourced from Finviz and the market data are sourced from Fidelity -- that have a market cap between $5B and $15B and ranked them based on their annualized dividend yields. The top and bottom halves and their performances are shown below:

HIGHER DIVIDEND YIELDS

Dividend Yield

YTD Return

Health Care REIT Inc.

HCN

6.23%

0.55%

HCP Inc.

HCP

5.79%

-6.22%

Ventas Inc.

VTR

4.84%

-7.52%

Plum Creek Timber Co.

PCL

4.67%

-0.94%

Kimco Realty Corp.

KIM

4.27%

-4.69%

NYSE Euronext Inc.

NYX

4.26%

-4.45%

ProLogis

PLD

4.03%

-11.03%

M&T Bank Corp.

MTB

3.83%

-14.74%

Weyerhaeuser Co.

WY

3.57%

-9.95%

The Allstate Corp.

ALL

3.34%

-20.15%

BB&T Corp.

BBT

3.12%

-20.48%

Northern Trust Corp.

NTRS

3.05%

-32.99%

SLM Corporation

SLM

2.88%

10.94%

Avalonbay Communities

AVB

2.76%

16.57%

Invesco Ltd.

IVZ

2.76%

-25.46%

AVERAGE

-8.70%

Click to enlarge

LOWER DIVIDEND YIELDS

Dividend Yield

YTD Return

Fifth Third Bancorp

FITB

2.51%

-34.36%

T.Rowe Price Group

TROW

2.43%

-20.24%

Principal Financial Group

PFG

2.34%

-27.89%

XL Group Inc.

XL

2.29%

-10.93%

Progressive Corp.

PGR

2.18%

-6.27%

Ameriprise Financial Inc.

AMP

2.08%

-22.32%

Hartford Financial Services Group

HIG

2.01%

-24.45%

Boston Properties Inc.

BXP

2.00%

17.53%

Unum Group

UNM

1.87%

-6.10%

KeyCorp

KEY

1.87%

-27.01%

SunTrust Banks Inc.

STI

1.09%

-37.91%

Discover Financial Services

DFS

1.03%

26.52%

Host Hotels & Resorts Inc.

HST

0.99%

-32.10%

Lincoln National Corp.

LNC

0.90%

-19.62%

Intercontinental Exchange Inc.

ICE

0.00%

-3.58%

AVERAGE

-13.68%

Click to enlarge

Since the beginning of this year, these 30 mid-cap S&P500 financial stocks lost 11.98% vs. -5.2% for the SPY. During this underperformance of the sector in 2011, higher dividend yielding financial stocks performed relatively better. In this period, the average return of the 15 high dividend yielding mid-cap S&P500 financial stocks was -8.70%, while the second group of 15 financial stocks with lower dividend yields lost 13.68%. As we expected, high dividend mid-cap financial stocks have given more attractive dividend yields, outperforming low dividend mid-cap financial stocks recently.

We prefer high dividend stocks over low dividend stocks since the former provides better protection in down markets. Top 10 mid-cap S&P500 financial stocks with the highest dividend yields are as follows:

Health Care REIT Inc. is a real-estate investment trust investing in healthcare properties. HCN has a 6.23% dividend yield and returned 0.55% since the beginning of this year. The stock has a market cap of $8.14B. Jacob Gottlieb's Visium holds more than $100M of HCN.

HCP Inc. is a real-estate investment trust investing primarily in healthcare properties. HCP has a 5.79% dividend yield but lost 6.22% since the beginning of this year. The stock has a market cap of $13.50B and P/E Ratio of 29.35. D.E.Shaw had more than $100M in HCP. Jim Simons’ Renaissance Technologies is also among HCP investors.

Ventas Inc. is another real-estate investment trust investing primarily in healthcare properties in the United States and Canada. VTR has a 4.84% dividend yield but lost 7.52% since the beginning of this year. The stock has a market cap of $13.68B and P/E Ratio of 41.67. D.E. Shaw, Israel Englander, Phil Gross and Simons hold the largest VTR positions among 300+ funds we are tracking.

Plum Creek Timber Co. is a real-estate investment trust that acquires and manages timberlands in the United States. PCL has a 4.67% dividend yield and returned -0.94% year-to-date. The stock has a market cap of $5.82B and P/E Ratio of 33.60. Jean Marie Eveillard’s First Eagle has the largest PCL position, holding more than $200 million of the stock.

Kimco Realty Corp. is a real-estate investment trust managing neighborhood and community shopping centers in the United States. KIM has a 4.27% dividend yield and lost 4.69% since the beginning of this year. The stock has a market cap of $6.86B and P/E Ratio of 112.40. Gross and Simons are among KIM investors.

NYSE Euronext Inc. is a multinational corporation that operates or holds stakes in various U.S. and European securities exchanges. NYX has a 4.26% dividend yield and returned -4.45% since the beginning of this year. The stock has a market cap of $7.38B and P/E Ratio of 12.92. Bill Miller had more than $140 million in NYX at the end of March.

ProLogis is a real-estate investment trust operating industrial distribution properties worldwide. PLD has a 4.03% dividend yield but lost-11.03% since the beginning of this year. The stock has a market cap of $12.74B. Steven Cohen holds the largest PLD position among the 300-plus funds we are tracking.

M&T Bank Corp. is the holding company of M&T Bank, an American commercial bank. MTB has a 3.83% dividend yield but lost 14.74% since the beginning of this year. The stock has a market cap of $9.17B and P/E Ratio of 10.32. Warren Buffett holds more than $450 million of MTB.

Weyerhaeuser Co. is a real-estate investment trust that owns and manages timberlands in the United States. WY has a 3.57% dividend yield but lost 9.95% since the beginning of this year. The stock has a market cap of $9.04B and P/E Ratio of 4.17. John Paulson invested more than $750 million in WY. Eveillard is another prominent WY investor.

The Allstate Corp. is an insurance company providing property and casualty insurance services. ALL has a 3.34% dividend yield but lost 20.15% since the beginning of this year. The stock has a market cap of $12.98B and P/E Ratio of 24.87. Harris Associates, Clint Carlson and Ron Gutfleish are prominent ALL investors.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.