Investors are always on the chase for high dividend yields. Sometimes stocks truly are earning their dividends so can pay their historically high dividends. In other cases, there can be issues to be aware of prior to purchase. In the stock market, a "no refund" policy is strictly enforced. Here are 10 stocks that seemingly have a high-yield, and many are very worthy of consideration. I present my views and opinions on each name.
I used fastgraphs.com screening software to find 10 high-yielding stocks with a return in excess of 14%.
( EYE Ratio is Earnings Yield Estimate to T-bond Yield Ratio, Est EPS Growth is Estimated Earnings Per Share Long-term Growth Rate, Current PE is a Price to Earnings Ratio which is blended based on actual past and expected future earnings )
|Est EPS |
|15yr Historical |
|Debt||10yr EYE |
|DivYld||5yr Est |
Ann Tot Ret
|Market Cap||Annualized |
|INVESCO MORTGAGE CAPITAL INC||$17.60||4.6||5.0%||7.6%||12.5:1||22.0%||37.4%||1.67 Bil.||7.4% 3 yr|
|AMERICAN CAPITAL AGENCY CORP||$28.74||4.6||2.0%||NMF||9.1:1||19.5%||27.7%||5.13 Bil.||26.2% 4 yr|
|ARMOUR RESIDENTIAL REIT INC||$ 7.46||5.7||2.0%||314.1%||9.1:1||19.3%||28.1%||564.92 mil.||9.8% 3 yr|
|CORNERSTONE PROGRESIVE RT FD||$ 6.68||NMF||0.0%||NMF||0%||NMF||18.5%||6.3%||NA||-6.1% 5 yr|
|RESOURCE CAPITAL CORP||$ 5.44||5.5||5.0%||4.0%||10.2:1||18.4%||33.3%||404.93 mil.||-2.9% 6 yr|
|CYPRESS SHARPRIDGE INVTS INC||$13.42||8.5||3.5%||NMF||9.1:1||17.9%||30.6%||1.11 Bil.||16.8% 3 yr|
|WHITING USA TRUST I||$16.91||5.9||0.0%||13.1%||0%||7.5:1||17.2%||5.7%||234.44 mil.||-5.8% 4 yr|
|TWO HARBORS INVESTMENT CORP||$ 9.56||6.0||5.0%||NMF||9.7:1||16.7%||31.2%||1.34 Bil.||8.7% 3 yr|
|LIFE PARTNERS HOLDINGS INC||$ 6.71||4.3||0.0%||68.5%||10.9:1||15.5%||21.5%||125.10 mil.||67.9% 14 yr|
|ANNALY CAPITAL MANAGEMENT||$18.05||7.4||2.0%||8.6%||7.2:1||14.4%||21.8%||17.49 Bil.||9.2% 15 yr|
1. INVESCO Mortgage Capital (IVR)
INVESCO is a non-agency mREIT with a strong catalyst. Wilbur Ross is a well known billionaire investor, and often appears on popular financial news. He has a vested interest in IVR and placed a management team to run the inner workings of IVR.
The company recently completed a secondary offering to bring new funds into the mREIT operation. IVR's book value did decrease from June 30th to late July. This needs to be factored in when determining if the company is likely to continue its projected dividend yield. A 22% yield offers a great return if the identical dividend distributed during past quarters can be met.
2. American Capital Agency Corp. (AGNC)
AGNC is a pure agency-mREIT. The company is expected to go ex-dividend, for $1.40, in the 3rd week of September. Investors should expect a dividend run during the post Labor Day market. The $1.40 dividend has been constant for the past 8 quarters. I respect management. I own the stock. The management team has provided a solid return since their IPO in 2008.
3. ARMOUR Residential REIT (ARR)
ARR is an agency-mREIT which pays a monthly dividend of 12-cents per share. An agency mREIT means the holdings are implicitly backed by the Federal government. Freddie Mac, Fannie Mae, and Ginnie Mae are all agency-MBS held by ARR. ARR borrows cheap (e.g., 1-month Libor rate as a rough estimate) and buys longer-term agency-MBS. This borrow and buying is then levered at a 5-10x level. The yield curve difference, in borrowing and lending, is the net profit.
4. Cypress Sharpridge Investments (CYS)
CYS is a name I am very confident in, although they are a fairly new mREIT. The holdings are all agency MBS. Management has blue-blood pedigrees, having worked at Goldman Sachs and other well known financial institutions. The mREIT was levered at 8.1x as of June 30th, 2011. This is a high level albeit management has not let me down thus far. I remain long CYS.
5. Cornerstone Progressive Return (CFP)
CFP is a closed end fund (CEF) which invests primarily in other closed end funds. There is a managed distribution payout in place. This can account, potentially, for the return of capital as part of the dividends. CFP trades at close to a 25% premium to net asset value. I personally have a difficult time investing in any CEF that trades at more than a 3-5% premium to NAV. The current payouts should continue as far as the data indicates.
6. Resource Capital Corp. (RSO)
RSO is a speciality finance shop, set up as a REIT. The business primarily deals in commercial real estate and commercial finance. The dividend has been solid at 25 cents per share. At the end of the day, RSO will succeed if management performs effective due diligence on their client base and risk tolerance is acceptable. Management is critical in dealing with commercial debt in touch economic times.
7. Two Harbors Investment Corp. (TWO)
TWO is a hybrid mREIT. This means the stock holds both non-agency and agency mortgage backed securities (MBS). There was insider buying in the $8-$9 range. This is usually a very good sign. Assessing a value on non-agency MBS, which is not guaranteed by the Federal government, can be difficult for the average investor. Again, trust in management is critical.
8. Whiting USA Trust I (WHX)
Whiting is a USA energy trust. This indicates to investors the trust will not last forever and has a finite time frame. Production over time will decrease and SEC filings and management discussion will highlight the projected energy production levels. As with most U.S. energy trusts, the distribution payout is also based upon current natural gas and oil prices.
9. Life Partners Holdings, Inc. (LPHI)
Life Partners Holdings operates in the U.S. secondary market for life insurance. I have studied this stock for quite some time and can not assess an appropriate valuation. I have never owned a position in LPHI. The equity was under review for NASDAQ delisting due to allegations and charges filed by third parties. I recommend anyone considering this stock to review the SEC filings for factual information on the thrust of the pending lawsuits. The stock has rebounded from recent lows. The company has continued to pay their dividends.
10. Annaly Capital Management, Inc. (NLY)
Annaly is run by Mr. Michael Farrell. Mr. Farrell is well respected in the non-agency and agency mREIT industry. He is the grey beard of the mREIT industry. The projected dividend yield should be retained as NLY's focus uses a barbell strategy to reduce risk and level out net income. I feel pretty confident NLY can deliver on their continued high yield strategy.
Disclosure: I am long AGNC, CYS, NLY.