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Are high dividend companies in the energy or shipping sectors appropriate for fixed-income investors? In the past, energy companies and shipping companies have been touted as energy inflation plays. The idea was that as commodities become scarce or more expensive, companies involved in their discovery, production, and distribution would benefit. For example, as coal increases in price, coal producers and companies that ship coal would both see higher returns and stock price appreciation. Can top dividend stocks be found in either shipping or energy?

Income alternatives are certainly appropriate in the face of our current debt bubble. Interest rates in 2011 are at record lows, and real returns of short-term treasuries are expected to be negative. Investors seeking yield have bid up the prices of junk bonds and bid down their yields. This can be witnessed in the returns of the high yield debt (junk bond) exchange-traded funds (ETFs), which trade at dividend yields near 8%.

Below is a list of top dividend energy stocks trading at or above 8% dividend yield:

Extreme Dividend Energy Companies: Oil and Gas Production, Exploration, Utilities

Ticker

Dividend Yield

Return on Equity

Country

Performance (Year to Date)

Beta

P/E (ttm)

P/B

WHX

16.65%

60.58%

USA

-14.77%

0.79

6.19

4.31

VOC

15.56%

N/A

USA

9.13%

N/A

14.17

2.6

NKA

11.15%

6.77%

USA

-33.44%

N/A

6.9

0.48

RGY

10.05%

-0.32%

USA

-24.24%

0.59

34.4

2.87

CLMT

9.65%

7.18%

USA

2.45%

0.33

26.64

2.28

ENP

9.45%

-1.39%

USA

-5.69%

0.84

N/A

2.94

BBEP

9.10%

-8.90%

USA

-1.75%

0.92

N/A

0.89

FGP

8.93%

-19.24%

USA

-9.24%

0.51

N/A

9.95

MMLP

8.53%

2152%

USA

-3.71%

0.39

30.57

2.36

BWP

8.49%

6.68%

USA

-16.05%

0.2

21.89

1.49

BPT

8.48%

18950%

USA

-6.24%

0.63

12.5

5576

EXLP

8.46%

-8.01%

USA

-10.02%

0.67

N/A

1.91

YPF

8.14%

29.25%

Argentina

-19.24%

0.84

10.65

3.09

Alternatively, high dividend yields are found among shipping stocks:

Extreme Dividends in Shipping

Ticker

Div Yield

Return on Equity

Country

Performance (Year to Date)

Beta

P/E (ttm)

P/B

FRO

15.6%

-2.5%

Bermuda

-69.4%

1.39

N/A

0.84

TNK

14.7%

4.1%

Bermuda

-41.0%

1.17

19.8

0.77

DHT

13.9%

8.3%

Channel Islands

-33.9%

0.86

8.2

0.71

CPLP

13.9%

6.1%

Greece

-25.6%

0.97

18.1

1

SBLK

13.6%

5.3%

Greece

-40.5%

2.17

3.6

0.19

GLBS

11.7%

6.5%

Greece

-36.3%

N/A

4.9

0.4

NMM

11.3%

11.9%

Greece

-14.0%

1.16

11.2

1.27

VLCCF

10.9%

12.0%

Bermuda

-11.8%

0.94

9.8

1.2

BALT

9.8%

N/A

USA

-48.8%

N/A

26.3

0.39

SFL

9.8%

16.8%

Bermuda

-22.7%

1.45

9.1

1.48

TNP

9.4%

-1.8%

Greece

-33.3%

0.83

N/A

0.29

SB

8.5%

38.3%

Greece

-15.5%

2.48

4.7

1.62

ISH

8.2%

8.8%

USA

-24.0%

0.72

6.1

0.52

Would either sector be appropriate for a risk adverse fixed-income investor? Certainly, the shipping industry is not for the faint of heart. This industry is suffering a global oversupply of ships that makes the housing bubble look reasonable. Today, ships are being scrapped, dry-docked, and accepting unprofitable trips in their routes. What’s worse is that shipyards are poised to add as much as 40% to the global fleet (in terms of tonnage) in the next two years.

Is energy any better? Yes. The top dividend energy stocks listed here have dropped less year-to-date: -8.24% versus the -32.0% drop in the highest dividend shipping companies. Moreover, these energy stocks are more resistant to market swings, with an average beta of 0.64, much lower than the 1.28 average of these high dividend shipping stocks. The slightly lower 10.2% average dividend yield relative to shipping’s average 11.6% is well worth the comfort of stepping of the shipping industry rollercoaster.

Source: 8% Or Higher Dividends: Energy Vs. Shipping