10 Stocks with Dividends Higher Than 10%

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Includes: AGNC, AI, ANH, BFR, BGCP, CEL, CIM, CMO, CPY, NLY
by: David Zanoni

Here is a list of companies who pay at least 10% in dividends and have grown earnings annually at a minimum of 10% in the last five years. What do most of these companies have in common? Most of them are REITs, which are Real Estate Investment Trusts. When a company operates as a REIT, they distribute at least 90% of their annual taxable income to shareholders, and in return, do not have to pay U.S. federal or state corporate taxes on their taxable net income. There are also some interesting companies in this list that are not REITS. Let’s take a look.

American Capital Agency (NASDAQ:AGNC) is a REIT that invests in agency pass-through securities and collateralized mortgage obligations where the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government sponsored entity. They are well-valued as their stock price of $27 is only trading less than a dollar above book value per share of $26.76. The company has a great profit margin of 92.77% and an operating margin of 92.85%. They pay an incredible dividend of 20.4% and had earnings that averaged 36.09% the last five years. On the other hand, they are only expected to grow earnings annually at 2% for the next five years, so it is questionable whether they can maintain their high dividend payouts.

Annaly Capital Management (NYSE:NLY) is a REIT that invests in various mortgage backed securities. They also invest in debt instruments in Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, and Federal National Mortgage Association. Annaly has a forward PE of 6.50 and a PEG of 3.67. Their stock is currently trading a few cents above book value per share. They enjoy a profit margin of 89.34% and an operating margin of 91.22%. They currently pay a dividend of 13.9% and have grown earnings annually at 44.15% the past five years. Unfortunately, they are only expected to grow earnings annually at 1.82% for the next five years.

Cellcom Israel (NYSE:CEL) provides cellular communications service in Israel. They handle all of the services that you would expect from a cellular company such as: advanced cellular telephone services, texting, multimedia message services, and advanced data services. They have a customer base of about 3.4 million subscribers. They have a low forward PE of 2.02 and a PEG of 0.60 indicating value. However, their stock trades at almost 26 times book value per share which does not indicate a great value, but that should be fine if they continue to hit their earnings expectations. Cellcom has a profit margin of 18.29% and an operating margin of 28.25%. They pay a dividend of 10.2% and have grown earnings annually at 14.95% the last five years. They are expected to grow earnings annually at 12% for the next five years, so their dividend looks safe.

Anworth Mortgage Asset Corporation (NYSE:ANH) is a REIT that invests in U.S. agency mortgage backed securities guaranteed by the U.S. government. Anworth looks well valued with a forward PE ratio of 7.23. This value is reinforced as their stock is trading slightly under book value per share. They have a profit margin of 89.71% and an operating margin of the same rate. They pay a dividend of 14.7% and have grown earnings annually at 30.63%. However, they are expected to grow earnings annually at a negative 1% for the next five years, so their dividend may not hold up.

Arlington Asset Investment Corp. (NYSE:AI) is an investment firm that invests in mortgage related assets and other assets. The company acquires mortgage backed securities where the principal and interest are guaranteed by U.S. government agencies or U.S. government sponsored agencies. Their forward PE of 4.89, shows a nice value. The stock is actually trading at about $3 under book value per share, reinforcing this value. Arlington Asset has a profit margin of 74.47% and an operating margin of 69.15%. They pay a nice dividend of 13.4% and have grown earnings annually at 24.24% the past five years. Next year they are expected to grow earnings at a negative 10.5%. However, there are no analyst earnings expectations for the next five years, so it’s difficult to predict how well they’ll do in the longer term.

BBVA Banco Frances S.A. (NYSE:BFR) provides financial services to individuals and businesses in Argentina. They operate a total of 267 offices, 650 ATMs, and 690 quick deposit boxes. BFR is well valued with a forward PE of 4.28 and a PEG of 1.25. Their stock is trading at only 1.33 times book value per share. They have a profit margin of 30.34% and an operating margin of 45.2%. They pay a nice dividend of 17.6% and have grown earnings annually at 40.69% the last five years. Unfortunately, they’re expected to wind up with negative earnings growth of 33.9% for this year and are expected to grow earnings annually at only 4.2% for the next five years.

BCG Partners Inc. (NASDAQ:BGCP) operates as a financial intermediary to the financial markets. Their services include: electronic marketplaces such as: spot foreign exchange, government bond markets, corporate bonds, foreign exchange options, and credit default swaps. They also operate a variety of brokerage services, and financial information technology services. With their forward PE of 7.49 and PEG of 0.68, BGCP offers a nice value. Their stock trades at 2.65 times book value per share. They have $302.7 million in cash compared to $186.5 million in debt. They have a nice balance sheet, sporting a 1.26 current ratio (current assets divided by current liabilities). Their operating cash flow is $83.42 million. They pay a dividend of 10.4% and have grown earnings annually at 56.21% in the last five years. They are expected to grow earnings annually at 12.5% for the next five years.

CPI Corporation (NYSE:CPY) is involved in the manufacture and sales of professional portrait photography of young children. They operate about 3000 portrait studios in the United States. The company operates portrait studios in Walmart, Babies R Us, and Sears under the following respective names: Picture Me Portrait Studio, Kiddie Kandids, and Sears Portrait Studio. CPI has a forward PE of 2.8 and a PEG of 2.44. Their stock trades at 8.4 times book value per share. They have an operating cash flow of $25.05 million. They pay a generous dividend of 14.3% and have grown earnings at 15.6% the last five years. They are expected to grow earnings annually at 5% for the next five years.

Capstead Mortgage Corporation (NYSE:CMO) is a Dallas based REIT that invests primarily in adjustable-rate mortgage securities guaranteed by government sponsored enterprises. They have a forward PE of 6.87 and a PEG of 6.86. The stock price of $11.75 trades under their book value per share of $12.51. They have a total cash figure of $11.23 billion compared to total debt of $10.56 billion. Capstead has a profit margin of 89.59% and an operating margin of 89.73%. They pay a dividend of 14.2% and have grown earnings annually at 36.15% the past five years. Unfortunately, they are only expected to grow earnings annually at 1% for the next five years.

Chimera Investment Corporation (NYSE:CIM) operates as a REIT that invests in residential mortgage backed securities, residential mortgage loans, commercial mortgage loans, and other real-estate related securities. They look well valued with a forward PE of 5.76 and a PEG of 1.82. This value is reinforced since the stock price of $2.88 trades under their book value per share of $3.35. Chimera has a profit margin of 90.71% and an operating margin of 90.96%. They pay a huge dividend of 17.3% and have grown earnings annually at 16.47% in the last five years. They are expected to grow earnings annually at 2.85% for the next five years.

Recommendation

I was impressed at how well these companies did in the last five years with higher than average dividends and earnings. However, I was highly disappointed to see that most of them are expected to grow earnings annually at below average rates for the next five years. Cellcom Israel and BCG Partners look like the standout companies among this list. Cellcom is expected to grow earnings annually at 12% for the next five years and pay a dividend of 10.2%. This should give an investor a total annual yield of 22.2% if those expectations are met. BCG Partners has a dividend of 10.4% and five year annual earnings grow expectations of 12.5%. This would provide an investor with a total annual yield of 22.9%. These two stocks should double the returns of an S&P 500 index over the next five years (if the dividends are reinvested). If you are looking to add a generous dividend-paying, market-beating stock to your portfolio, consider Cellcom Israel or BCG Partners.

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