Find Value In These 7 High-Yielding Stocks

by: Brian Gorban

Finding stocks trading with favorable valuations is always a good bet to outperform the market, as many value fund managers over the decades have shown us. In these volatiles times, it's also beneficial to find stocks with heavy institutional ownership, since they tend to provide strong price support as they have holding periods longer than seconds or minutes. Below is a group which not only have strong institutional ownership, but some very nice dividend yields as well:

Diversified telecommunications giant Frontier Communications (NYSE:FTR) has recently dropped sharply, bringing its yield over 12.5%. Moreover, FTR management sent out a press release on Oct. 3 reaffirming their intention to maintain the $0.75 annual dividend and pointed out that FCF guidance for the year is from $1.075 to $1.125B, which easily covers the approximately $746M current annual dividend. The company is trading at a relatively cheap 1x P/S, has a great management team committed to rewarding shareholders, and strong institutional ownership of 49.5% as of last quarter. I bought some recently at $5.78 and will look to add to my position if FTR continues to show great value.

Business development and closed-end management company Apollo Investment (NASDAQ:AINV) now sits at a yield of approximately 14.5%. On a valuation basis, the stock looks cheap trading at 5.57 P/E, 0.8x P/B, has a respectable return on equity of just over 14%, and strong institutional ownership of 56.5% as of last quarter. This is at a good entry price now.

mREIT Chimera (NYSE:CIM) has dropped considerably, bringing its yield to approximately 18.5%. It recently had some nice insider buying, as I described here. The stock looks even cheaper now, trading at 4.9x P/E, 0.85x P/B, return on assets of over 6.5% and return on equity of almost 18% with strong institutional ownership of 58.9% as of last quarter. I currently own some CIM and am looking to add to my position, as the fears regarding Operation Twist and further economic slowdown look more than priced into the stock.

Fellow mREIT Annaly Capital (NYSE:NLY) now has a yield of approximately 15%. This stock has dropped, and now has some considerable value, trading at a 5.9x P/E, 1x P/B, with a return on equity of over 17%, and good institutional ownership of 40.4% as of last quarter. NLY is widely regarded as having the best management team in the mREIT space, and when I see it trading at these levels, I'll be looking to add to my position.

Integrated communications giant CenturyLink (NYSE:CTL) now has a sizable dividend yield of approximately 8.5%. The company now trades at 17x P/E, 1x P/B, and has strong institutional ownership of 78.2% as of last quarter. However, I don't see how sustainable the dividend is when the annual payout is approximately $1.75B and FCF is approximately $1.18B. I'd rather own FTR.

Diversified private equity firm Ares Capital (NASDAQ:ARCC) currently yields approximately 10%. This stock has attractive valuations trading at 6.5x P/E, 1x P/B, a return on assets of almost 5% and return on equity over 15%, with strong institutional ownership of 53.4% as of last quarter. This is a solid buy.

Diversified telecommunications giant Windstream (NASDAQ:WIN) has fallen recently, bringing its yield up to 8.3%. This company now trades at 22x P/E, 1.5x P/S, the approximately $510M annual dividend payment looks secure as the company has annual FCF of approximately $680M, and has strong institutional ownership of 49.5% as of last quarter. This can be a great dividend stock to diversify with your FTR position.

Sources: SEC filings, Yahoo.

Disclosure: I am long FTR, NLY, CIM.