4 Solid Stock Ideas With 20%+ Yields

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Includes: AGNC, IVR, TNE, TRU-OLD
by: Leonid Kanopka

I feel that in order to see substantial gains in the market, one must do substantial research in order to find stocks that are being sold at a true "value." A momentarily bad quarter and shifting market sentiment has pushed the market low, on some stocks more than on others.

I have compiled the data for 4 companies in different sectors that are "must haves" for value investors who are seeking long term growth. These positions pay substantial dividends, and I believe they are great additions to any good portfolio. Another reason why I like dividend investing is because it provides a steady stream of income to live off, whether it is monthly or quarterly. Below are 4 stocks that pay dividends and are excellent companies to consider for a steady stream of income and steady growth:

1) American Capital Agency Corp (NASDAQ:AGNC) is a real estate investment trust (REIT), which invests in residential mortgage pass-through securities and collateralized mortgage obligations on a leveraged basis. The current market price is $27.7 with a one-year analyst price target of $30.03. This represents an 8.41% upside potential, however this in not the number that interested me. After running a screen, the number that interested me was the quarterly dividend of $1.4, giving this position a 20.27% annual dividend yield. This means a $10,000 investment would bring in a profit of $2,027 a year on dividends alone (given the yield remains constant). AGNC's ROE is the highest within its Mortgage REITs subsector, and AGNC's trailing P/E of 4.1 represents an 11% discount to its 5-year average of 4.6. Overall this is a great pick for income investors, and it appears insiders have also found value in the current price-dividend combination:

Insider

Role

# Shares

$ value

Date reported

Yr Div.

Kain, Gary D

CI

0.12M

3.53M

2/28/2011

$4,245,531.00

Dobbs, Randy E

D

21,000

0.62M

4/27/2011

$ 745,674.00

Harvey, Larry K

D

7,500

0.22M

2/7/2011

$ 264,594.00

Couch, Robert M

D

5,000

0.15M

8/9/2011

$ 180,405.00

Davis, Morris A

D

4,500

0.13M

8/11/2011

$ 156,351.00

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2) Torch Energy Royalty Trust (NYSE:TRU-OLD), is a grantor trust that holds net profit interest from several oil and gas properties. The payments to the trust are received from the working interest owners. Its working interest owners include Torch Royalty Company, Torch E&P Company, Samson Lone Star Limited Partnership, and Constellation Energy Partners LLC. The trust is entitled to receive 95% of the net proceeds attributable to oil and natural gas produced and sold from wells on the underlying properties, including Chalkley Field in Louisiana; the Robinsons Bend Field in the Black Warrior Basin in Alabama; Cotton Valley Fields in Texas; and Austin Chalk Fields in central Texas.This position is a strong buy at the current market price of $3.4. ROA is 9.44% and ROE is 16.24%, current earnings per share are .25 with a P/E ratio of 13.77x. TRU also offers a $0.17 per share quarterly dividend, for a 20.30% return. The 52-week high for TRU is $4.99, and if this was reached within one year (including dividends), a $1,000 investment would turn into an outstanding $1,671 (67.1% increase).

3) Tele Norte LesteParticipacoes (NYSE:TNE) provides integrated telecommunication services in Brazil. TNE is currently trading at $10.24 with a one-year price target of $27.3 (166.6% upside potential which is substantially more than what I wrote in my article last month, here). The current book value of $ 17.29 shows a highly undervalued company trading near its low, and at the brink of a recovery. Current dividend yield shows 21.55% with a beta of .99, so this is a less risky choice than the market itself. Current EPS is .79 and P/E ratio of 13.02x. The 50 day moving average is $10.27 and the 200 day moving average is $13.88. Overall a great pick, and even better then when I discussed it last month, (although the dividend is slightly lower).

4) Invesco Mortgage Capital Inc (NYSE:IVR) focuses on investing in, financing and managing residential and commercial mortgage-backed securities and mortgage loans. The current market price is $15.38 (up 12% since I last wrote about it here) with a one-year analyst price target of $18.79 (22.17% upside potential). IRV is offering about $0.80 per share in a quarterly dividend. The past four payments have been $0.97, $1, $0.97, and $0.8 respectively, resulting in a 24.02% dividend yield. This means you could potentially recover 100% of your money back in 4 years via dividends alone. The trend of hefty dividends does not seem to be fading anytime soon; of the 27 firms within the Mortgage REITs subsector that have reported debt-to-capital, IVR is among the 17 companies whose balance sheets are free of long-term debt. This represents a good cash position for future investments and dividend payments. If there was ever a time to buy IVR it would be now. IVR's current forward PEG of 0.1 represents a 96% discount to its Mortgage REITs subsector average. Also, based on Trailing P/E, IVR currently trades at a 54% discount to its Mortgage REITs subsector peers. I strongly endorse this position. Additionally, considering insider activity/holdings, it looks like they do too:

Insider

Role

# Shares

$ value

Date reported

Yr Div.

King, Richard J

CEO

34,345

0.56M

9/13/2011

$ 694,512.00

Kelley, Karen Dunn

D

25,000

0.41M

8/9/2011

$ 508,482.00

Anzalone, John M

CI

15,607

0.26M

9/13/2011

$ 322,452.00

Balloun, James S

D

8,234

0.13M

8/2/2011

$ 161,226.00

Williams, Neil

D

8,234

0.13M

7/29/2011

$ 161,226.00

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Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in IVR, TNE, TRU-OLD over the next 72 hours.