6 Dividend Busters With Yields As High As 19%: Part IX

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Includes: AGNC, ORAN, OZM, PER, SLRC, TWO
by: Tactical Investor

This is part IX of the Dividend buster series. In part VIII we examined 7 stocks with yields as high as 23%. Two of which were BKCC and ETP. One general rule investors should keep in mind is that higher yields are usually associated with more risk. In coming up with this list we looked for the following factors;

  1. A dividend payment history of 4 or more years, or 3 years or more of increasing the yearly dividend. The only exception is PER and it was included on the list because it has the potential to offer investors a steady stream of income for years to come. This was recently demonstrated when it raised it suddenly raised its dividend payment by 6 cents from 66 to 72 cents; an increase of 9%.
  2. Operating cash flow of $ 300 million or more or a quarterly revenue growth rate in excess of 20%. Operating cash flow is generally a better metric than earnings per share because a company can show positive net earnings and still not be able to properly service its debt; the cash flow is what pays the bills.
  3. A Yield of 9.5% or higher.

Stock

Dividend

Market Cap

Forward PE

EBITDA

Quarterly Revenue Growth

Operating Margins

Revenue

Operating Cash Flow

STD

9.7%

65B

6

9.65B

7.6%

34.03%

43.7B

69B

FTE

12.5%

40B

10.4

19.39B

1.9%

17.68%

59.65B

17.60B

SLRC

11.10%

784M

8

-----

20.20%

66.5%

134M

-20.8M

TWO

17.30%

1.31B

6.8

----

530%

86.5

131M

98.7M

OZM

13.9%

789M

5.8

558.6M

22%

54.71%

1.B

395M

AGNC

19.30%

5.3B

4.75

---

320%

93.2%

757M

509M

PER

15.1%

2.3B

8.

-----

41%

93%

71M

------

Click to enlarge

B= billion M= million

Banco Santander SA (STD)

It has enterprise value of $126 billion, a price/sales value of 1.46, a revenue growth (YOY) of 7.6%, a five-year dividend growth rate of 13.25% a total return of 3.94% for the past three years, and has been paying dividends since 1990. Upgrade and down grade can be accessed here. Net income for the last 3 years is as follows; 2008 it came in at $13.1 billion, 2009 it moved up a bit to $13.5 billion and in 2010 it dropped to $12.2 billion.

STD is trading $3.50 below book value and has a quarterly earnings growth rate of 10.3%

  • ROE 10.73%
  • Return on assets 0.67%
  • Total debt $420B
  • 200 day moving average $ 9.07
  • Book value $10.62
  • Dividend yield 5 year Average 7.10%
  • Dividend rate $0.69
  • Payout ratio --
  • Dividend growth rate 5 year average 13.25%
  • Paying dividends since 1990
  • Total return last 3 years 3.94%
  • Total return last 5 year -41%

France Telecom (FTE)

It has enterprise value of $82 billion, a price/sales value of 0.69, a revenue growth of 1.9%, a ROE 9.72%, a five-year dividend growth rate of 8.5%, %, a total return of -21% for the past three years, and has been paying dividends since 1998. It has a very strong levered free cash flow rate of $9.14 billion.

Potential warnings

Net income has been dropping for the last 3 years; in 2008 it stood at $6.8 billion, in 2009 it dropped to $551 million and in 2010 it turned negative to -$4 million.

  • ROE 9.72%
  • Return on assets 5.5%
  • Total debt $48B
  • 200 day moving average $18.50
  • Book value $13.82
  • Dividend yield 5 year Average 8.7%
  • Dividend rate $1.94
  • Payout ratio 154%
  • Dividend growth rate 5 year average 8.55%
  • Paying dividends since 1998
  • Total return last 3 years -21%
  • Total return last 5 year -8.3%

Solar Capital Ltd. (SLRC)

It has enterprise value of $944 million, a price/sales value of 5.88, a revenue growth of 20%, a total return of -10% for the past 12 months, a ROE of 4.37%, and has been paying dividends since 2010. It has a levered free cash flow rate of $99 million. Net income for the last 2 years is as follows; 2009 it came in at $86million, and in 2010 it jumped to $ 141 million. Out of the 8 firms following this stock all have it has a buy or outperform except for two, one of which rates it as a hold and the other has a neutral rating on it. The full list can be accessed here

Potential warnings

Negative operating cash flow, but it does have a levered free cash flow rate of $99 million.

  • ROE 6.88%
  • Return on assets 4.37%
  • Total debt $388
  • 200 day moving average $22.70
  • Book value $21.20
  • Dividend yield 5 year Average N/A
  • Dividend rate $2.40
  • Payout ratio 188%
  • Dividend growth rate 5 year average N/A
  • Paying dividends since 2010
  • Total return last 3 years N/A
  • Total return last 5 year N/A

Two Harbors Investment Corp (TWO)

It has enterprise value of $6.49 billion, a price/sales value o 10.03, a revenue growth of 530% , a quarterly earning's growth rate of 452%, a total return of 35.8% for the past three years, and has been paying dividends since 2009. Cash flow from operating activities has improved significantly over the past 3 years; in 2009 the figure was negative -$11.36 million, but in 2010 it surged to $33.11 million. Net income has jumped nicely for the past 2 years; in 2009 it stood at -$8.7 million and in 2010 it surged dramatically to $35.7 million. For 2011 net income so far stands at roughly $76 million.

Insiders have purchased over 120,000 shares from August-November 2011 at a cost of $.8.95-$9.70. The full list of insider purchases can be accessed here .

  • ROE 11.94%
  • Quarterly earnings growth 452.70%
  • Total debt $7.35 billion
  • 200 day moving average $9.66
  • Book value $9.30
  • Dividend yield 5 year Average N/A
  • Dividend rate $1.60
  • Payout ratio 104%
  • Dividend growth rate 3 year average 0.00%
  • Consecutive dividend increases 0 years
  • Paying dividends since 2009
  • Total return last 3 years 35.08%
  • Total return last 5 years N/A

Och-Ziff Capital Management Group LLC (OZM)

It has enterprise value of $1.34 billion, a price/sales value of 3.3, a revenue growth of 22% ,a three-year dividend growth rate of 99%, %, a total return of 101% for the past three years, and has been paying dividends since 2008. It has a levered free cash flow rate of $490 million.

Potential warnings

Dividend dropped from .0.14 to 0.09, it has negative book value and net income has been negative for the past 3 years; in 2008 it was negative $510 million, in 2009 it the losses widened and net income dropped even more -$1.37 billion and in 2010 it was negative 1.1 billion.

  • Return on assets 19.27%
  • Total debt $721M
  • 200 day moving average $10.94
  • Book value - $4.03
  • Dividend yield 5 year Average N/A
  • Dividend rate $1.07
  • Payout ratio --
  • Dividend growth rate 3 year average 99.69%
  • Paying dividends since 2008
  • Total return last 3 years 101%
  • Total return last 5 year N/A

American Capital Agency Corp (AGNC)

It has enterprise value of $43.9 billion, a price/sales value of 7.00, a revenue growth of 322% , a quarterly earning's growth rate of 317%, a total return of 123 for the past three years, and has been paying dividends since 2008. American Capital Agency Corp is one of the highest yielding agency REITS out there. Net income for the past 3 years is as follows; for 2008 it was $35 million, in 2009 it came in at $118 million and in 2010 it soared to $288 million.

Insiders have purchased 8,500 shares in August at $27.97-$29.04 a share. The full list of insider transactions can be accessed here.

  • ROE 23.9%
  • Quarterly earnings growth 317%
  • Total debt $40.16 billion
  • 200 day moving average $28.60
  • Book value $26.91
  • Dividend yield 5 year Average N/A
  • Dividend rate $ 5.60
  • Pay out ratio 78%
  • Dividend growth rate 3 year average 97%
  • Consecutive dividend increases 2 years
  • Paying dividends since 2008
  • Total return last 3 years 123%
  • Total return last 5 years N/A

SandRidge Permian Trust. (PER)

It has a market cap of $2.3 billion, a strong quarterly earnings growth rate of of 42.8%, a quarterly revenue growth rate of of 41%, and a profit margin of 92.7%.

PER will work 509 actively producing wells in the Permian Basin, Texas. It is also obligated to drill another 888 wells by the end of March 2015. Thus production should increase significantly in the years to come. PER has hedged over 70% of its oil production until March 2015 at a price of $101 a barrel. On the 28th of Oct PER suddenly announced it was going to raise it dividend payment by 9% (6 cents) from $0.66 to $0.72; this is definitely a move in the right direction as it sends a signal to investors that management has their interests at heart, especially since this is a new trust.

SANDRIDGE ENERGY INC purchased 4.875 million shares indirectly on the 16th of august. The full list of inside transactions can be accessed here. Out of the 5 firms following the stock three of them rate it as an outperform, one as a market perform and one as a buy. The full list can be accessed here.

  • ROE 9.29%
  • Return on assets 6.27%
  • Quarterly earnings growth 42%
  • Quarterly revenue growth rate 41%
  • Total debt 0.00
  • 200 day moving average $18.51
  • Dividend rate $1.57
  • Payout ratio 70%
  • Dividend growth rate 3 year average N/A
  • Consecutive dividend increases 0 years
  • Paying dividends since 2011
  • Total return last 3 years N/A
  • Total return last 5 years N/A

Conclusion

Our favourite two plays on this list are PER and AGNC. PER is a new trust with tremendous upside potential and management appears to have investor’s interests at heart. They raised the dividend suddenly from 66 cents to 72 cents; a 9% increase. Earnings should increase significantly going forward as they are going to drill another 888 wells by the end of March 2015. We like AGNC because it has a very decent ROE of 29.3%, a torrid quarterly revenue growth rate of 320% and a spectacular earning's growth rate of 317%. Out of 3 years, it has been paying dividends it has increased dividend payments for two years in a row and has a strong three-year dividend growth rate of 97%. Investors looking for dividend yields in other sectors might also find some ideas in this article "MLP Sizzlers, Part III".

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

Disclaimer: Do not treat this as a buying list. It is very important that you check the finer details in each of the mentioned plays before investing any capital in them. Some investors are happy with taking enormous amounts of risks, while others are bothered by the slightest degree risk; it is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.