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Our favourite two plays on the list are Energy Transfer Partners, L.P. (NYSE:ETP) and Boardwalk Pipeline Partners LP (NYSE:BWP). Before we go further, investors should understand that buying a dividend stock based on yield alone is usually a recipe for a disaster. It is okay to roll the dice with small amounts of money (Las Vegas money) on some plays that sport incredibly high yields like CPI Corporation (CPY), but betting the house on them is asking for trouble.

ETP has a quarterly revenue growth rate of 32.9%, a very large cash flow of $1.1 billion, a ROE of 13.4%, a five-year dividend growth rate of 7.56%, a total three-year return of 67%, and has been paying dividends since 1996.

BWP has a levered free cash flow rate of $177 million, a current ratio of 1.25, a ROE of 7.2%, 5 year dividend growth rate of 10.8%, a five year dividend average of 7.0%, a quarterly revenue growth rate of 4.4%, a five year sales growth of 7.5%, has consecutively increased its dividends for 4 years in a row and has been paying dividends since 2006.

Investors should pay attention to the following metrics as they could prove to be useful during the selection process.

Current ratio is obtained by dividing the current assets by current liabilities. This ratio allows you to see if the company can pay its current debts without potentially jeopardising their future earnings. Ideally, the company should have a ratio of 1 or higher.

Enterprise value is a combination of the market cap, debt, minority interests, preferred shares less total cash and cash equivalents. This provides a better picture because it is a more accurate representation of a company's value contrary to simply looking at the market cap.

Levered free cash flow is the amount of cash available to stock holders after interest payments on debt are made. A company with a small amount of debt will only have to spend a modest amount of money on interest payments, which in turn means that there is more money to send to shareholders in the form of dividends and vice versa. Individuals looking for stocks that more volatile but offer potentially higher rates of return might find the following article to be of interest, 7 Relative Strength Champions With Great Upside potential.

Turnover ratio lets you know the number of times a company's inventory is replaced in a given time period. It is calculated by dividing the cost of goods sold by average inventory during the time period studied. A high turnover ratio indicates that a company is producing and selling its good and services very quickly.

Debt to equity ratio is found by dividing the company's total amount of long-term debt (debts with interest rates that have a maturity longer than one year) by the total amount of equity. A debt to equity ratio of 0.5 tells us that the company is using 50 cents of liabilities in addition to each $1 dollar of shareholders equity in the business.

The payout ratio tells us what portion of the profit is being returned to investors. A pay out ratio over 100% indicates that the company is paying out more money to shareholders, then they are making; this situation cannot last forever. In general if the company has a high operating cash flow and access to capital markets, they can keep this going on for a while. As companies usually only pay the portion of the debt that is coming due and not the whole debt, this technique/trick can technically be employed to maintain the dividend for sometime.

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.

Important facts investors should be aware in regards to investing in MLPs and REITS:

  1. Payout ratios are not that important when it comes to MLPS/REITS. Both are required by law to pay a majority of their cash flow as distributions. Payout ratios are calculated by dividing the dividend rate by the net income per share, and this is why the payout ratio for MLPs and REITS is often higher than 100%. The more important ratio to focus on is the cash flow per unit. If one focuses on the cash flow per unit, one will see that in most cases, it exceeds the distribution/dividend declared per unit/share.
  2. MLPs are not taxed like regular corporations because they pay out a large portion of their income to partners (as an investor you are basically a partner and are allocated units instead of shares) usually through quarterly distributions. The burden is thus shifted to the partners who are taxed at their ordinary income rates. As ordinary income tax rates of investors are typically lower than the income tax assessed on corporations, this arrangement is advantageous to the MLPs and generally most investors.
  3. MLPs issue a Schedule K-1 to their investors. If the MLP pays out distributions in excess of the income it generates, the distribution is classified as a "return of capital" and tax deferred until you sell your shares or units. Income from MLPs is generally taxable even in retirement accounts like 401KS and IRAs if the income generated is in excess of $1000.

Stock

Dividend Yield

Enterprise Value/EBITDA

Forward P/E

EBITDA

Quarterly Revenue Growth

Beta

Revenue

Operating Cash flow

(UVE)*

8.70%

-2.03

N/A

53.09M

-29.50%

0.15

235.59M

34.87M

(CPY) **

65.0%

3.3

12.5

25.73M

-10.50%

0.37

383.49M

11.07M

(NYSE:CIM)

15.8

N/A

6.19

--------

-37%

0.79

614.1M

409M

(ETP)

7.50

11.10

19

1.62B

32.9%

0.63

6.49B

1.13B

(BWP)

7.6%

13.41

19

650.1M

4.4%

0.18

1.14B

455M

(NASDAQ:AGNC)

19.8%

N/A

4.75

-----

320%

0.57

757M

509M

(NYSE:ORI)

7.8%

-7.06

61.33

-255.5M

12.9%

0.88

4.5B

-236M

** Very speculative play *= speculative play

Universal Insurance Holdings I (AMEX: UVE)

Industry: General Insurance

It has a levered free cash flow rate of $163 million and a quarterly earnings growth rate of -92%

Net income for the past three years

  1. 2008 = -$40 million
  2. 2009 = $28.7 million
  3. 2010 = $36.9 million
  4. 2011 = it stands at 22.3 and could top the $24.5 million mark.

Total cash flow from operating activities

  1. 2008 = $52.8 million
  2. 2009 =$37.3 million
  3. 2010 = -$9.26 million
  4. 2011 = It stands at $177 million

Potential Warnings

It has a terrible quarterly earnings growth rate of -92%. Only investors willing to take on some risk should consider deploying money into this stock.

Key Ratios

• Price to sale 5.4

• Price to tangible book 0

• Price to cash flow 8.7

• Price to free cash flow N.A.

• 5 year sales growth 4.45

• Inventory turnover 0

• Asset turnover 0

• ROE 19.45%

• Return on assets 3.75%

• 200 day moving average 3.98

• Total debt 56.97M

• Book value 3.92

• Dividend yield 5 year Average 9.60%

• Dividend rate $ 0.28 %

• Payout ratio 47.00%

• Dividend growth rate 3 year average -10.65%

• Dividend growth rate 5 year average 31.27%

• Consecutive dividend increases 0 years

• Paying dividends since 2001

• Total return last 3 years 69.58%

• Total return last 5 years 43.90%

CPI Corp. (NYSE: CPY)

Industry: Miscellaneous Consumer Services

In 2010 it paid out 91 cents, in 2011 it paid out $1.00 in dividends and given that the stock is trading under 1.50 this works out to a lofty yield of almost 70%. However, do not just chase this stock for the yield alone. Several class action law suits have been filed against CPY. The details are covered below.

Net income for the past three years

  1. 2008= -$7.6 million
  2. 2009 = $13.7 million
  3. 2010= $11.9 million
  4. 20011= net income so far is roughly -$13million and rising.

Total cash flow from operating activities

  1. 2008= $11.8 million
  2. 2009 =$31.2 million
  3. 2010 =$39.06 million
  4. 2011= it currently stands at $12 million

Red Flags

Harwood Feffer LLP announces that a class action suit was filed in the United States District Court for the Eastern District of Missouri against CPI Corp. ("CPI" or the "Company") on behalf of all purchasers of CPI common stock between April 20, 2010 and December 21, 2011 (the "Class Period").

On December 22, 2011, CPI announced results for the fiscal quarter ended November 12, 2011. The Company reported a net loss of $7.25 million and that net sales declined 11% to $95.0 million, due in significant part to the Company's comparable store sales declines. The poor results caused CPI to fail the leverage ratio test for its revolving credit facility. CPI had to obtain an amendment to its credit agreement

The law firm of Izard Nobel LLP, which has significant experience representing investors in prosecuting claims of securities fraud, announces that a lawsuit seeking class action status has been filed in the United States District Court for the Eastern District of Missouri on behalf of purchasers of the common stock of CPI Corp. ("CPI" or the "Company") between April 20, 2010 and December 21, 2011, inclusive (the "Class Period").

Only speculators should even think about taking a position in this stock.

Key ratios

• Price to sale 0.5

• Price to tangible book 0

• Price to cash flow 73

• Price to free cash flow 4.7

• 5 year sales growth -2.93

• Inventory turnover 0

• Asset turnover 0

• ROE 189.25%

• Return on assets 3.69%

• 200 day moving average 7.07

• Total debt 73.50M

• Book value -0.5

• Dividend yield 5 year Average 19.80%

• Dividend rate $ 1.00 %

• Payout ratio 116.00%

• Dividend growth rate 3 year average 17.36%

• Dividend growth rate 5 year average 10.42%

• Consecutive dividend increases 2 years

• Paying dividends since 1985

• Total return last 3 years -16.95%

• Total return last 5 years -89.38%

Chimera Investment Corporation (CIM)

Chimera Investment Corporation is a specialty finance company that invests in residential mortgage-backed and a wholly-owned subsidiary of Annaly Capital.

Net income for the past three years

  1. 2008= --$119 million
  2. 2009= $322.9 million
  3. 2010= $532.8 million
  4. 2011= it stands at $371.96 million and could top the $461 million mark.

Total cash flow from operating activities

  1. 2008= $30.6 million
  2. 2009 =$168.6 million
  3. 2010 = -$305.5 million
  4. 2011= It stands at $337.9 million and could top the $457 million mark.

Potential warnings

The dividend has been cut from $0.13 to $0.11; this is troubling because CIM has only been paying dividends since 2007. It also has a negative quarterly revenue growth of -37%

It is attempting to put in a bottom, and if it can trade above 3.00 on a weekly basis, the outlook will turn bullish and CIM should be in a position to test the 3.60-3.90 ranges before pulling back.

Key ratios

  1. Price to tangible book 0.85
  2. Price to cash flow 5.70
  3. Price to free cash flow -14.90
  4. 5 year sales growth N/A
  5. Inventory turnover N/A
  6. Asset turnover 0.00

  1. ROE 17.75%
  2. Return on assets 6.55%
  3. 200 day moving average $2.90
  4. Total debt $6.2B
  5. Book value $3.27
  6. Dividend yield 5 year Average 12.8%
  7. Dividend rate $ 0.51
  8. Payout ratio 104%
  9. Dividend growth rate 3 year average 17.43%
  10. Consecutive dividend increases 1years
  11. Paying dividends since 2007
  12. Total return last 3 years 30.09%
  13. Total return last 5 years N/A

Energy Transfer Partners LP

It has a levered free cash flow rate of -$309 million and a current ratio of 0.84.

Net income for the past three years

  1. 2008= $886 million
  2. 2009= $791 million
  3. 2010= $617 million
  4. 2011= it stands at $462 million and could top the $520 million mark.

Total cash flow from operating activities

  1. 2008= $1.28 billion
  2. 2009 =$826.8 million
  3. 2010 = -$1.202 million
  4. 2011= It stands at $730 million and could top the $1.2 billion mark.

Key ratios

  1. Price to tangible book 2.78
  2. Price to cash flow 7.20
  3. Price to free cash flow -5.00
  4. 5 year sales growth -5.57%
  5. Inventory turnover 17.50
  6. Asset turnover 0.50

  1. ROE 13.46%
  2. Return on assets 5.66%
  3. 200 day moving average $ 44.79
  4. Total debt $ 8.08B
  5. Book value $23.75
  6. Dividend yield 5 year Average 7.80%
  7. Dividend rate $ 3.58
  8. Payout ratio 260%
  9. Dividend growth rate 5 year average 7.56%
  10. Consecutive dividend increases 0 years
  11. Paying dividends since 1996
  12. Total return last 3 years 62%
  13. Total return last 5 years 26%

Boardwalk Pipeline Partners, LP

It has a levered free cash flow rate of $177 million and a current ratio of 1.25. The full upgrade and downgrade history can be accessed here.

Net income for the past three years

  1. 2008= $294 million
  2. 2009= $162.7 million
  3. 2010= $289.4 million
  4. 2011= it stands at $234 million and could top the $280million mark.

Total cash flow from operating activities

  1. 2008= $350.3million
  2. 2009 =$400.5 million
  3. 2010 = -$1464.7 million
  4. 2011= It stands at $345 million and could top the $447 million mark.

Key ratios

  1. Price to tangible book 1,82
  2. Price to cash flow 12.00
  3. Price to free cash flow -43.80
  4. 5 year sales growth 7.50
  5. Inventory turnover 39.40
  6. Asset turnover 0.20
  1. ROE 7.2%
  2. Return on assets 3.87%
  3. Total debt 3.2B
  4. 200 day moving average $26.89
  5. Book value $16.04
  6. Dividend yield 5 year Average 7.0%
  7. Dividend rate $2.19
  8. Payout ratio 171%
  9. Dividend growth rate 5 year average 10.8%
  10. Consecutive dividend increases 4 years
  11. Paying dividends since 2006
  12. Total return last 3 years 65%
  13. Total return last 5 years 17%

American Capital Agency Corp (AGNC)

It has a current ratio of 0.11 and quarterly earnings growth rate of 317%.

American Capital Agency Corp per share data

Earnings 7.15

Sales 5.32

Cash Flow 7.40

Net income for the past three years

  1. 2008= $35 million
  2. 2009= $118 million
  3. 2010= $288 million
  4. 2011= it stands at $445million and could top the $690 million mark.

Total cash flow from operating activities

  1. 2008= $30.6 million
  2. 2009 =$93.2 million
  3. 2010 = -$19.6 million
  4. 2011= It stands at $211 million and could top the $400 million mark.

Key ratios

  1. Price to tangible book 1.05
  2. Price to cash flow 7.40
  3. Price to free cash flow 112
  4. 5 year sales growth N/A
  5. Inventory turnover N/A
  6. Asset turnover 0.00

  1. ROE 23.9%
  2. Quarterly earnings growth (year over year) 317%
  3. Total debt $40.16 billion
  4. 200 day moving average $28.35
  5. Book value $26.91
  6. Dividend yield 5 year Average N/A
  7. Dividend rate $ 5.60
  8. Pay out ratio 78%
  9. Dividend growth rate 3 year average 37.9%
  10. Consecutive dividend increases 2 years
  11. Paying dividends since 2008
  12. Total return last 3 years 117%
  13. Total return last 5 years N/A

Old Republic International Corp (ORI)

It has a rather large negative levered free cash flow rate of -$1.18 billion, is trading roughly $6 below book value and has a current ratio of 2.87

Net income for the past three years

  1. 2008= $558 million
  2. 2009= -$99 million
  3. 2010= $301 million
  4. 2011= it stands at -$194million and the losses could top the -$200 million mark.

Total cash flow from operating activities

  1. 2008= $565 million
  2. 2009 =$532 million
  3. 2010 = -$282 million
  4. 2011= It stands at -$203 million.

Potential warnings

Net income for 2011 is negative and total cash flow from operating activities is on course to drop for 4 years in a row.

Key ratios

  1. Price to tangible book 0.61
  2. Price to cash flow -11.20
  3. Price to free cash flow -5.20
  4. 5 year sales growth 2.11
  5. Inventory turnover NA
  6. Asset turnover 0.30

  1. ROE -5.32%
  2. Return on assets -1.15%
  3. Total debt $912M
  4. 200 day moving average $9.45
  5. Book value $14.98
  6. Dividend yield 5 year Average 5.90%
  7. Dividend rate $ 0.70
  8. Payout ratio 532%
  9. Dividend growth rate 5 year average 3.51%
  10. Paying dividends since 1942
  11. Total return last 3 years -6.40%
  12. Total return last 5 year -45%

Conclusion

Our favourite two plays as mentioned above are ETP and BWP. CPY is a very speculative play and only individuals willing to gamble should even consider deploying money into this stock.

One way to build an extra stream income is by selling covered calls; stocks with high beta's command higher option premiums. If you are bullish on the stock and would not mind owning the stock at a lower price, then you can open up another stream of income via the sale of naked puts.

Long term dividend investors should wait for the markets to pull back before commiting large sums of money to the market. There are signs tha the market is putting in an intermediate top.

All charts were sourced from dividata.com

Source: 7 Stocks With Yields As High As 65%