As income becomes a scarce commodity to find for money-saving Americans, many are turning to the capital markets to find a sustaining yield. Here, investors are often bombarded with a list of royalty trusts and master limited partnerships that offer lucrative yields for their investors. Yet with the abundance of such oil and gas related equities, investors often find themselves tuning out their need to diversify into multiple industries as they pursue higher-yield returns exclusively in these sectors.
The following list of companies consist of a well rounded variety of industries that offer high dividend yields. By adding some of these companies, investors may be able to further diversify their portfolios away from a single sector while still retaining high income returns. Each of these companies have consistently paid out a dividend, although investors would do well to research each company to determine suitability. Current ratios were added to illustrate the ability of the company to pay its current obligations. All values are representative of the companies as of January 24, 2012.
|Company Name||Market Capitalization||Trailing Dividend%||Current Ratio||Industry|
|Terra Nitrogen Company (TNH)||$3.48 B||7.5%||7.7||Fertilizer|
|Teekay Tankers Ltd (TNK)||$287.22 M||17.9%||1.76||Shipping|
|Windstream Corporation (WIN)||$6.31 B||8.2%||0.94||Telecom Services|
|Pitney Bowes Inc (PBI)||$3.87 B||7.6%||1.25||Business Equipment|
|Chimera Investment Corporation (CIM)||$3.03 B||17.3%||0.07||Mortgage REIT|
|Hospitality Properties Trust (HPT)||$3.04 B||7.3%||0.92||Hotel REIT|
|New York Community Bancorp, Inc (NYB)||$5.70 B||7.7%||n/a||Banking|
Teekay and Chimera are two entities that have lowered their dividends in recent months, and should bear an extra dose of scrutiny to match one's tolerance to the risks involved. Despite being a financial institution, New York Community has encouragingly continued to pay its high-rate dividend even throughout the Great Recession. Teekay is paying out all of its earned cash as a dividend, but is restrained by the spot market shipping rates that have tumbled in recent months. Pitney Bowes retains the advantages of leasing out its equipment.
Many of these companies have high payout ratios, as should be expected, but generate significant amounts of operating cash flows. Windstream for instance has a payout ratio of 192% and pays about $450 million in dividends annually yet continues to generate operating cash flows north of $1 billion. Nevertheless, high payout ratios can often be a sign of increased risk toward the sustainability of these dividends and should be treated on a case-by-case scenario.
Investors should remember that the ability to diversify one's holdings offers an innate insurance ability against the unpredictability that makes up life. Even if an industry such as oil and gas maintains the perception of inevitable growth in the near future, there are no certainties in this world when it comes to the behavior of markets. Being able to supplement that portfolio with additional exposures elsewhere is a preventative measure that is well accepted when the rate of returns are comparable at best.
Disclosure: I am long CIM.