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Recently Financials have been very shaky and extremely risky. However, if we learned anything from March 2009, it is that strong financial stocks can make a very big recovery. Two examples are: General Growth Properties (NYSE:GGP), which went from $0.46 to $13 (2,726% upside) or iStar Financial Inc. (SFI), which went from $0.75 to $6 (700%).

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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. Starting this year it seems financials have begun to recover very nicely and I expect this to continue throughout the year.

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Below I have screened four stocks that I believe are good dividend plays and additions to a portfolio. Each of these stocks has a higher than the industry average payout ratio on dividend yields in excess of 7%

Alliance Bernstein Holding L.P (NYSE:AB) is an investment firm that provides research, diversified investment management and related services to a range of clients. It also provides distribution, shareholder servicing and administrative services. It offers a range of investment products and services to its clients, which include Institutional Services, Retail Services, Private Client Services and Bernstein Research Services. The current market price is $15 with a book value of $16.79. This represents a 11.93% upside potential not including its $0.26 quarterly dividend yielding 7%. AB has a 90% dividend payout ratio, and has a 5-year average of paying 6.80%. Based on trailing P/E, AB currently trades at a 37% discount to its Inv Mgmt & Fund Operators Industry peers. Also, AB is down 37% from its 52-week high of $23.69. I love the fact that this company has no debt on its books. Despite its discounted price, Alliance Bernstein Holding is outperforming its industry peers in nearly every category:



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Market turmoil has put pressure on the company's assets under management in recent months, but third-quarter earnings were up 77% as the fund manager sharply improved operating margins. Overall this is a great position at this price, and with dividend yield in excess of 7% makes AB a real winner.

Hugoton Royalty Trust (NYSE:HGT) is an express trust, which was created pursuant to the Hugoton Royalty Trust Indenture between XTO Energy Inc., as a grantor, and NationsBank, N.A., as trustee. XTO Energy conveyed to the trust 80% interests in natural gas producing working interest properties in Kansas, Oklahoma and Wyoming under three separate conveyances. The current market price is $13.99 with a monthly dividend payment of $0.082 making up a dividend yield of 7% with a 100% payout ratio. HGT has a 5-year dividend yield average of 5.30% which shows consistency in payments.

HGT has a 52-week price range of $13.81 - $24.67. Like most of its industry peers HGT is trading right at its 52-week low; this I believe offers a great buy opportunity for both growth and a large monthly dividend. Compared to its peers HGT trades at a heavy discount, yet its fundamentals are relatively in line with its competition. Hugoton Royalty Trust also has the benefit of having no long-term debt on its books, which puts it at a very advantageous position.




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MTR = Mesa Royalty Trust

SBR = Sabine Royalty Trust

Uncertainty in the market has pushed this stock -43.3% to its 52-week low. This leaves open a great opportunity to buy for a huge turnaround. Not only is this stock poised for a turnaround, but the low price has opened the door to a huge opportunity for a large monthly dividend payment.

Apollo Investment Corporation (NASDAQ:AINV) is a closed-end, non-diversified management investment company that has elected to be treated as a business development company. Its investment objective is to generate both current income and capital appreciation. It invests primarily in the form of subordinated debt, as well as by making investments in certain senior secured loans and/or equity in private middle market companies. The current market price is $7.59 with a one-year analyst price target of $9.25. This represents a 21.87% upside potential not including its quarterly dividend of $0.28 yielding a massive 14.76% per year. AINV has a higher than industry average payout ratio with a consistent 5-year average payout of 14.10%.

According to "MarkeWatch" AINV is highly undervalued, and a 52 week price drop of 35.95% solidifies this point. Investment activity is expected to slowly improve from recent anemic levels. Its typical investment ranges between $20 million and $250 million, and the company prefers to invest in middle market companies. In FY 11 the company invested $1.1 billion in 21 new portfolio companies, an increase from the $716 million in five new and 24 existing companies in FY 10. Investments sold or prepaid during FY 11 totaled $977 million; up from $452 million in FY 10.This position is extremely cheap and after its sharp sell-off is now teetering on the brink of recovery. While the pace of sales and prepayments continues to remain somewhat restricted, resulting in less recycled capital from the portfolio for new investments, the firm retains easier access to capital than peers.




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ACAS = American Capital, Ltd.

FIG = Fortress Investment Group LLC

With the global financial markets in disarray, dividend stocks have become one of the top destinations for investors over the last year. Apollo Investment Corporation is no stranger to dividend investing given its payout track record. Right now is the perfect opportunity to take advantage of this dividend giant poised for a recovery.

Banco Santander, S.A. (STD) is a financial group operating principally in Spain, the United Kingdom, Portugal, other European countries, Brazil and other Latin American countries and the United States, offering a range of financial products. It operates in four segments: Continental Europe, United Kingdom, Latin America and Sovereign. The current market price is $7.77 with a one-year analyst price target of $8.75. This represents a 12.61% upside potential. The 12.61% upside potential does not include its hefty dividend of $0.16 that is paid quarterly and amounts to 8.24% yield. The dividend is above its five-year average of 4.4%, but the stock price is much lower than its five-year average and the payout ratio is above average at 75%.

Compared to its peers Banco Santander's five-year EPS growth rate is slightly higher at -0.11%, where the industry average for regional banks is -2.13%. The financial sector on the other hand outperforms with a five year EPS growth rate of 1.14%. STD's direct competition Citigroup (NYSE:C) and HSBC Holdings (HBC) both have higher net income and a larger market cap. STD has a PEG of 0.62 where C has one of 1.22 and HBC's is 0.63. It seems like STD compares about evenly with its industry, however its dividend yield is unmatched.




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C = Citigroup, Inc.

HBC = HSBC Holdings plc

STD has an upward slope regarding its ten and twenty-one-day moving average which signifies a bullish trend. Also, Moving Average Convergence/Divergence indicates a Bullish Trend. For fiscal year 2011, analysts estimate that STD will earn $1.09. For fiscal year 2012, analysts estimate that STD's earnings per share will grow by 16% to $1.26. With an upward momentum this excellent dividend yield will not last long. I believe Banco Santander is undervalued at current prices and should see a substantial rise in price this year.

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