Europe may be getting its act together to impose austerity, but there are no concrete proposals to promote growth. After all, eurozone unemployment stands at 10.4%, in Spain, it is 22.9%, and in Greece, it is 19.2%. Additionally, the US personal saving rate in December climbed to 4.0% from 3.5% in November, signaling a risk-averse mood by American consumers. The US Q4 GDP report was disappointing as well, with growth in inventories leading the way, instead of showing some other organic form of growth. As such, consumer sentiment fell unexpectedly to 61.1 in January, according to the Conference Board. You may want to build a nuclear fallout shelter, but good dividend yields may help your portfolio survive in the future.
It may be time to consider adding more fixed-income instruments to your portfolio. More particularly, I like preferred stocks because you can smooth out the bumps and erratic moves of the market through consistent dividend payments. Also, these instruments do not ebb and flow like common shares and equities. Keep in mind that companies aim to make the dividend payments to avoid credit rating downgrades. With dividend paying consumer staples stocks running up and reaching overvalued levels, preferred stocks offer reasonable alternatives.
I ran a stock screen to focus on the energy sector, which tends to be speculative, and thus have higher yielding securities. I must say, though, that you should consider purchasing these shares on a pullback, if you are bearish on the global economy, and believe that the stock market is due for a 10% correction. I take care to mention those at or below par value or call price, which is the dollar amount that you get after the security reaches maturity. Generally speaking, you should avoid preferred stocks that trade significantly above par value, because you end up losing the gap between what you paid for and the par value or call price. With the Fed targeting 0%-0.25% for the federal funds rate and slowing global economic growth, you ought to consider the following.
Magnum Hunter Resources (MHR) (Cumulative Perpetual Series C) has been callable at $25 per share since December 2011. Currently, it trades below $25.50 per share, but you can recoup the half point loss soon with monthly dividends of $0.2135. All dividend payments have been made since the first in March 2010.
Dividends are paid out on the last business day of each month, so the next one would occur on February 29. The record date is typically 10 business days prior. S&P and Moody's have NOT yet rated this security. The current yield is 10.0%, and the 52 week trading range is $17.79-27.49. The Yahoo! Finance ticker symbol is MHR-PC, the Google Finance ticker symbol is MHR-C, and the Fidelity ticker symbol is MHR/PC. I recommend this only to aggressive investors looking to fill in their high yield portion of the portfolio.
A more expensive alternative is the series D cumulative preferred stock. It becomes callable at $50 per share on March 21, 2014. Currently, shares trade below $48.50, so there is a 3.0% capital appreciation opportunity. Dividends of $0.3333 are paid out monthly, and all have been since inception on March 2011.
The next dividend payment should be on February 29, with a record date of February 15. There are no ratings on this security, yet. The dividend yield is 8.2%, and the 52 week trading range is $35.51-60.01. The Yahoo! Finance ticker symbol is MHR-PD, for Google Finance, it is MHR-D, and Fidelity recognizes it as MHR/PD. This is safer than the Series C, but still do research on your risk profile.
Magnum Hunter Resources Corporation is a Houston, Texas based independent exploration and production company engaged in the acquisition, development and production of oil and natural gas, primarily in the states of West Virginia, Kentucky, Ohio, Texas, North Dakota and Saskatchewan, Canada. The Company is presently active in 3 shale resource plays in North America, namely the Marcellus Shale, Eagle Ford Shale and Williston Basin/Bakken Shale. Here is the recent company presentation.
Double Eagle Petroleum (DBLE) (Cumulative Series A) is callable at $25 per share after June 29, 2012. The shares trade below $26 per share, but you can reap quarterly dividend payments of $0.578125. Since inception in June 2007, all dividends disbursements have occurred on time.
The next dividend payment should occur on March 30 to holders of record at 10 business days prior. S&P and Moody's have NOT yet rated this security. The dividend yield is 8.8%, and the 52 week trading range is $22.00-26.89. The ticker symbol is DBLEP. These shares are for those seeking high yields in the energy sector, and especially, for those annoyed by Exxon Mobil's (XOM) low yield and fed up by its share buybacks.
Double Eagle Petroleum explores for, develops, and sells natural gas and crude oil, with natural gas constituting more than 95% of its production and reserves. The Company currently has development activities and opportunities in its Atlantic Rim coal bed methane and in the Pinedale Anticline in Wyoming. Also, exploration potential exists in its Niobrara acreage in Wyoming and Nebraska, which totals over 74,000 net acres. View a recent company presentation.
Gastar Exploration (GST) (Cumulative Series A) becomes callable at $25 per share on June 23, 2014. The par value is $25 per share. Currently, shares trade below $19.75, so you may be looking at 26.5% in capital appreciation. Additionally, dividends are paid out monthly, and all have been made since inception in June 2011. Each month, you should be owed $0.1796875, and totaling $2.15625, for the year.
The next dividend payment should be on February 29, with a record date of February 15. S&P and Moody's have not yet rated this security. The dividend yield is 10.9%, and the 52 week trading range is $17.25-23.23. The Yahoo! Finance ticker symbol is GST-PA, for Google Finance, it is GST-A, and for Fidelity, it is GST/PA. This is highly speculative, so please do your research, know your risk profile, and how much in losses that you can handle.
Gastar Exploration is an independent company engaged in the exploration, development and production of natural gas and oil in the US. Principal business activities include the identification, acquisition, and subsequent exploration and development of natural gas and oil properties with an emphasis on prospective deep structures as well as unconventional natural gas reserves, such as shale resource plays. The Company is pursuing natural gas exploration in the Marcellus Shale in the Appalachian area of West Virginia and central and southwestern Pennsylvania and in the deep Bossier gas play in the Hilltop area of East Texas. Here is a recent company presentation.
El Paso Energy (EP) (Trust Convertible) has been callable at $50 per share since March 2002. Shares trade below $45.50; therefore, you may potentially earn 9.8% in capital appreciation. Dividends are also paid out quarterly in disbursements of $0.59375, and have made all dividend payments since March 2002.
The next dividend payment should be on March 30 to holders of record at March 15. Also, S&P gives this a rating of B. The dividend yield is 5.2%, and the 52 week trading range is $35.13-47.08. The Yahoo! Finance ticker symbol is EP-PC, the Google Finance ticker symbol is EP-C, and on Fidelity, it is EP/PC. This is the highest rated security on this list, but I still would give it a medium risk rating. Sole income investors should not purchase this.
El Paso Corporation provides natural gas and related energy products. The company owns North America's largest interstate natural gas pipeline system, one of North America's largest independent exploration and production companies and an emerging midstream business. On October 16, 2011, Kinder Morgan (KMI) announced that it will acquire all of the outstanding shares of EP.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.