Yield Hogging For 2016

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Includes: NRZ, SNH, SPH
by: Mitchell Harris

Summary

Supplement your income with high yields.

Offset equity losses with income stream.

Opportunity for capital gains in oversold positions.

I have always been a yield hog. It is just who I am. The issue is that you have to be very careful about which industries you "hog" in in today's climate. Financials and some others are very sensitive nowadays and dividend cuts are common. Keep in mind that high yield does include a higher level of risk. If your time horizon is long term, then you can survive a few bumps and bruises along the way. Here are a few high yielding positions I feel comfortable with right now in this market climate.

Suburban Propane (NYSE:SPH) markets, distributes propane, fuel oil and refined fuels. The stock is currently trading at $26.10, with plenty of upside to its 52 week high of $45. Don't let the current oil markets' low prices scare you; their top line might not look great, but it isn't having any impact on their ability to pay shareholders. Plus your entry point is okay now that analysts feel the oil market bludgeon is mostly over. The current yield is 13%. As a bonus if you want some added income, write the August $30 calls of 2016 and take in 3.5%. If the stock breaks $30 by then, you can fold up the tent for 2016 and count your blessings.

Senior Housing Properties (NYSE:SNH) invests in hospitals, nursing homes, assisted living facilities, and senior apartments. They currently own 184 properties throughout the US. The stock is down 40% in the past 12 months to $14.50, raising the yield to 10.25%. With the baby boomers starting to retire, it is viewed as a defensive position with generational growth opportunity.

New Residential Investment (NYSE:NRZ) is an oversold REIT investing in residential mortgage assets, mortgage servicing rights, and real estate securities. The stock is down 15% in the past 52 weeks, and boasts a 17% dividend. Their payout ratio is less than you would think for a high dividend such as this one, 138%. Earnings growth has been very strong and the company has been buying back shares year over year. New Residential has $930 million in operating cash flow. As with any 17% yielding stock, there is always a bit of uncertainty, but I am confident this stock will outperform its peers in 2016. Buy in a little at a time, dollar cost average your entry points to minimize some risk.

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

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.