Two of My Favorite High-Yielding Stocks: BBVA Provida and Centerline Holdings

One of the trends I've noticed in the past few months, is that some investment newsletters are focusing quite a bit on dividend paying stocks - especially obscure ones that I've never heard of.

A few of these ideas percolate to the top as being fairly interesting for further research, so I thought I'd share my thinking on a couple of them. These are all very high yielding stocks (I consider anything above 5% high yield these days), and they're not the standard REITs.

The ones I've run across really incorporate a wide variety of investments - from Master Limited Partnerships in both gas/oil and coal, to REITs of one sort or another, to foreign investments (since big companies outside the U.S. tend to pay higher dividends, either as a matter of law or tradition).

These are two of my favorites:

BBVA Provida (really, Administradora de Fondos de Pensiones Provida SA, the ADR (PVD). This was teased in an email ad as a "secret pension payout plan ... the world's greatest retirement stock," but what it really is is a pension administrator in Chile. Chile privatized its social security system more than 20 years ago, and workers are required to participate in a private account system. BBVA Provida is the largest provider of these accounts, and with only a half dozen or so large providers, the account fees are fairly high. This is also a bet on the Chilean economy (which has been a quiet star of late, thanks in part to copper prices), since its required to invest the majority of its funds in the Chilean markets.

So, what is there to say about Chile? It has a growing economy, and more importantly, it doesn't have the baby boom generation as we do, so PVD is not necessarily on the verge of imminent outflows from these funds as Chilean workers retire. Chile generally has a similar percentage of workers aged 30-40 or so to the U.S., but in age groups above that, its percentage declines significantly, while below that it increases significantly. Chile is a younger nation, and if PVD is able to get more "temporary" workers signed up, and to do well with its newly increased ability to invest overseas, the potential seems pretty good to me.

It is important to explain those points. Because of Chile's labor laws, there are a lot of temps in Chile that are really standard workers without "permanent" work, and I believe only permanent workers are required to contribute to pension accounts, although that may change, and the foreign exposure for these accounts can now go to 45% next year from the current 30%. Of course, this all assumes that Chile's economy generally continues its positive course. In the meantime, this one yields in the neighborhood of 6-7%, although the payout certainly fluctuates.

The second one that has caught my eye recently is Centerline Holdings Co. (CHC), the parent of Centerline Capital Group (formerly known as CharterMac). This is a financial company structured as a partnership, and it basically serves as a fiscal middleman between real estate developers, and investors. Recently, newsletters have touted it
as a "high income gem."

It runs a few funds that take advantage of the tax benefits of developing low income housing, and do more standard bridge loans, mortgages and the like for real estate development, primarily commercial and multi-family residential. It also advises some REITs, and have a former REIT as a division, but it doesn't seem to me like it's unduly tied to the troubled U.S., single family home market.

These companies can quickly get confusing, and there aren't that many of them that are structured like this (as opposed to being a mortgage REIT, of which there are many, including some scary ones). The other big one that does some of this kind of work, including specifically the low-income housing stuff, is MuniMae (MMA), which also has programs to lend money for housing development overseas and for energy efficiency projects (for example, it will lend you the money to put solar panels on your shopping mall, and it gets paid back with a cut of the energy savings). Both MuniMae and Centerline yield just over 8%, but Centerline seems to me to have the steadier business.

In my work at stockgumshoe.com I've also run across many other income investments, of course - there was the "Escondido Retirement Trust," which is a retail real estate REIT with a decent monthly dividend, the many different standard MLPs (teased as "American Oil Pension" plays), and even some of the alternative MLPs that are cropping up - including Alliance Resource Partners (ARLP), which owns high sulfur coal in the ground. But after the yield erosion and nosebleed valuation (in my opinion) that most of these standard high dividend investments have come to compared to their historical averages, I haven't been tempted as much by those as by PVD and CHC.

Neither of these two investments, PVD or CHC, appears to me to have been pushed up to the same kind of bubble valuation that I think we're seeing in many of the REITs and MLPs, and they are both somewhat "odd" businesses that don't have many compatriots, at least in U.S. markets, so I'm taking a little time to look them over in more detail for a possible investment.

I don't currently own any of the companies noted here, at the moment the highest-yielding stock I hold is Rayonier (RYN), which I consider a core holding for its timber assets, though I do also foresee a day of high dividends for SeaDrill (SDRLF.PK), my largest individual stock holding, in the next couple of years.