Investors looking for income are being presented with new buying opportunities thanks to a market correction that has taken about 800 points off the Dow Index in just a matter of days. Stocks that pay dividends tend to have relative strength when the markets are dropping, and it is comforting for investors to know that they will get paid a monthly or quarterly dividend, even if the market performs miserably. Over time, the income can really add up, offering strength and stability to a portfolio and giving peace of mind to investors. Here are some stocks that appear to be compelling buys now due to a recent pullback in the market:
Wells Fargo Advantage Multi-Sector Income Fund (ERC) shares have dropped a little during the market selloff, and that is providing investors with a solid buying opportunity. This closed-end bond fund offers diversification and a great yield of over 8%. Another big positive is that it pays a dividend of 10 cents per month. For many investors, it's preferable to receive a dividend payment each month rather than waiting for every quarter. This fund is managed by Wells Fargo and it invests in high yield bonds, asset backed bonds, government bonds, corporate bonds, as well as in other bonds and cash. This fund is selling for a discount to net asset value which is currently $16. This means investors are able to buy $16 worth of assets for just about $14.80, which is a discount of about 7.5%. This fund has a very stable payout history and it's a great way to add a generous, over 8% yield to a portfolio.
Here are some key points for ERC:
- Current share price: $14.80
- The 52 week range is $13.70 to $15.80
- Earnings estimates for 2012: n/a
- Earnings estimates for 2013: n/a
- Annual dividend: $1.20 per share which yields 8.1%
Annaly Capital Management, Inc. (NLY) shares have been in an uptrend since early April, and recently traded around $16.70 per share. This stock has performed relatively well in the face of very weak markets, although it has recently given up some of its gains. Annaly shares are worth buying on dips because the dividend appears safe and it pays a monster yield of over 13%. This company is a mortgage real estate investment trust that invests primarily in mortgage securities. This structure allows it to use leverage, and enables it to pay large returns to shareholders in the form of a quarterly dividend.
Here are some key points for NLY:
- Current share price: $16.15
- The 52 week range is $14.05 to $18.79.
- Earnings estimates for 2012: $1.97 per share
- Earnings estimates for 2013: $2.05 per share
- Annual dividend: $2.20 per share which yields 13.3%
Seadrill Limited (SDRL) shares were recently trading around $39, but it has dipped to a level that now provides investors with a potential buying opportunity. This company offers offshore drilling services to oil and gas companies and it has a fleet of 63 units which include drillships, jack-up rigs, semi-submersible rigs and tender rigs, etc. Seadrill is a leader in this industry and it has relatively new equipment which often leads to higher contract rates, less down time, and less maintenance expenses. Since the dividend is easily covered by earnings estimates, it looks very safe and it even has room to be raised in the future. Buying on dips around $35 or less could give investors a solid chance for capital gains and a strong dividend while waiting for higher prices.
Here are some key points for SDRL:
- Current share price: $35.80
- The 52 week range is $24.68 to $42.34
- Earnings estimates for 2012: $3.15
- Earnings estimates for 2013: $3.51
- Annual dividend: $2.46 per share which yields about 6.8%
SPDR Barclays Capital High Yield Bond (JNK) is another option for investors seeking income. This fund invests in high-yield bonds that pay investors a very generous yield, which is similar to the Wells Fargo Advantage Multi-Sector Income Fund listed above. One main difference is that this exchange traded fund trades close to net asset value while the other is a closed end fund that currently trades at a discount, allowing it to pay a higher yield. Both are good ways to play the high-yield bond market, and after a recent sell-off in both names, investors buying now could end up with capital gains and a very high yield that is paid monthly.
Here are some key points for JNK:
- Current share price: $38.22
- The 52 week range is $34.09 to $40.89
- Earnings estimates for 2011: n/a
- Earnings estimates for 2012: n/a
- Annual dividend: about 24 cents per month, per share which yields about 7%
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.