Insiders may sell shares for any number of reasons, but there is really only one reason to buy. With the amount of information they possess about the company, there must be something good happening. When I see an executive personally buying a big quantity of a stock, it raises my conviction to buy as well. Academic evidence backs up my gut instinct. Better than 30 years of research shows that companies with significant insider purchases tend to outperform the market for the 12 months after those purchases. Then, you add in stocks with high dividend yields to get paid while you wait. Last, you look at the consensus among analyst in the equity summary score to get a second confirmation about the prospects of the stock.
The following stocks have recent insider buying, bullish equity summary scores, and 10% or more dividend yields.
Insiders at PennyMac Mortgage Investment Trust (PMT) purchased 279,000 shares in the $17-$19 price range since the beginning of the second quarter. PMT is currently trading at $19.15 per share with a market capitalization of $794 million. PMT has a dividend yield of 11.49% following a 30% hike in the past year. PMT is a mortgage real estate investment trust (REIT) that invests primarily in residential mortgage loans and mortgage-related assets. PMT reported net income of $19.1 million, or $0.65 per diluted share, for the first quarter of 2012 on net investment income of $46.6 million. PMT has an equity summary score of 8.8 out of 10 for a Bullish outlook.
Insiders at Winstream Corp. (WIN) purchased 215, 025 shares at a market value of $2,070,670 since the beginning of the second quarter. WIN is currently trading at $9.36 per share with a market capitalization of $5.51 billion. WIN has a dividend yield of 10.68%. Even with increased capital spending to support broadband and other initiatives, we view WIN's dividend, recently yielding an above-average 10%, as secure. WIN's access line base has been more stable than that of its peers, and business demand has been strong despite a sluggish economy. We believe recent acquisitions have been integrated smoothly, although there are risks as WIN works to align the PAETEC assets during 2012 and suspends certain wholesale operations. With our view of WIN's stronger fundamentals than many peers, we see the shares as undervalued. WIN has an equity summary score of 8.0 out of 10 for a Bullish outlook.
Insiders at Frontier Communications Corp. (FTR) purchased 217,302 shares at a market value of $729,115 since the beginning of the second quarter. FTR is currently trading at $3.45 per share with a market capitalization of $3.44 billion. FTR has a dividend yield of 11.69%. While the shares have continued to decline months after its dividend cut in January, we believe the company's fundamentals are sound. After acquiring wireline assets from Verizon Communications in mid-2010 that more than doubled its size, FTR provides wireline communications services, including voice services, to 5 million customers in rural areas and small and medium-sized cities in the U.S. While we acknowledge the risks tied to integration efforts and competitive pressure, we think the stock is trading at too much of a discount to peers and is undervalued. This is a higher risk dividend play than usual, so wait this one out to see if insiders do know something more. FTR has an equity summary score of 8.0 out of 10 for a Bullish outlook.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.