Income Stocks on Sale Once Again

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 |  Includes: APL, ATLS, CMLP, MNRTA, NAT, PWE, SFL, THMR, TNH
by: Tim Plaehn

When the stock market gets hammered like the last few days, my thoughts turn to the income stocks in my portfolio. Falling prices mean higher yields, and you know these stocks will recover as long as the dividend stays intact (always the big “if” with high yielding stocks). The last time I highlighted income stock was on 12/03/07. 2 of the 3 stocks discussed then are higher now and all have paid regular dividends.

The stocks I research and write about basically fall into two camps, growth stock, where I expect price changes in multiples, and income stock, where I look for high, sustainable dividends. The 20 Stock Portfolio currently has 8 of what I would classify as high yield income stocks. Here is a quick thought on each. Yields are from Yahoo Finance:

  • Nordic American Tanker (NYSE:NAT): Yield: 6.8%. Pure play, spot market oil tanker company. Last 2 quarter’s dividends have been disappointing. My least favorite in this group.
  • Ship Finance International Ltd. (NYSE:SFL) Yield: 8.2% Low risk and nice yield on this ship (mostly oil tankers) leasing company. Dividend should start rising again soon.
  • Penn West Energy Trust (NYSE:PWE) Yield: 14.2%. Yes, 14%! Largest of the Canadian oil and gas trusts. Share prices on these trusts have fallen after announced Canadian tax law changes for 2011. Monthly dividend looks stable for the next couple of years.
  • Thornburg Mortgage (TMA) Yield: 10.2%. The once-upon-a-time 68¢ dividend is now a quarter (25¢). The company must still navigate the treacherous mortgage waters. I believe the company will survive, thrive and raise the dividend.
  • Terra Nitrogen Co. LP (NYSE:TNH) Yield: 12.5%. Last 4 quarterly dividends have been: $1.57, $3.00, $2.10 and $4.45 as the company rides the agricultural boom. With very little room for capacity increases, they live on pricing. Not for the faint hearted, but who knows when the ride will stop.
  • Inergy LP (NRGY) Yield: 8.2%. Propane distribution company has increased the dividend every quarter since it’s IPO in 2001. Sounds good to me!
  • Atlas Pipeline Partners (NYSE:APL) Yield: 8.2%. Natural gas transport and processing. Closely tied to production of Atlas America (NYSE:ATLS). Natural gas price play and growth possibilities. Read my recent post and comments.
  • Monmouth Real Estate Investment Corp (MNRTA) Yield: 7.4%. Small cap, REIT to round out the portfolio. Well run company that could be acquired for a premium.

Equally weighted, this bunch has an average yield of 9.5%. I have tried to purchase the ones I own during pull backs where the market hammers all, good and bad, equally. Of course, do your own research to see if these stocks fit your investment needs, but I see some compelling stories here.

Disclosure: Stocks above are stocks in my 20 Stock Portfolio. I currently have long positions in: SFL, TMA, PWE, NRGY.