Shares of Annaly Capital Management, Inc. (NLY) have been a great way for investors to earn outstanding yields. This company invests in mortgage securities and it is set up as a real estate investment trust, which means it must pay out most of what it earns to shareholders in the form of a dividend. Since the company uses leverage, it is able to borrow money at very low rates to buy fairly stable mortgage securities. This leverage amplifies the returns for shareholders. While Annaly has been and can continue to be a great way for investors to achieve outsized dividend payments, it makes sense to be diversified in other companies and invest in other high-yielding assets. With that in mind, here are a number of stocks for investors to consider that provide dividend yields of over 10% to about 16%:
Chimera Investment Corporation (CIM) is another real estate investment trust that like Annaly, invests in residential mortgage-backed securities and both commercial and residential mortgage loans. It also happens to be managed by a subsidiary of Annaly Capital Management. However, this stock is generally regarded as carrying more risk which is one reason why it offers an even higher yield of about 15.6%. The company changed auditing firms earlier this year and it has delayed the filing the 10-K form, which is one reason some investors are concerned. If the company files and there are no big surprises, the stock is likely to rise. Chimera looks undervalued and trades below book value, which is $3.27 per share.
Here are some key points for CIM:
Current share price: $2.88
The 52 week range is $2.38 to $3.62
Earnings estimates for 2012: 48 cents per share
Earnings estimates for 2013: 46 cents per share
Annual dividend: 44 cents per share which yields 15.6%
Compass Diversified Holding (CODI) shares were trading around $15 before the market correction began in May. The stock has come down enough to raise the dividend yield above 11%, and the lower price has even attracted multiple insiders into buying shares last month. On May 16, 2012, Elias Sabo, a partner at the firm, purchased 25,000 shares in a transaction valued at $309,750, and just a couple days before, he bought another 25,000 shares. Compass invests in other companies and it pays out some of the profits to shareholders. It owns a portfolio of companies that includes Camelbak, Staff Mark, Liberty Safe, Ergo Baby Carrier, etc. Insider buying could be a sign that the shares are undervalued, especially considering the generous yield.
Here are some key points for CODI:
Current share price: $12.70
The 52 week range is $11.21 to $17.36
Earnings estimates for 2012: $1.48 per share
Earnings estimates for 2013: $1.62 per share
Annual dividend: $1.44 per share which yields 11.4%
Telefonica SA (TEF) shares have plunged due to the ongoing debt crisis in Europe. This company is based in Spain and provides communication services ranging from mobile phones, Internet and fixed-line services in that country. However, it also has major operations in Latin American countries, which provides geographic diversification and growth potential with emerging market consumers. Since mobile phones and Internet are basic needs for many people even in a tough economy, this company might be more insulated than most Spanish companies. Telefonica has about $10.16 billion in cash and about $85.36 billion in debt. This high level of debt is a concern for some investors, but if any company can survive in Spain, it might be the "phone company." If European leaders find a solution that can control the debt crisis, investors in this company could be looking at not just high yields, but also significant capital appreciation in the coming years.
Here are some key points for TEF:
Current share price: $11.99
The 52 week range is $10.90 to $24.82
Earnings estimates for 2012: $1.70 per share
Earnings estimates for 2013: $1.94 per share
Annual dividend: $1.34 per share which yields about 10.7%
American Capital Agency (AGNC) shares have been very strong and the stock recently hit a new 52-week high. Like Annaly, this company invests in residential mortgage-backed securities, and it is also set up as a real estate investment trust. This stock shows the strength of the new bull market for mortgage REIT stocks and both Chimera and Annaly could soon also be hitting new 52-week highs. American Capital shares have a book value of $29.06, and due to the recent rally, the stock is now overbought. However, a buy on the dips strategy is likely to reward investors seeking income.
Here are some key points for AGNC:
Current share price: $33.61
The 52 week range is $22.03 to $33.95
Earnings estimates for 2012: $4.02
Earnings estimates for 2013: $5.47
Annual dividend: $5 per share which yields about 14.9%
Annaly Capital Management, Inc., shares have been showing strength in spite of what has been a very weak market. When you consider that holding this stock for about four years will provide returns of over 50% (13% yield times 4 years = 52%), it is easy to see why this company is favorite for many income investors. A recent Forbes article details some positive comments about Annaly and why this investment strategy works, it states:
Jeremy Diamond, head of research at Annaly Capital Management, a mortgage REIT that uses leverage to maximize the spread between the mortgage-backed securities it buys and its cost of capital, said the repo markets the firm operates in are tremendously deep and liquid. The AAA-rated assets the firm deals in are getting scarcer, "yet there is all this money out there that needs a return."
Here are some key points for NLY:
Current share price: $16.86
The 52 week range is $14.05 to $18.79.
Earnings estimates for 2012: $1.98 per share
Earnings estimates for 2013: $2.05 per share
Annual dividend: $2.20 per share which yields 13%
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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.