Due to strong investor interest, there are fewer and fewer dividend stock bargains in the market. Some of the best known dividend stocks now yield around 3%, or even less. For example, pharmaceutical giants like Abbott Laboratories (NYSE:ABT) and Pfizer Inc. (NYSE:PFE), respectively yield 3.1% and 3.7%. Johnson & Johnson (NYSE:JNJ) yields 3.6%. While these yields will beat traditional money market and savings accounts, there are much higher yields out there. That's why it makes sense to look deeper for yield by looking at smaller companies.
Smaller companies can add risk to a portfolio, but often this risk is offset with much larger rewards. One way to try minimizing the risks of smaller company stocks is to look for insider buying. Insiders tend to know their companies better than analysts and other investors, so when they buy it can be a sign that the dividend is probably safe and it could also mean the stock has upside.
Here is a closer look at one stock that offers a very generous yield of nearly 8%, plus has heavy recent insider buying:
Home Loan Servicing Solutions (NASDAQ:HLSS) is focused on buying mortgage servicing assets such as: mortgage servicing rights, rights to fees and other income from servicing mortgage loans, and associated servicing advances. It is based in the Cayman Islands and it has offices in Atlanta, Georgia and West Palm Beach, Florida. Here are a few reasons to consider buying the stock:
1) This company recently reported solid financial results. For the second quarter of 2012, it earned $4.7 million, or 33 cents per share. It also completed the acquisition of mortgage servicing assets with an unpaid principal balance of $2.9 billion from Ocwen Financial Corporation (NYSE:OCN) on May 1, 2012. This transaction takes the unpaid principal balance to a portfolio value of about $17.3 billion.
2) This company went public at $14 per share in February, 2012, so it's almost a "ground-floor" opportunity to invest in. The shares are trading above the IPO price, but even insiders are paying up for the stock.
3) This company is poised to see strong growth as more and more banks seek to sell off mortgage assets in order to raise capital and meet requirements set by regulators and new laws.
4) Insiders at Home Loan Servicing Solutions have recently purchased significant amounts of stock. On August 23, 2012, William Erbey (a director), bought 42,221 shares in a transaction worth about $657,380. He also bought 19,906 shares on August 22 in a transaction valued at $307,547, and the day before that he bought 14,976 shares in a transaction worth $227,934. Other insiders have been buying as well. For example, on August 12, 2012, John Patrick Van Vlack (an officer), bought 30,000 shares in a transaction valued at about $435,000.
Here are some key points for HLSS:
- Current share price: $15.65
- The 52 week range is $12.80 to $15.92
- Earnings estimates for 2012: $1.30 per share
- Earnings estimates for 2013: $1.32 per share
- Annual dividend: $1.20 per share, which yields nearly 8%
Data is sourced from Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: 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.