The stock market had some rough days in the past couple of weeks and that has brought many stocks back down to interesting levels. With the post-election plunge of over 300 points in the Dow Jones Index in just a single day, investors seeking income should consider accumulating dividend-payers on the current and any additional pullbacks. Buying dividend stocks on dips has been a successful strategy for the past couple years, and with rates likely to stay low, this strategy should continue to outperform. However, it also makes sense to buy in stages because additional buying opportunities are possible in the coming months as the United States faces looming tax hikes and budget cuts which could put the economy back into a recession. That is why it makes sense to keep plenty of cash available for big market drops, but also to use these pullbacks to selectively buy in stages. With that in mind, here are two high-yielding stocks that are getting Jim Cramer's attention:
Annaly Capital Management, Inc., (NLY) is a leading mortgage real estate investment trust that focuses on mortgage-backed securities. This industry has come under pressure recently due to a drop in mortgage interest rates. Record low rates have caused some homeowners to refinance in order to save money. This is coming at the expense of this industry as mortgages with higher rates are replaced by consumers. When profits drop for a real estate investment trust, it can often lead to a cut in the dividend payout because these companies pay out 90% or more of the earnings to shareholders in the form of a dividend. While these concerns have taken many stocks like Annaly lower in the short term, the pullback is worth buying for investors with a longer-term outlook for two major reasons. One is that this stock yields over 12% and short-term hiccups in the stock price can be smoothed out over time by a yield that solidly beats the average of just over 2% for the S&P 500 Index. The second major reason this stock makes sense for income investors is the historical performance. This stock has provided shareholders with gains of over 600% since it was formed in 1997. This shows the long-term power of high yields and buy and hold investing with Annaly. Jim Cramer has been backing this stock and a CNBC article recently said he "continues to like this stock."
Here are some key points for NLY:
Current share price: $14.91
The 52-week range is $14.27 to $17.75
Earnings estimates for 2012: $1.80 per share
Earnings estimates for 2013: $1.71 per share
Annual dividend: $2 per share, which yields 12.6%
PDL Biopharma, Inc. (PDLI) might sound like a risky biotech pick at first glance but after taking a closer look this stock, many income investors might want to consider it. This company owns important patents that are licensed by major pharmaceutical and biotech companies. Monoclonal antibodies are used by these companies to target diseased cells and keep the healthy ones undisturbed. Its patent portfolio provides a steady ongoing stream of royalties, which are used to distribute an above-average yield to shareholders.
This company recently reported solid financial results. Net income for the third quarter of 2012 was $48.6 million, or 32 cents per diluted share. This compares favorably with net income of $45.9 million, or 28 cents per diluted share, in the same quarter of 2011. Since 2004, PDL's revenue has averaged year-over-year growth rates of more than 20%, which shows the value of these patents. This type of growth also means that the dividend could continue to rise from already generous levels. Another big plus is that revenue for this company is relatively recession-resistant because healthcare is a defensive industry that remains stable even in tough times. A recent CNBC article stated "Cramer likes this stock right now," and that is just one of many reasons why investors should consider this high-yielding stock.
Here are some key points for PDLI:
Current share price: $7.74
The 52-week range is $5.76 to $8.43
Earnings estimates for 2012: $1.44 per share
Earnings estimates for 2013: $1.64 per share
Annual dividend: 60 cents per share, which yields 7.9%
Data sourced from Yahoo Finance. No guarantees or representations are made.
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.
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