Taking Stock Of 3 Dividend Plays

by: Patrick Young

On July 8, 2011 I recommended buying Teekay LNG Partners (NYSE:TGP),TICC Capital Corp (TICC), and SeaDrill (NYSE:SDRL) because they have sound business fundamentals and a higher than typical dividend. I expected these stocks to outperform the market, and they did. Despite making a recommendation in July (remember there was a panic in August), these stocks have indeed outperformed the market. Since July 8, 2011, the S&P has appreciated 1.06% and yields 2.92% for a grand 8 month ROI of ~3%.

SeaDrill is an oil and gas offshore drilling company with a new fleet of deepwater ships. Operating profits, cash flow, and new orders all grew substantially last year. The stock has appreciated 11.09% with a yield of 8.39%, for a 8 month ROI of 16.68%.

TICC Capital Corp is a technology sector capital investment firm. Company insiders have continued to purchase stock through the end of 2011. It has appreciated 1.62% with a yield of 10.17% for a 8 month ROI of 8.4%.

Teekay LNG Partners is a transporter of LNG and crude oil. Liquid Natural Gas is in high demand and shipping rates have soared in the last two years. Golar LNG Limited Patners (NASDAQ:GMLP) would have been a better bet (stock is up ~50% with a 4.5% yield). However, Teekay has appreciated 1.98% with a yield of 6.66%, for a 8 month ROI of 6.42%.

While the late summer and early fall were scary, holding these stocks produced returns above the market. Better yet, since a great deal of the Return on Investment is from the dividends, your tax burden is reduced when trading on shorter than 1 year timescales.

Once again, the business models of these companies is sound, and while markets may go up and down now because of very unpredictable and frustrating macro events, these companies will also pay you more than the market to take a ride.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.