Looking For Dividends In Uncertain Times

by: Tim Plaehn

As the market gyrates with the higher swings we have seen over the last couple of months, my thoughts turn to dividends. I like the thought of dividends for two reasons:

  1. A dividend is a nice piece of good news when everything else is going in the crapper.
  2. Dividends provide cash to buy some of those stocks you really like, and don’t believe they belong in said crapper.

My investing style for this blog (my personal investing style is evolving in a parallel universe) is what I think of as aggressive eclectic. I am looking for small cap, growth, value, international good ideas that few are following. I am not really interested in the large cap stocks every investor, guru, TV commentator and analyst knows every piece of information about worth knowing. So when I look for dividend stocks I want the outsize yields that the market thinks are unsustainable, thus driving down share prices.

My recent post on tanker stocks highlighted some of these stocks and I added (NYSE:NAT) and (NYSE:SFL) to my 20 Stock Portfolio (a paper stock portfolio for tracking what I think are good ideas). These stocks are currently taking a beating due to the current softness in spot tanker rates. The prudent investor would wait for a quarterly earnings report before making any decision on either of these companies.

Another high dividend payer (or was) is Thornburg Mortgage (TMA). I have written numerous posts on this company. (The REIT or high yield categories should take you to these posts). Historically this company has paid a 10% plus dividend, but the recent credit crisis has put it on the ropes. Check this recent post on up coming news that will give us an idea on the health of Thornburg . I am hoping to add TMA to my 20 Stock Portfolio after the conference call.

Another sector with excellent dividends is energy royalty trusts. I recently posted here on an ETF that hold Canadian royalty trusts and oil sands stocks (NYSEARCA:ENY-OLD). I am not impressed with the structure or payout of the ETF so would prefer to look at the royalty trusts directly. Kurt Wulf is a oil industry numbers guy with insights I admire. He recently recommended Penn West Energy Trust (PWE). I am not going to rehash his analysis, but it convinces me to add it to my 20 Stock Portfolio (a paper stock portfolio for tracking what I think are good ideas).