3 Dividend Powerhouses With 8%-Plus Yields

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Dividends are in focus right now for many investors as high-yield stocks provide a much-needed hedge against market volatility. Not only do regular dividend payments provide some good income, they provide peace of mind. Stocks have the potential to swing wildly up and down with the broader market sentiment. Even if you finish the year flat, you still will have something to show for your investment.

But what makes a “good” dividend stock? A substantive yield, yes — but that’s only part of the equation. Shareholders need to pay attention to sustainable payouts or else they could see last quarter’s big payday shrivel up to nothing. The lack of reliability is an especially big problem for prospective buyers, because if your biggest motivating factor is the dividend, you will be sorely disappointed if your first payout isn’t quite what you had planned.

To help you maximize your dividends — without venturing into volatile small caps with unreliable payouts — I’ve compiled this list of dividend powerhouses with yields of between 8% and as high as 15%.

The share performance of these picks might never burn down the house. In fact, it’s worth noting that none of these stocks have posted significant gains year-to-date in this choppy market. However, as income investments, they are certainly worth a closer look.

Annaly Capital — 14.7% Dividend Yield

Many investors are leery of any company trafficking in the mortgage business these days. But Annaly Capital (NYSE:NLY) should be on your radar if you’re a dividend investor by virtue of its designation as a real estate investment trust. An REIT must deliver 90% of its taxable income back to shareholders — meaning a mandate for big dividends.

Annaly makes its cash trading in mortgage paper and can borrow money at ultra-low interest rates before investing in mortgage-backed securities. Of course, the biggest risk of owning NLY shares is the unreliable dividends. In fact, the company’s shares just got slammed because its 65-cent dividend in June dropped to 60 cents in September.

However, NLY has consistently paid huge dividends, and if you annualize that recent payout to $2.40 annually, you still get an impressive 14.7% yield. If you take the last four quarterly payouts, however, you get $2.51 — 60 cents in September + 65 in June + 62 in March + 64 in December. That’s 15.4%. While NLY might cut its dividend again, the track record also shows Annaly is not afraid to up the ante, either. You could find a bargain in NLY stock now before it announces its December dividend.

CenturyLink — 8.2% Dividend Yield

Telecom stocks are frequent favorites of dividend investors. That’s because reliable cash flows from monthly data and voice subscriptions allow companies to offer reliable dividends. CenturyLink (NYSE:CTL) has been paying dividends since 1974, and its current payday is an impressive 72.5 cents per quarter — adding up to an 8.2% yield.

True, landline telephone service seems like a bad investment opportunity given the digital age, but after the recent merger with Qwest, you can have faith that CTL will be around to pay those plump dividends for many more years to come. Shares might not be impressive — a -25% performance year-to-date is quite ugly — but that 8.2% return on your investment via dividends is a mighty nice hedge against further losses. The selloff earlier this year was related to costs incurred digesting the massive Qwest merger, and a better Q3 report could indicate a more stable company these days.

SeaDrill — 8.4% Dividend Yield

SeaDrill (NYSE:SDRL) is an offshore drilling contractor serving the oil and gas industries worldwide. The company owns the manpower and ships to tap wells, then turns those wells over to big energy companies. It’s a lucrative business, and SDRL offers a big chunk of its revenue back to shareholders in the form of dividends.

Like Annaly, however, those dividends can fluctuate quarter to quarter. SeaDrill’s two most recent payouts have been 75 cents apiece — giving SDRL stock an 8.4% yield at current valuations based on a $3 annual dividend. If you take the last four consecutive paydays, you get almost the same number — $3.025 based on 75 cents in September + 75 in June + 87.5 in March + 65 in December. SeaDrill stock essentially is flat year-to-date — however, this big dividend is a mighty nice return on investment. Energy stocks continue to spend big bucks on exploration, and that bodes well for SeaDrill’s bottom line.

For a more in-depth look at SeaDrill, click here.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.


Article printed from InvestorPlace Media, https://investorplace.com/2011/11/3-dividend-powerhouses-high-yields-nly-ctl-sdrl/.

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