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.