When looking for dividend stocks, it’s common to find yourself in lazy corners of the market, betting on blue chips with steady payouts but little room for upside.
Still, every investor dreams of buying dividend stocks that can offer a little bit of everything — namely, big income and sweet share appreciation. But that combo is difficult to find, especially considering that dividend stocks’ yields naturally dwindle as their prices rise.
But that’s doesn’t mean these companies don’t exist — a handful of dividend stocks have put on a stellar performance so far this year but still offer eye-popping yields.
Thing is, these stocks could ride that hot momentum into the fall … or their gains could be in the rear-view. But if the latter’s the case, that’s where these big dividends come in. With yields north of 5% right now, you can afford for these dividend stocks to tread a little water until the needle heads back north.
With that in mind, let’s take a look at big-time gainers offering big-time dividends:
Summit Midstream Partners, LP
Year-to-Date Gain: 73%
Dividend Yield: 5.1%
You had to know that a limited partnership would make its way into this list.
The one that’s put on the biggest show so far in 2013 is Summit Midstream Partners LP (SMLP), a natural gas MLP that hit the markets in late 2012. Year-to-date, the company has posted a 73% climb — that’s nearly four times the broader market.
One obvious reason to like Summit: The natural gas market has a promising future as an alternative to coal. SMLP recently made two acquisitions in the Bakken and Marcellus shales — both promising regions in the natural gas landscape.
And the kicker is that — as a midstream firm — SMLP doesn’t have to worry about the nitty gritty of extraction, the economics of selling to people, or even natural gas prices. Instead, it’s really just a glorified toll taker; it provides natural gas gathering and compression services, charges some money, then passes along most of that money to unitholders.
While there’s not a long payout history to look at here, natural gas’ promising prospects mean there’s a good chance its distributions — currently at 43.5 cents quarterly — will keep marching upward.
Year-to-Date Gain: 50%
Dividend Yield: 5.2%
The first stock on our list is one of China’s top online game developers, Giant Interactive Group (GA).
Earlier this week, Giant Interactive shares crept higher along with other Chinese stocks thanks to “optimism the biggest emerging economy is stabilizing after a two-quarter slowdown,” according to Reuters.
Of course, while talk of a Chinese slowdown has held back a lot of equities so far this year, Giant has weathered the storm just fine. GA’s year-to-date gains sit at a hefty 50% — more than double the S&P 500 — thanks in part to most-recent quarterly earnings that showed 11% revenue growth year-over-year and net income improvement of nearly 20%.
That’s not to say Giant is guaranteed to keep up its rocketing growth, especially considering the fact that, for now, it has had little competition. The sale of gaming consoles has been banned in the country for over a decade, but chatter has been getting louder that such a ban might be lifted. If companies like Sony (SNE) and Microsoft (MSFT) have a chance to grab part of the Chinese online gaming market — which is estimated to be more than $11.9 billion this year — Giant’s future could be a bit rockier.
Of course, GA’s dividend is there to easy your worries. The company came public in late 2007 and has been paying a dividend (annually) since early 2009. Last year, GA increased its dividend from about 30 cents to 42, helping Giant’s yield keep up with its sprinting shares.
Year-to-Date Gain: 58%
Dividend Yield: 5.4%
The main reason: Investors think a turnover is on the way. The company got a new CEO last November, picked up big-box behemoth Walmart (WMT) as a distribution channel, then lifted its full-year outlook by 10% in July.
InvestorPlace contributor James Brumley, for one, is a strong believer in the turnaround. He wrote earlier this month:
“Given the comparative performance of the two stocks, it would be easy to call WTW an oversold equity ripe for a bounce and deem NTRI an overbought name that’s ready to pull back. But, in the case of Weight Watchers vs. NutriSystem, the results each stock has seen of late are deserved. And more of the same (respectively) could be in store.”
NutriSystem’s appeal is only sweetened when you consider dividends. There’s little growth in that aspect — it has been paying a 17.5-cent quarterly dividend since 2008 — but that’s still good for a yield around 5.4%. WTW’s payout of 1.9% pales in comparison.
RR Donnelley & Sons
Year-to-Date Gain: 113%
Dividend Yield: 5.6%
Next up, we have our biggest gainer on the list: RR Donnelley & Sons (RRD). I wrote about RRD back in June, noting that the stock had roared back from its five minutes of infamy. At that point, it had bagged a 55% year-to-date gain. Since I wrote that, RRD has tacked on another 36%, representing a doubler so far in 2013.
Of course, there was really nowhere for RRD to go but up, considering the stock shed more than half of its value from the beginning of 2011 to the end of 2012. One reason: Last year, a Google earnings report was accidentally released early last October — a gaffe that helped send Google nearly 10% in the red that day. Google pointed a finger at its financial printer, meaning poor little RR Donnelley also slid.
And it kept on sliding.
But much like the selloff was overdone, there’s a chance the recovery could be, too. While the forward P/E of 11 hardly looks frothy at face value, RRD’s earnings are expected to slip 25% this quarter, and grow by a mere 2% per year for the next half-decade.
Thankfully, RRD is rewarding shareholders with a dividend, though. The company’s payout has only increased by a penny during the past decade, but it still yields 5.6%.
Year-to-Date Gain: 74%
Dividend Yield: 8%
Our next company is the global brokerage name BGC Partners (BGCP), which boasts the biggest dividend on this list. The company currently rewards shareholders with a 12-cent per share payout, which gives the cheap stock a yield of 8%.
And that’s despite the stock’s 75% leap so far in 2013.
One reason for the outperformance: BGCP rose 48% on April 2 when it announced the sale of its benchmark, on-the-run, U.S. Treasury fully electronic trading platform. As the company explained, the assets it sold generated just under $100 million in revenues in 2012, and constituted less than 6% of its overall revenues for last year. But they sold for $750 million in cash for it, on top of stock.
The “new” BGC Partners seems to have good prospects, too. Even after the run-up, BGCP is trading for a mere 9.6 times forward earnings, while its five-year annualized growth is slated for 12.5%.
One thing to look out for, though: The current 12-cent dividend is actually a decrease from last year’s 17-cent-per-share payout. But for now, it’s still one heckuva yield.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.