by James Brumley | October 23, 2013 10:49 am
Names like Tesla (TSLA), Netflix (NFLX) and Amazon (AMZN) might get a lot of attention on Wall Street, but not all stocks can be head-turners.
In fact, sometimes the best stocks to buy are actually obscure, irrelevant and even downright boring. Boring can often be just what a portfolio needs … if the dividends are big enough and reliable enough.
Here are five stocks boasting some of the market’s best dividends — all with with yields much stronger than the (mostly) risk-free 10-year Treasury yield of 2.5%.
What these dividend stocks lack in pizzazz they more than make up for with punch for income seekers.
Take a look:
Dividend Yield: 6.4%
Based on the tepid dividends being paid by the likes of Bank of America (BAC) or Citigroup (C), it would be easy to assume none of the major banking stocks are doling out much in the way of quarterly payments.
That would be an errant assumption, however.
New York Community Bancorp (NYCB) currently boasts a yield of 6.3% — and it’s not going anywhere either. The company has paid out 25 cents per share dividends every quarter since 2004, even when it wasn’t easy to do so.
Heck, even when times were tough and earnings were contracting in 2008, New York Community Bancorp could still afford to share the wealth. That’s a sign of prudent cash flow management.
Dividend Yield: 7.2%
As the name implies, Suburban Propane Partners, L.P. (SPH) sells propane via a home-delivery service. It also supplies heating oil, kerosene and natural gas to a variety of individual, industrial and utility customers.
Yes, it’s “old school” to say the least.
It’s also a fairly-reliable model, however, allowing Suburban Propane Partners to pass along dividends worth 7.2% of the stock’s current price.
The yield could about to ramp up, too. Last year, Suburban Propane Partners acquired a company called Inergy, which has already shown an increase in EBITDA. More synergies are likely to be on the way as the integration continues to be hammered out through the end of 2013 and into 2014.
Dividend Yield: 7.4%
Money management firm AllianceBernstein Holding (AB) currently yields 7.4%, but those dividends could — and likely will — grow in the foreseeable future.
The nature of the money-management business can ebb and flow considerably, sometimes with the economic cycle, and sometimes apart from it.
One thing is clear, though … AllianceBernstein is capable of putting up big revenue and earnings numbers. When it does, it ups the dividend to reflect those larger profits and wider margins.
And with a 63% increase in last quarter’s earnings on top of a $60 million acquisition of another investment firm a couple of months ago, there’s room for dividend growth.
Dividend Yield: 9.5%
While many doubted the longevity of the rally when it first started, the Baltic Dry Index has held onto the bulk of its doubling in value over the past three months. We’ve also seen ship-scrappage rates fall, prices of used dry-bulk vessels rise and building-capacity tumble, all within the last few weeks.
Put all those clues together, and it looks like the maritime shipping industry is finally poised for a recovery now that supply and demand are lining up.
That’s good news for Ship Finance International Limited (SFL), which own a fleet of 61 vessels and oil rigs. As the Baltic Dry Index increases in value, the price at which the company can lease/charter those boats also expands, widening margins.
The current dividend yield of 9.5% is solid as is, but as the older — and lower-revenue — charter contracts expire and are replaced by stronger deals, look for most of that revenue improvement to land on the company’s bottom line … and eventually in shareholders’ pockets in form of bigger dividends.
Dividend Yield: 10.6%
Part REIT, part mutual fund, part business development company, part investment manager, Oaktree Capital Group, LLC (OAK) is nothing like any of the other strong-dividend names under the microscope. Then again, with a yield of 10.6%, income investors probably aren’t going to care about the structure of the vehicle. What matters is that the formula works.
Better still, stronger dividends may be on the way.
It’s a tad difficult to explain, but Oaktree Capital Group manages closed-end funds that reap performance bonuses for the company. Those funds are collectively up about 20% over the past year or so, but until those funds’ assets are liquidated, much of that strong performance and incentive potential won’t be collected and passed along to shareholders.
It’s in the queue, however, and after nearly doubling the second quarter’s revenue as well as income, the company has proven it knows how to pick opportunities.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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