High yield dividend stock investing seems to be all the rage right now, as investors look to insulate themselves from share price depreciation via a guaranteed quarterly payday. But the result has been a lot of misinformation about dividends, yield and income investing – and that has confused and frustrated many long term investors.
For instance, if a stock paid a $1 dividend for three straight quarters but cut it to a penny last week, does it really have an annual payout of $3.01? Or if a company pays a massive special dividend, can you really use those numbers to inflate the stock’s yield?
If your stocks are only paying back pennies a share despite claims of being a “high yield dividend stock,” are you really playing it safe? Hopefully these picks will help you find some quality dividend investments.
Here are 7 REAL high yield dividend stocks to consider.
Dividend Stock – Armour Residential (ARR)
Annualized Dividend: $1.60
Current Dividend Yield: 24.2%
Real estate investment trusts or REITs are great dividend investments because they have to give back 90% of their income according to federal regulations. Often that means big profits come back to stock owners via dividends. That’s the case with Armour Residential REIT, Inc. (AMEX: ARR). Armour doesn’t own properties, but rather invests primarily in hybrid adjustable rate and fixed rate residential mortgage backed securities. This is a risky business, to be sure, with the volatility in the housing market and foreclosure woes. ARR stock has slumped a whopping -18% year-to-date on this negativity. However, that didn’t stop the company from a July 29 payment of 40 cents a share – even as the stock was trading for about $6.50 a share! Annualized, this $1.60 payout gives the stock a whopping 24% dividend yield based on current valuations. But it’s worth noting that ARR has only paid a dividend for two quarters so this yield may not be reliable. Yes, ARR is a bit of an oddball from the rest with a shorter dividend track record, slumping share prices and a smaller market cap. But a 24% yield may make the risk seem worthwhile to some aggressive investors.
Dividend Stock – Capital Product Partners (CPLP)
Annualized Dividend: $0.90
Current Dividend Yield: 10.1%
Another great source of high yield dividend stocks is the tanker and drybulk shipping industries. Capital Product Partners L.P. (NASDAQ: CPLP) is a great example of this. Capital Product operates out of Greece owns and operates medium-range product tankers worldwide, with a fleet of 18 vessels. CPLP is set to pay a dividend of 22.5 cents a share on August 13 – down from a payout of 41 cents a share in February, but still a significant portion of it’s nearly $9 share price. Annualizing out the dividend to 90 cents a year gives you a +10% yield. Not bad — and if CPLP resumes its previous payout rate of 41 cents a share per quarter, that yield would bump up to a hefty 18%. Dividends have been paid since 2007. CPLP shares have been lackluster year-to-date, posting a small loss of -3%. However, the insulation of the dividend means longer term investors may actually be in the black.
Dividend Stock – Resource Capital Corp. (RSO)
Annualized Dividend: $1.00
Current Dividend Yield: 16.6%
Another REIT worth a look is Resource Capital Corp. (NYSE: RSO), a specialty finance company that focuses primarily on commercial real estate and commercial finance. This high yield dividend stock invests in a combination of commercial real estate debt and other real estate-related assets. It just paid a dividend of 25 cents a share on July 27, giving it an annual payout of $1 a share. Pretty impressive, considering you can pick up RSO stock for just about $6 a share right now! Another nice sign for income investors is that dividends have been paid since 2006. To top it off, RSO has been riding hopes of a recovery in commercial real estate with improving earnings in the last two quarters and a very healthy +25% gain in share prices since January 1. A big dividend is great, but coupled with big stock increases those paydays are even better.
Dividend Stock – Whiting USA Trust (WHX)
Annualized Dividend: $2.80
Current Dividend Yield: 13.4%
Another sector to look for high yield dividend stocks is in energy trusts and partnerships. Whiting USA Trust (NYSE: WHX), formed by mid-cap energy stock Whiting Petroleum Corp (NYSE:
WLL), is a great example of this. These “depletion” trusts are only good so long as the oil is flowing, but as of the first of this year only about 3 million barrels of oil equivalent had been sold or produced from of the trust’s total 8.20 million barrel supply. That means the profits – and dividends – should keep flowing. WHX just paid a dividend of 70.1 cents a share back in May and is due for another payday soon. With shares at just under $21, that gives this dividend stock a yield upwards of 13%. What’s more, WLL just upped its dividend each time in the last four quarterly payouts – from about 60 cents last August to 61 cents in November, then to 66 cents in February and then 70 cents this last May. That bodes very well for the next payday. And the icing on the cake? WHX stock is up +20% so far in 2010. That’s a one-two profit punch investors only dream of.
Dividend Stock – MV Oil Trust (MVO)
Annualized Dividend: $3.86
Current Dividend Yield: 13.5%
While we’re talking trusts, another +13% yield depletion trust would be MV Oil Trust (NYSE: MVO). MV Oil Trust owns net profits interest in oil and natural gas properties of MV Partners, LLC, across about 1,000 oil and gas wells in Kansas and Colorado. The company just paid a nice 96.5 cent dividend to shareholders on July 23, and has a record of payouts since 2007. Like the aforementioned Whiting Trust, MVO has also steadily increased its dividends recently – from 57.5 cents in January to 60.5 cents in April to the 96.5 payout most recently. That bodes well for future dividend growth. MVO has also tallied impressive gains year-to-date, including a +40% leap in share prices since January 1.
Dividend Stock – Kohlberg Capital Corp (KCAP)
Annualized Dividend: $0.68
Current Dividend Yield: 13.1%
Kohlberg Capital (NASDAQ: KCAP) is a private equity and venture capital firm specializing in buyouts – and a high-yield dividend stock that I’ve highlighted before in articles like these. The company is up about 12.5% year to date, and just paid a 17 cent dividend per share on July 29. That’s down from 24 cents a share as recently as October 2009, but still equals a nice 13% yield when annualized out. KCAP stock has seen some slumping earnings in recent quarters, though estimates for the upcoming August 9 report are pointing to improvement quarter over quarter. But we’ll see. Whatever the case, the nice dividend payout provides some insulation from any volatility in share prices.
Dividend Stock – Mesabi Trust (MSB)
Annualized Dividend: $3.20
Current Dividend Yield: 13.5%
Rounding out seven big dividend stocks is the Mesabi Trust (NYSE: MSB), which holds interests in various iron ore properties in the Mesabi Iron Range across Minnesota. The company is scheduled to pay a heft 80 cent quarterly dividend on August 20 – up significantly from 12.5 cents paid out per share in May. Annualized, that dividend gives Mesabi Trust shares a nice 13.5% yield. But investors who own the company have far more to cheer about than just this payday. MSB stock is up a stunning +84% year-to-date!
As of this writing, Jeff Reeves did not own a position in any of the stocks named here.
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