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4 High-Yield Small Caps Poised to Rally

Good things, like big cash payouts, come in small packages

By James Brumley, InvestorPlace Feature Writer

http://invstplc.com/1foiJKX

Looking for some big dividends but don’t want to step into an already-crowded trade? Well, consider checking out the world of small caps for some investment ideas.

small-caps-dividend-yieldThe following four small-cap stocks are … well, small, and in a couple of cases, they’re downright obscure.

But they’re also potent. Not only do they contain the possibility for significant capital appreciation, but they also offer plenty as far as dividends are concerned. In fact, of the following four small caps, the weakest dividend yield is still a very healthy 8%.

Ship Finance International Limited (SFL)

small-caps-dividend-yield-sfl-stockSFL Dividend Yield: 9.1%

Don’t let the name fool you; Ship Finance International Limited (SFL) isn’t much of a middleman or deal-facilitator for maritime shipping companies looking to add boats to their fleet. Ship Finance primarily manages its own fleet, ranging from drybulk vessels to drilling rigs to crude oil tankers … 73 in all, as of the last count.

It hasn’t been an easy (or profitable) business to be in since late 2008, when charter rates fell from record highs in the first half of the year to multiyear lows in the latter half of the same year. But, beginning in mid-2013, shipping prices began to move back to, well, at least promising levels. They’re currently up 60% over the past 12 months, and still rising.

Ship Finance International Limited is one of the better-positioned names to take advantage of that modest relief.

In the meantime, the 9%-plus dividend yield — at 40 cents per share, which is a dime better than SFL stock paid out in 2009 — is nothing to sneeze at.

Och-Ziff Capital Management Group LLC (OZM)

OchZiff185OZM Dividend Yield: 13.6%

Asset management — hedge fund management, to be specific — isn’t exactly what you would call a high-growth industry. It’s stunningly reliable, however, in that revenue is collected each and every quarter based on the amount of money under management. That’s how Och-Ziff Capital Management Group LLC (OZM) could afford its double-digit dividend yield ($1.42 per share, all told) in 2013.

No, the reason an investor might want to nibble on Och-Ziff Capital Management Group shares here and now is that the price of OZM has been pulled down of late by a Department of Justice probe; the DOJ has questions about why Och-Ziff chose to manage money for the Libyan Investment Authority.

Bribery has been suspected, but given the DOJ and SEC’s completion rate, it’s unlikely anything substantial will come of the probe. Still, the price of OZM stick suffered all the same, falling from January’s peak of $16 to the current price of $13.37.

The seller will let up as soon as the news is a fading memory, which should be soon.

Apollo Investment Corp. (AINV)

Apollo185AINV Dividend Yield: 9.7%

It’s classified by most as a business development company, but Apollo Investment Corp. (AINV) is quite different than most investment vehicles of that ilk. Rather than simply supplying cash in exchange for very favorable (to the lender) debt, Apollo Investment takes on a decent stake in equity of its portfolio’s companies.

That mix hasn’t prevented Apollo Investment shares from doling out some wild swings this year, but the current yield of 9.6% has been worth the turbulence.

The real buying cue for Apollo Investment Corp. right now, however, isn’t the strong yield. It’s the fact that a handful of insiders collectively bought 33,500 shares of AINV stock — a little more than a quarter of a million dollars’ worth — in February. It’s the first major insider stock purchase since the middle of last year.

If they want in, it might be a lead worth following.

CTC Media (CTCM)

ctcmediaCTCM Dividend Yield: 8.2%

When tensions between Russia and Ukraine first began to develop in early March, most Russian stocks tanked. Russian broadcast television company CTC Media (CTCM) was no exception, with its stock losing 19% of its value in March alone, on top of the 24% dip that had whacked CTCM stock from the beginning of the year through the end of March.

Big mistake.

As alarming as the threat of military action can be, the reality is, just like Americans, most Russians are going to continue watching the tube no matter what kind of geopolitical turmoil has been stirred up.

Better still, CTC Media has been more than generous with its already-impressive free cash flow. Its free cash flow is reliably at or better than 20% of revenue, with half of that being religiously paid back to CTCM stock owners. That translates into a healthy dividend yield of more than 8.0% at the stock’s current price.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/03/high-dividend-yield-small-caps/.

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