High-yield dividend stocks are attractive to investors because the regular payouts provide a good hedge against principle losses via share price declines. And broadly, any company that pays a decent dividend very likely has a strong balance sheet because you can’t support a robust payment to shareholders without the cash flow to back it up.
But another good indicator of stability is insider ownership. When company execs, big Wall Street investment banks and mutual fund managers are flocking to a specific investment, it’s a very good sign that buyers will stick with a stock instead of just swing trading it; high insider ownership is sometimes a sign of low volatility.
So what happens when you wed the two worlds of high-yield dividend stocks and companies that are largely held by insiders? You find some very stable companies with impressive income potential.
Here are five such dividend stocks to keep an eye on:
High-Yield Dividend Stocks: Icahn Enterprises (IEP)
- Dividend Yield: 4.7% (based on last four payouts)
- Market Cap: $11.8 billion
- Industry: Financial services
- Insider Ownership: 90%
It’s probably no surprise that the biggest shareholder in Icahn Enterprises (IEP) is Carl Icahn, with nearly 102 million of the nearly 117 shares of IEP stock that trade publicly. That’s good for 87% of the company alone, without baking in the rest of insider ownership.
IEP stock is up strongly in the last 12 months, thanks in large part to Icahn’s successful and very public support of Herbalife (HLF) and his push to lead a Forest Labs (FRX) buyout. The stock is up 80% in the last 12 months as a result … even if his major stake in Apple (AAPL) didn’t lead to a big buyout proposal as he was pushing for a few months back.
These successful deals have resulted in big dividends lately to shareholders, with a Q1 payout of $1.50 that is 50% higher than the $1 dividend paid at the beginning of 2013.
High-Yield Dividend Stocks: NL Industries (NL)
NL Industries (NL) got its start at National Lead, one of the original 12 stocks in the Dow Jones Industrial Average. Nowadays, the company traffics in a variety of businesses including security products, marine components and paint chemicals.
Billionare Harold Simmons owns about 2.5 million of the roughly 49 million shares of NL that trade publicly, either directly or through his trust. On top of that, another 52% is held by mutual funds and institutions.
NL has had a rough go of things lately, with revenue struggles and an operating loss for fiscal 2013. However, the company has been rock solid in its dividend payments and boasts a nice 4.8% yield at current pricing.
High-Yield Dividend Stocks: Terra Nitrogen (TNH)
- Dividend Yield: 5.8% (based on last four payouts)
- Market Cap: $2.8 billion
- Industry: Chemicals
- Insider Ownership: 75%
Terra Nitrogen (TNH) is a agricultural chemicals stock that traffics mainly in fertilizers. The company has seen very sluggish revenue for the last three years, and the share price of Terra has been very soft as a result; TNH has a 12-month return of -26% and is down almost 50% from its 2012 peak.
However, with a robust 5.8% yield and with a lot of the negativity baked in, Terra could be a stable long-term play for fans of dividend stocks. With 75% insider ownership, there is also a lot of stability coming from folks who are in this for the long haul and not just day-trading Terra.
Also, some 26% of investors are institutions and mutual funds, meaning TNH has a strong base of buyers to keep shares stable at current levels.
High-Yield Dividend Stocks: Thomson Reuters (TRI)
Thomson Reuters (TRI) is a media company that has seen better days. Recently, it has been restructuring, including the spinoff of its $1.25 billion health analytics division in 2012 and more recent layoffs of about 3,000 employees.
Revenue continues to be pressured but TRI stock has fought back from a low of under $30 in 2012 to current pricing around $35 per share; Thomson Reuters hasn’t kept up with the markets broader gains, sure, but it does appear to be stabilizing.
With more than half of shares held by insiders and institutions, it’s also reasonable to expect stability from this pick now that it has reached equilibrium in the wake of recent restructurings … and pays a nice 3.8% dividend yield to boot.
There may not be breakneck growth here, but if you’re looking for stable dividend stocks, then TRI may be a good long-term bet.
High-Yield Dividend Stocks: Williams Partners (WPZ)
- Dividend Yield: 6.8% (based on last four payouts)
- Market Cap: $22.6 billion
- Industry: Oil & Gas
- Insider Ownership: 68%
Williams Partners (WPZ) is a master limited partnership that focuses mainly on natural gas transportation and storage. Like most MLPs, it pays a heft dividend as a result.
It also has major insider ownership, with a massive portion of its 438 million shares held by the private Williams Gas Pipeline LLC parent and also Williams Companies Inc.
It’s also worth noting major stakes held by big wall street investment banks, including 3.6% ownership by Kayne Anderson and a big 1.75% stake held by Alps Advisers, which runs a series of MLP ETFs including the Alerian MLP ETF (AMLP).
This big insider ownership adds stability to an already rock-solid MLP.
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Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at [email protected] or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.