The average dividend yield of the S&P 500 is a paltry 2%.
At that level, it’s almost better to look for a company that can grow 2% faster than its peers and be done with it.
But I’ve found seven A-rated income stocks that are kicking off yields higher than the S&P 500 — and in one case, five times better than the S&P average. Plus, these income stocks have great growth prospects — they’re more than just income stocks and they make excellent total return plays.
The run the gamut from major financial players to real estate investment trusts (REITs) in key markets to telecom and retail to shipping. But the one thing they all promise is above average total returns.
Each represents a stock that has strong momentum in its respective sector, which bodes well for growth, and has a very respectable dividend given today’s low inflation rate. The goal is to find stocks where their dividend yield outpaces the inflation rate so you are compounding the dividends over time, adding to your wealth.
In many of these stocks you can also reinvest the dividends (depending upon your broker) so you can slowly, continually buy the stocks. Then, whatever growth you get from the stocks is an added kicker that goes straight to your bottom line.
Here are the seven income stocks that should continue to grow:
7 Worthy Income Stocks With a Growth Kicker: Blackstone Group (BX)
Blackstone Group (BX) is one of the world’s top financial services firms. It specializes in what are deemed “alternative investments. And the best way to define what that means is to explain what it doesn’t mean: stocks, bonds or cash.
That leaves you with hedge fund strategies, derivatives, real estate, commodities and the like. For example, when the U.S. real estate market tanked after 2008, BX was one of leading buyers of single family homes and apartments around the country, taking distressed mortgages off the banks’ books at discounts and holding them.
Last year, BX helped launch several IPOs, including a major hotel chain, a solar company and a national craft store chain.
It has another division that sinking $5 billion into solar projects in sub-Saharan Africa over the next five years.
The stock is up almost 300% in the past years and 20% year to date. Add to that a whopping 8.7% dividend yield and it’s almost too tempting to pass up.
7 Worthy Income Stocks With a Growth Kicker: Aircastle (AYR)
Aircastle (AYR) is in one of the hottest global growth sectors going right now — selling and leasing commercial aircraft.
Asia is a booming market for air travel. And a few carriers in the Middle East are looking to expand their markets substantially to the U.S. and Asia. This is all very good news for AYR.
The demand is not just for large jets either. Many airlines are growing their domestic fleets and upgrading to new airplanes. This is a key part of AYR’s business.
At the Paris Air Show, AYR just bought 25 Embraer E-Jet E2s with the purchase rights for another 25. These are 70-130 seat planes that are generally used for short to mid-distance domestic flights, where the global demand is greatest.
Also bear in mind that many carriers are also upgrading fleets now while gas prices are low and margins are higher than they have been for a while.
The stock is up 27% in the past year and throws off a nice 3.9% dividend.
7 Worthy Income Stocks With a Growth Kicker: Digital Realty Trust (DLR)
Digital Realty Trust (DLR) is a REIT that focuses on tech-focused real estate.
That means if you’re a company that needs a secure site for your server farm with 99.99999% power reliability, climate control and top-notch security, you lease from DLR.
It has clients in the financial, healthcare, IT, energy and retail sectors around the world. Ten of the world’s largest financial institutions and three of the largest stock and mercantile exchanges trust DLR with their data.
Now that the Great Recession is in its last stages, DLR will have more and more room to run. As companies expand they will need more digital space, and as security becomes an increasingly crucial aspect of all business (records, transactions, accounts, etc), DLR’s services are ready to oblige.
As a REIT, investors essentially share the profits of the business, so global growth is going to be very good to this REIT. Right now, DLR is yielding almost 5% and that is certainly a nice payout for your patience while we wait for more robust markets.
7 Worthy Income Stocks With a Growth Kicker: Home Properties (HME)
The young are strapped with massive student loan debts and can’t qualify, or they’re not even interested in strapping on a mortgage after seeing what happened to their parents home ownership travails.
Older people are also opting out of the ownership market because of how difficult it has been to get banks to loan out money to anyone with less than perfect credit. Plus, the cost/benefit analysis of home ownership isn’t what it used to be.
All this is reflected in the rising cost residential rentals. Demand is up.
And this is precisely the market Home Properties (HME) is in. HME owns and operates 121 communities with 42,107 apartment units, mostly in key mid-Atlantic markets — Washington, D.C., Baltimore, Philadelphia, Long Island and northern New Jersey.
This REIT is well-positioned to capture many of the professionals that are moving to major metropolitan areas as the economy improves. Its slow steady growth — up 11.7% year to date — and its 4.1% dividend make this a great long-term investment.
7 Worthy Income Stocks With a Growth Kicker: China Mobile (CHL)
China Mobile (CHL) is an interesting play right now for two primary reasons.
With more than 800 million subcribers, CHL is a powerful mobile telecom companies in one of the fastest growing regions in the world. It’s also incredibly stable, holding bond ratings of Aa3 and AA- from Moody’s and Standard & Poor’s, respectively. It’s no disruptive start-up.
In fact, it’s consistently selected as one of the Financial Times Global 500; a list of the top companies in the world.
The second reason is contrarian. Right now the Chinese stock market is getting slaughtered — more Shanghai than Hong Kong, where CHL is listed, but it doesn’t change the fact that all Chinese stocks are getting painted with the same brush on the way down.
CHL is a bargain during this correction. And as the stock falls, the dividend rises — CHL is yielding 2.5%. So you have a strong company at a bargain price that’s putting forth a yield significantly better than the average S&P 500 stock, and with far more upside.
That’s a pretty good deal.
7 Worthy Income Stocks With a Growth Kicker: Target (TGT)
Target (TGT) has a has had quite a year.
Many didn’t expect that Brian Cornell, who took over as CEO less than a year ago, could turn around the nation’s No. 3 retailer this quickly.
But he has. Cornell has moved aggressively into the e-commerce space where Amazon.com (AMZN) and Wal-Mart (WMT) were eating its lunch. And that meant getting customers to actually trust the company with their financial details again after a massive security breach in 2013.
He moved more aggressively into the healthcare space that had been the dominion of WMT. He also streamlined its fashion lines so trends hit stores while still trendy. He cut his losses in Canada.
So what does he have to show? Well, last quarter he raised guidance for the rest of the year.
TGT is back in the game. It’s 2.7% dividend isn’t fantastic but you have to remember the total return aspect here. That’s a better dividend than any similar retailer pays and it’s likely to get stronger over the years.
What’s more, TGT has yet to fully achieve its revamping and there is plenty of growth left in the stock and the company.
7 Worthy Income Stocks With a Growth Kicker: Nordic American Tanker (NAT)
Then Nordic American Tanker (NAT) is the stock for you.
This oil tanker company is unique in an industry that goes through its fair share of boom and bust cycles.
NAT has paid a dividend for 71 consecutive quarters — nearly 18 years. Most tanker firms haven’t been around that long, much less continued to issue a dividend.
It has been buying and building double-hull Suezmax tankers for a number of years now, starting eight years ago with three and increasing this year to 24. Many of the ships have been purchased from shipping companies that have gone out of business or are looking to unload non-productive assets.
In this market, if you can find the cash to buy in at the bottom and have the management to know how to keep the company going during hard times, it will pay off in spades when the good times roll back in.
NAT is in a good position now, but you have to keep an eye on this one; its 10.3% yield will be as volatile as oil prices.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.