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3 Dividend Stocks Paying 6% or More

Don't stick to the Blue Chips -- check out these high-yield alternatives

By Lawrence Meyers, InvestorPlace Contributor

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When it comes to dividend stocks, most “conservative” investors go for blue chip stocks paying under 4% or so.

3 Dividend Stocks Paying 6% or More
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I think this is a terrible idea in general, because most dividend blue chip stocks are, at this point, wildly overvalued. You risk big declines against which a measly 4% yield will give you little comfort.

There are plenty of great dividend stocks out there that pay more than a 6% dividend yield, are far less likely to experience a major decline and have much greater capital appreciation potential.

The problem is that the financial media has convinced investors that if a dividend is too high, there must be something wrong with the underlying stock. Since dividend yield increases as price declines, the fallacious logic is that the stock has declined for a reason.

That’s not always true. The whole point of value investing is finding stock that are undervalued because the market just doesn’t get them.

Dividend Stocks With Growth Potential: Ashford Hospitality Trust (AHT)

Dividend Stocks with Growth Potential: Ashford Hospitality Trust (AHT)Ashford Hospitality Trust (AHT) is one of these dividend stocks. Despite the fact that it outperforms its peers on virtually every metric, has more seasoned management than most hotel REITs and has executed brilliantly in both boom times and during the financial crisis, the market does not get Ashford.

Ashford has a dividend yield of 7.4%, and it is eminently sustainable. Cash flow at the REIT is exceptional, liquidity and debt are carefully managed, and the REIT is repositioning itself to focus on more upscale hotels during these boom times.

Amazingly, you can now get Ashford stock cheap, thanks to the ten-plus years of dividend payments and overall market myopia. At $6.72 per share, it is one of the premier dividend stocks that you must have in your portfolio. I see no reason it cannot exceed its previous high of $10.94 and go way beyond.

Dividend Stocks With Growth Potential: R.R. Donnelley & Sons (RRD)

Dividend Stocks with Growth Potential: R.R. Donnelly & Sons (RRD)R.R. Donnelley & Sons (RRD) has proven remarkably nimble and resilient in the age of digital. Once thought of solely as the publisher of the obsolete yellow pages directory, the company has impressively expanded its public presence. The company is really a broader communications play now and one of several great dividend stocks.

It serves multiple forms of media and multiple channels of delivery. A lot of what it does offers customers turnkey solutions for content management, from creation and production to management and distribution.

The goal, of course, is to monetize it all. We’re talking about little things like insurance cards and policy kits that they print. They still work with magazines. They also handle global supply chain management.

Its EPS isn’t growing much, but it has reliable cash flow. As a result, its 6.7% dividend yield is sustainable.

Dividend Stocks With Growth Potential: Telefonica SA (TEF)

Telefonica (NYSE: TEF)When it comes to global telecom, there are few better names than Telefonica SA (TEF). It began as a telecommunications operation in Spain, but has now blasted its way to full operations in more than 18 countries in western Europe and the Americas. In fact, it provides American businesses with telecom services in Latin America and Europe.

It’s difficult to argue with a global powerhouse, but I will say that free cash flow has been declining in recent years. I don’t think there’s much concern over the dividend yield, which is presently at 7.4%.

In addition, with the stock just above $12, there’s also very little downside. As dividend stocks go for international holdings, there aren’t too many options I would consider.

Certainly, you might argue that AT&T (T) is the safer play. It may be, and with a 5.5% yield and the DIRECTV merger ready to goose revenues, it’s not an unreasonable backup choice.

As of this writing, Lawrence Meyers has no position in any security mentioned.

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