Maybe a utility or two, like Southern Co (NYSE:SO). Sure, they’re big, they’re safe … but even when they’re down, they’re still wildly crowded trades.
So let’s explore five dividend stocks with bulletproof yields up to 7.1%. Their payouts are high because their stock prices are low – thanks to these firms’ undercover status.
I love “hidden” dividends so much that I’ve dedicated one of my premium services — Hidden Yields — to them. That’s because there’s far more value to be wrung out of lesser-known gems thanks to their lack of analyst cheerlea … ahem, coverage, and relatively small media interest.
However, it’s important to note that many so-called “hidden” dividend stocks can be on the smaller end of the market capitalization spectrum. So even if they’re reliable, stable businesses that just happen to be more niche than, say, providing telecommunications services across the entire U.S., you and I both know there’s a little more risk. Which is why, across all five of today’s picks, I’ve drawn a hard line on their payout ratios.
Remember, a payout ratio is simply the percentage of something – whether it’s earnings, cash flow or even AFFO – that a company pays out as dividends. It speaks to the company’s ability to afford and continue paying a dividend.
Many high-yield dividend stocks stretch too far to make their generous payouts, dishing out 100% or more of earnings as dividends, to the point where they draw from their cash piles or even raise debt to continue making payments. Not good.
Here are five hidden dividend gems that pay dividends up to 7.1% and boast safe, reliable payout ratios of 75% or less!
KAR Auction Services (KAR)
Dividend Yield: 3.1%
Payout Ratio (Vs. Forward Earnings Estimates): 51%
When you hear the name KAR Auction Services (NYSE:KAR), you might imagine a fast-talking motormouth with a gavel, but this operation is far, far more sophisticated. KAR – which employs 17,400 employees across North America and the U.K. – is a business Cerebus that spans a wholesale, used-vehicle auction operation (Adesa), salvage auto auctions (Insurance Auto Auctions) and a financing and business services unit (Automotive Finance Corporation).
While KAR’s yield just north of 3% appears modest, it’s not for lack of dividend hikes – the company started issuing dividends just five years ago, and has already upped the ante on the payout by 70% to a current 32-cent quarterly distribution. But capital gains just keep getting in the way – 150% returns in just five years (more than double the S&P 500) have held the headline yield back.
KAR’s top and bottom lines have grown like weeds, and analysts expect more of the same going forward. That should help propel shares, and a payout ratio of just about half KAR’s earnings means the dividend isn’t just safe – it has plenty of upside.
KAR Auction Is Going, Going … Still Going!
Ennis, Inc. (EBF)
Dividend Yield: 4.4%
Payout Ratio: 70%
There’s a reason Ennis, Inc. (NYSE:EBF) doesn’t make much in the way of headlines – it’s boring. Ennis is a print manufacturing specialist that deals in things such as business forms, checks, envelopes and custom advertising items such as ribbons and sticky notes. Their 55 facilities span 22 states, primarily located (of course) in big cities, and it boasts more than 40,000 worldwide distributors.
While the world becomes increasingly digitalized, Ennis continues to hang around, not just because there are still many needs for paper services and branded products, but also because it has expanded to digital business solutions such as e-commerce app EOS Touchpoint.
Ennis pays out a reliable 17.5-cent dividend every quarter that translates into a yield of 4.4%, and it does so at a sustainable 70% of next year’s projected earnings.
Ennis will never be the topic of a water cooler discussion, which is ideal for contrarians like us.
Ennis (EBF): Reliable Dividends (And the Occasional Special)
Extended Stay America Inc (STAY)
Dividend Yield: 4.8%
Payout Ratio: 71%
This company is probably the most recognizable on its face, though the stock is an also-ran in financial media and conversational circles.
Extended Stay America Inc (NYSE:STAY) owns and operates 629 hotels (primarily under the Extended Stay brand) in the U.S. and Canada, making it the largest owner/operator of company-branded hotels in North America. Their properties tend to feature amenities such as fully equipped kitchens and on-site guest laundry to accommodate guests for … well, extended stays. (Prices typically are listed at weekly rates.)
Extended Stay actually filed for Chapter 11 bankruptcy protection in 2009, with the company suing Blackstone Group (NYSE:BX) over claims that it skimmed $2.1 billion off the chain when it sold Extended Stay in a leveraged buyout.
However, STAY has since reorganized, gone public again and is now a healthy and growing company. Extended Stay’s five-year plan to expand via franchising is an exciting development, pushing an “asset-lighter” model in which it can generate more cash flows but make less in the way of expenditures. That in turn will go toward paying down debt and returning more money to shareholders.
Extended Stay is an odd bird in that it’s not a real estate investment trust, but has a REIT subsidiary (ESH Hospitality), so its dividends are a mix of ordinary income and capital gains. But this also evokes the possibility of an eventual REIT spinoff to unlock value.
Extended Stay America (STAY) Is Starting to Build Momentum
Triton International Limited (TRTN)
Dividend Yield: 6.6%
Payout Ratio: 72%
Triton International Limited (NYSE:TRTN) is the merged entity of Triton Container and TAL International that created the world’s largest intermodal container leasing company, at a combined container fleet of about 4.8 million 20-foot equivalent units (TEUs). The merger, announced in late 2015, is expected to realize $40 million annually in SG&A synergies.
The pairing is also expected to produce significant growth over the next few years, with earnings more than doubling and revenues shooting 36% higher in the current fiscal year, before “only” 14% bottom-line growth and 25% top-line growth.
Especially impressive is that the new entity started off with a 45-cent quarterly dividend that yields a robust 6.6% at current prices, and it’s not stretching to make that payout, at just more than 70% of earnings
Newly Merged Triton International (TRTN) Is Off to a Roaring Start
DineEquity Inc (DIN)
Dividend Yield: 7.1%
Payout Ratio: 71%
DineEquity Inc (NYSE:DIN) follows a longstanding Wall Street tradition of putting well-known restaurants under the banner of an unrecognizable corporate name. In this case, you’ve probably never heard of DineEquity, but you’ve almost certainly heard of its subsidiaries: Applebee’s and the International House of Pancakes.
Between your friendly neighborhood bar and the IHOP, DineEquity spans more than 3,700 restaurants in all 50 states, the District of Columbia, three U.S. territories and 17 other countries.
Yes, the restaurant industry as a whole has been struggling of late, and DIN shares have been particularly battered thanks to some contraction of late. But the dividend is safe, and the selling – which has inflated the dividend to more than 7% — is overdone, setting up an excellent value. DineEquity trades at just 10 times earnings, and will return to (robust) profit growth next year.
Meanwhile, the dividend still is paid out at just around 70% of projected earnings.
The High-Yield Retirement Portfolio You NEVER Have to Touch!
I know blue-chip stocks sound safe, and sure, you’ll never lose your money in them. But when you depend on well-known blue chips to fund your retirement, you’re playing with fire.
Do the math. Most “recommended” blue chips yield 3%, maybe 4% if you’re lucky. That means even if you’ve built a nest egg of half a million dollars, you’re only generating $20,000 in annual income from dividends – at the high end!
Does that sound like the kind of retirement you’ve been working your tail off to reach?
Of course not! You need double that kind of yield, which is exactly what I’ve targeted with my 8% “No Withdrawal” retirement portfolio.
This all-star portfolio features the very best of several high-income assets, from preferred stocks to REITs to closed-end funds and more, that yield 6% on the low end, and double digits on the high end, for a total portfolio yield of about 8%.
And that’s not even the best part.
In addition to the high, stable yields, these picks are also positioned to grow their yields while boasting the potential for significant capital gains. That means you can not only live off the income these stocks produce, but you can grow your nest egg while you collect dividend checks!
These “ultimate dividend stocks” weren’t easy to find. It took months of research, and a lot of dead ends while weeding out numerous yield traps that looked great on the surface, I’ve compiled a “No Withdrawal” portfolio of stocks that offer …
- No-doubt 6%, 7% even 8% yields – and in a couple of cases, double-digit dividends!
- The potential for 7% to 15% in annual capital gains
- Robust dividend growth that will keep up with (and beat) inflation
This portfolio will let you live off dividend income alone without ever touching your nest egg. That means never having to worry about how you’ll pay your monthly bills, and never having to worry about wrecking your retirement account if disaster strikes.
You deserve more than a retirement spent scraping by on meager blue-chip returns and your Social Security checks. You deserve big, regular dividend checks that will let you see the world and live in comfort for the rest of your post-career life.
Let me show you the path to a no-worry retirement. Click here and I’ll provide you with THREE special reports that show you the path to building a “No Withdrawal” portfolio. You’ll get the names, tickers, buy prices and full analysis of their wealth-building potential – and it’s absolutely FREE!