Ever since the Federal Reserve took bond yields to near zero, income and retirement investors have been in a pickle.
Should they earn next to nothing with the lower-risk bond investments, or go further out on the risk curve to earn the income they want and need for their portfolios? Do they want bonds or high-yield stocks?
Most income and retirement investors are taking on more risk to earn those yields. Of course, that means that having taken that risk, when the market finally corrects, they may find themselves unhappy at taking that risk.
That’s why my stock advisory newsletter, The Liberty Portfolio, is geared towards these investors. It aims to deliver returns that beat the market with less risk.
However, for those seeking some high-yield stocks, I have good news. I have three high-yield stocks that you may not have heard of before:
High-Yield Stocks to Buy: Collectors Universe, Inc. (CLCT)
Dividend Yield: 4.75%
Collectors Universe, Inc. (NASDAQ:CLCT) provides authentication and grading services to dealers and collectors of coins, trading cards, event tickets, autographs and historical and sports memorabilia.
CLCT operates a certified coin exchange, a website with collectibles for sale, publishes magazines that provide market prices and authoritative price guides. I used to get this magazine as a kid. What makes CLCT unique is that it is the entity that finally decided it was time to formalize and standardize grading systems for various types of collectibles.
CLCT grows very modestly, but generates most of what it needs to pay its 4.75% yield from free cash flow. Since it has very little overhead, it just plows its profits into the dividend. While I was a little concerned about the $1.40 dividend going forward, CLCT just got a loan that gives it a backstop on top of its $10 million in cash.
High-Yield Stocks to Buy: Icahn Enterprises LP (IEP)
Dividend Yield: 11.7%
Icahn Enterprises LP (NASDAQ:IEP) is the publicly traded vehicle for Carl Icahn’s holdings. Icahn is the most successful investor in history, even more so than Warren Buffett. Much of his success arises from buying distressed assets, taking over the company and then improving operations to the point where he can sell for multiples of what he paid.
Icahn has substantial holdings in copper, PayPal Holdings Inc (NASDAQ:PYPL), Hertz Global Holdings Inc (NYSE:HTZ), as well has holdings in insurance, MLPs, energy, railroads and food services.
IEP stock pays a very generous $6-per-share dividend. Right now, that equates to 11.7% — one of the market’s top high-yield stocks to buy. IEP is also trading only 10% off its 52-week low, so you can buy a distressed asset of your own.
High-Yield Stocks to Buy: Ashford Hospitality Trust, Inc. (AHT)
Dividend Yield: 7.1%
Ashford Hospitality Trust, Inc. (NYSE:AHT) is an under-followed, underappreciated stock in the lodging sector.
It has hotels in every corner of the nation, and it is now focusing on upper-upscale properties, instead of the mid-level properties it had focused on for quite some time. That’s because the upper-upscale sector is growing a bit more quickly and has juicier yields.
Ashford has fine cash flow, with properties that usually outperform its peers, and a management team that has not only been in hotels for a combined period of more than 100 years, but also has the highest insider ownership (almost 20%).
The next closest peer is only around 8% insider ownership. The stock is undervalued at $6.78-per-share, so there is upside here as well as a sustainable 7.1% dividend.
Also, Ashford Hospitality was one of the few hotel real-estate investment trusts that didn’t cut its preferred dividends during the mortgage crisis, when hotel stocks were cutting dividends left and right. Most hotel REITs failed to manage their debts as well as Ashford.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance, and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He owns shares of IEP and AHT. He has 22 years’ experience in the stock market and has written more than 1,600 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.
