There’s been a terrible trend over the past several years in the dividend stocks space. That’s because when the Federal Reserve dropped interest rates to almost 0, it pushed income investors in retirement investors further out on the risk curve. That meant a lot of money when flowing from the bond market into the stock market, and especially into dividend stocks. Now those dividend stocks have been bid up to prices that vastly exceed their intrinsic value.
That’s why I’ve constantly been looking for stocks that provide not just reliable yields, but dividend yields that vastly outstrip those of so-called “blue-chip stocks”. And that stock falls by 30%, while paying a dividend of only 3%. You are taking on far too much risk then you should for such a low dividend yield.
Risk reduction is the focus of my investment advisory newsletter, The Liberty Portfolio. Most investors unknowingly take on far, far too much risk
With that said, your three dividend stocks that pay reliable and high yields.
Overlooked Dividend Stocks #1: Icahn Enterprises (IEP)
Icahn Enterprises LP (NASDAQ:IEP) is the investment vehicle for the greatest investor of all time, Carl Icahn. That’s right, his investment returns of exceeded that of Warren Buffett. Icahn controls the publicly held vehicle with his massive stake in IEP. Right now, IEP down more than 50% from its 2014 highs, but as a shareholder, what you going to do? Question Ichan’s purchases? Throw him out of his CEO job? Of course not.
You buy into IEP because it is not only at the lower end of its multi-year trading range, but because it is paying a dividend of seven dollars a share. With the stock price at $66.73, that equates to a 10.5% yield.
Icahn’s latest move was to sell Tropicana Entertainment after buying it out of bankruptcy 10 years ago. True to form, he is recognized multiple times his initial investment in the sale.
Overlooked Dividend Stocks #2: Starwood Property (STWD)
One of the reasons I like Starwood Property Trust, Inc. (NYSE:STWD) is its diversification as a real estate investment trust. It has a lending segment which originates and acquires commercial first mortgages, subordinated mortgages, mezzanine loans and various types of commercial and residential mortgage-backed securities.
It also acquires and manages equity interests in multi-family and commercial properties and engages in complicated structured investments for assets that are stumbling.
What I really like is the fact that it keeps its investments limited to the near term. Loans are usually under five years in length. Starwood has virtually zero realized loan losses, and that’s because of its superior underwriting.
This diversification gives a lot more flexibility in terms of how it runs its business. Its revenue has almost doubled between 2015 and 2017. It presently yields 9.2%.
Hotel REITS are finally beginning to get some love from the market, after an extensive period of disinterest. Some of the upper upscale and luxury properties are getting a lot of attention from private equity and foreign buyers, these segments of the hotel industry have been able to increase rates at a higher rate than some of its sector peers.
Overlooked Dividend Stocks #3: Ashford Hospitality Trust (AHT)
Ashford Hospitality Trust, Inc. (NYSE:AHT) owns roughly 120 hotels covering more than 25,000 rooms in the country. The focus is mostly on full-service upscale and upper upscale hotels, and these hotels have revenue-per-available room (RevPAR) nearly double the national average.
Ashford also has 90 condo units at an Orlando resort, and has historically maintained excellent relationships with all of the different brands that its portfolio contains. It also owns a 30% position in Ashford Inc (NYSEAMERICAN:AINC), which it spun off a number of years ago. That entity is primarily a management company that has strategic positions in a number of hotel related investments.
AHT is an undervalued stock compared to its peers are, management has the highest insider ownership holdings in the sector, and yield 7%.
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 does not own any stock mentioned. He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at [email protected].