There are a couple reasons that people may invest in a stock. One is capital appreciation — they think the stock price will go up. Another is dividends — where the company pays you to hold it. There’s little doubt we’re in a growth mode on Wall Street as well as economically. Most people think that means growth stocks are where to turn for the best investing opportunities.
However, even dividend stocks grow during the good times. And the way some of them are structured, they can deliver impressive dividends. That makes them more attractive than having your money sit in a CD or money market fund.
The stocks featured here may not be as safe as a money market but for a little added risk they provide solid growth potential with decent dividends.
Some of these stocks may have low ratings in the dividend grader, but the monthly payouts here are a bonus on top of generally strong growth stocks.
- Armour Residential REIT (NYSE:ARR)
- AGNC Investment Corp (NASDAQ:AGNC)
- US Global Investors (NASDAQ:GROW)
- Orchid Island Capital (NYSE:ORC)
- Ellington Financial (NYSE:EFC)
- Main Street Capital (NYSE:MAIN)
- Dynex Capital (NYSE:DX)
Growth Stocks: Armour Residential REIT (ARR)
How about holding a stock with over 50% growth in the past year and that pays more in a month than you get total for a one-year CD?
ARR is a real estate investment trust (REIT), but it doesn’t deal in properties. It works with mortgage-backed securities. You see, once a mortgage is signed, it is then usually sliced up into smaller pieces – short term, intermediate term and long term, for example. Each of those pieces is then bundled with other similar pieces of other mortgages and then resold as a mortgage-backed security (MBS).
With low interest rates for as far as the eye can see, ARR is in the middle of a big run on real estate, and that works out very well for its investors.
Right now, ARR is delivering a 9.8% dividend, and the stock is up 53% in the past 12 months.
ARR has a C rating in Portfolio Grader. But it’s still attractive among other similar growth stocks.
AGNC Investment Corp (AGNC)
Born in the wake of the last real estate meltdown in 2008, AGNC also focuses on MBSs. But it’s significantly larger than ARR and hedges much of its portfolio of securities with a majority of its holdings being backed by the U.S. government or by government sponsored enterprises (GSEs).
This adds a level of safety to the process, although it does have investments outside of these protected securities.
The good thing is, its size is helpful in being able to access a broad selection of mortgages, so it doesn’t have to stick with one piece of the market. Diversity is key in this sector.
Also, its team is well acquainted with the risks in this industry so it navigates with prudence. AGNC is up nearly 51% in the past year, with 12% of that growth occurring since the start of the year. AGNC also delivers an 8.3% dividend, which is still very rich for most dividend stocks.
AGNC has an A rating in Portfolio Grader.
US Global Investors (GROW)
Surprisingly, GROW isn’t a REIT. It’s apparently lived up to its ticker’s name however, because the stock went on a tear this past year, growing 532% in the past 12 months. The dividend however is small at 0.7%.
So what’s the glow about GROW?
Even after that huge run, GROW is selling at a current price-to-earnings (P/E) ratio below 10. And this cash influx will be put to good use in building its funds and launching new ones. At that point, the dividend will grow, and investors will still get a solid growth company with an expanding dividend.
We have watched management build this investment management company for decades. They know what they’re doing. Its market cap is around $126 million, so it’s a boutique player, but a solid one.
GROW has an A rating in Portfolio Grader.
Orchid Island Capital (ORC)
When the real estate market collapsed in 2008, most mortgage companies, including the biggest and best in the U.S., crashed and burned simply because real estate prices were no longer as “real” as people had thought. When prices dropped, everyone funding those properties had to revalue their entire portfolios.
When the dust settled, it was time to rebuild. And ORC was part of that rebuild, founded in 2010.
But this time around, the risks weren’t abstractions, they were recent history. That meant rebuilding had to be done under more regulations as well as structured better than before. ORC is one of the growth stocks that came out of the mess better for the experience and now it’s doing very well from its Florida base with its focus on residential MBSs.
ORC stock is up 62% in the past 12 months, yet it’s delivering a whopping dividend of 14.34%. That’s more than 1% a month!
ORC has an A rating in Portfolio Grader.
Ellington Financial (EFC)
Based in Greenwich, Connecticut, this REIT is a bit more diversified than most growth stocks in this sector. It focuses on commercial and residential MBSs like its peers, but it also has other investments like collateralized debt obligations and equity investments.
In early April, EFC announced it was raising its dividend a whopping 40% — it has a 9.5% dividend — which gives you some indication on whether the company sees a bullish future in store. The stock is up 88% in the past year, but its market cap is still under $1 billion, around $771 million at this point. That makes it a decent-sized boutique player. But it’s a little pricey here.
EFC has a B rating in Portfolio Grader.
Main Street Capital (MAIN)
If you’re looking for a company that is focused on building out the U.S. economy beyond real estate, this business development company (BDC) may be just what you’re looking for. BDCs are an interesting niche, and a low-interest-rate, expanding economy is just the ticket.
Like REITs, BDCs get certain tax breaks for providing investors with direct access to net profits via dividends.
Basically, MAIN lends money, structures debt or takes some involvement in attractive businesses that are generating annual revenue between $10 million and $150 million. Over the years it has had over 200 companies in its portfolio. This sector is also a key beneficiary of the PPP loans distributed, which means they’re staffed up and ready to grow as the economy revives.
The stock is up about 69% in the past 12 months and has a dividend of nearly 6%, which is solid. It’s a bit pricey now, but when its portfolio kicks in earnings should come back quickly.
MAIN has a B rating in Portfolio Grader.
Dynex Capital (DX)
This is another MBS-focused REIT, with a market cap just under $600 million. The one standout feature for DX among these other dividend stocks is the fact that it was founded in 1988.
That means it has weathered more than a couple real estate boom and bust cycles, including 2008. Its goal of long-term appreciation through dividends and responsible growth has kept it chugging along. That also means what you get in reliability, you might not get in sexiness.
That said, DX is up nearly 49% in the past 12 months and sports a dividend of of 8%. What’s more, even after that run, DX still has a current P/E of 10.4.
DX has a B rating in Portfolio Grader.
On the date of publication, Louis Navellier has no positions in any stocks in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.