May 3, 2010
By Jeff Reeves, Editor, InvestorPlace
High yield dividend stocks were hard to come by in the recession, as some big blue chips slashed their payouts. But now, dividend growth appears to be back. According to Standard and Poor's, only 48 companies in the S&P 500 decreased their dividend payments during the first quarter of 2010, a vast improvement over the record 367 companies that slashed dividends during the same period in 2009 -- adding $6.4 billion in total dividends.
Stable blue chips are staples for dividend growth, and the top 10 high yield dividend stocks in the Dow are all fall-backs for many investors. These quarterly offerings can provide a regular "paycheck" for retirees -- especially when the company is a high-yielding blue chip with a track record of boosting its dividend year after year.
But dividends don't just have to be a quiet way to grow your nest egg. They can really supercharge your returns when you buy into a great stock that also happens to be cash-rich. On top of the appreciation you see in your shares, you'll also get a great bonus checked mailed four times a year -- or more, depending on the dividend schedule!
Here are 10 examples of high-yielding dividend stocks with breakout potential. All of these companies have a yield of 10% or more and are small cap stocks that seem to be going strong right now.
One word of caution, however: These dividend yields are annualized rates based on previous payouts. One big disbursement can skew the annualized yield for a stock. Also, as with any investment there are no guarantees on these yields -- stocks may be raising dividend yields as a whole, but there’s no guarantee these dividends will stay put for long. Finally, some of these small-cap stocks are thinly traded and can gap up dramatically on low volume. If you’re looking to buy, make sure you use a limit order and trade during regular market hours to protect yourself from overpaying.
Enough with the dividend stock disclaimers -- on to the list:
High yield dividend stock #10 – Formula Systems 1985 FORTY
- Sector: Information Technology
- Market Cap: $171million
- Current Annualized Dividend Yield: 11.3%
Formula Systems 1985 (FORTY) is an information technology company based in Israel, but trading on American exchanges as an ADR. Formula provides software consulting services and software development in over 50 countries. As companies look to keep costs down by outsourcing IT services, FORTY is doing brisk business. Shares are up 17% year-to-date and Formula Systems is currently offering a high dividend yield of 11.7%
High yield dividend stock #9 – Kohlberg Capital KCAP
- Sector: Financials
- Market Cap: $124 million
- Current Annualized Dividend Yield: 11.9%
Kohlberg Capital (KCAP) s a private equity and venture capital firm specializing in buyouts. This cash-rich company typically hasn't paid a first-quarter dividend, but has paid out cold, hard cash to shareholders in Q2-Q4 of 2008 and Q2-Q4 of 2009. Kohlberg has reported steady earnings recently, but it must be acknowledged that class action law suits have been filed against the company regarding its reporting practices. KCAP stock were really beaten down in early 2010 due to these troubles, dropping under $4 in early February, but have rebounded since then to the high $5 range and could be a good investment for those with the stomach for it.Kohlberg Capital’s high dividend yield was previously noted by InvestorPlace.com in March.
High yield dividend stock #8 – Walter Investment Management WAC
- Sector: Real estate investment trusts
- Market Cap: $417 million
- Current Annualized Dividend Yield: 12.39%
Walter Investment Management Corp. (WAC) is a real estate investment trust or REIT that operates as a mortgage portfolio owner and mortgage service. That means Walter is one risky play amid all the foreclosure uncertainty. But apparently the company has made some smart moves as to the loans it is buying, since the company currently enjoys a high dividend yield of 12.3%. According to tax rules, REITs must consistently deliver a portion of their profits to shareholders -- so WAC stock has a better chance of maintaining a high dividend yield than some other stocks in this list.
High yield dividend stock #7 – Whiting USA Trust WHX
- Sector: Real estate investment trusts
- Market Cap: $280 million
- Current Annualized Dividend Yield: 13.1%
Whiting USA Trust I (WHX) is a subsidiary of Whiting Petroleum Corp. (WLL). The parents company is an oil and gas stock that operates in the Rocky Mountains, Midwest and Gulf Coast – and due to its extensive exploration efforts, is a tremendous landowner. That’s where the Whiting USA trust comes in. This subsidiary is basically just a way to hold all that land with minimal tax impact to Whiting Petroleum. It’s apparently cheaper to pay WHX shareholders a high dividend yield of 13.1% than to keep that land under the WLL umbrella ... which is fine by those investors who own the Whiting USA trust!
High yield dividend stock #6 - Invesco Mortgage Capital IVR
- Sector: Real estate investment trusts
- Market Cap: $377 million
- Current Annualized Dividend Yield: 14.0%
Formerly Invesco Agency Securities, Invesco Mortgage Capital (IVR) is yet another real estate investment trust (REIT). The company finances and manages residential and commercial mortgage-backed securities and mortgage loans like high dividend stock #8, Walter Investment Management (WAC). As with Walter, this REIT is a risky play amid the uncertain housing market but appears to be doing all the right things right now. It’s worth noting that that despite a high dividend yield of 14% -- that’s an annual rate, remember -- IVR investors are under water themselves in 2010 as the stock has trended down -10% year-to-date. Most of that decline came at the end of April after news of a public stock offering for IVR. But IVR posted decent first quarter earnings and the dividend certainly softens the blow.
Click the navigation below to keep reading the remaining high yield dividend stocks -- including one with a +20% dividend yield!
No comments:
Post a Comment