High yield dividend stocks are attractive to investors in this environment of low interest rates. We went looking for some of the highest yielding dividend stocks in the market and then pared the list down by eliminating stocks with negative P/E ratio (i.e, unprofitable companies). Additionally, we eliminated the stocks that trade over the counter. The following 9 stocks offer some of the highest dividend yields and may also be reasonably valued.
Although we applied some preliminary filters to side step some of the common issues associated with very high yield stocks, you should always check these companies out to understand if the yield is sustainable, and/or there were some temporary situations that may be the cause of high yield (for example, a special dividend that may not be repeated, precipitous stock price decline due to unfavorable business environment in which case the dividend might be cut in the future, etc). You should also check to see if the company can afford to pay a high rate of dividend going forward. In many cases, even when the situation gets bad, management may not want to cut the dividend opting to put a brave face on the situation. Sometimes, they may even take on debt to be able to continue paying the dividend.
There may also be situations where the high dividend yield is justified even when the ongoing earnings may not support it. Occasionally, a company may come into a cash windfall due to sale of an asset or a legal settlement that they want to distribute to the shareholders, perhaps over a period of time. In the best case scenario, the company actually generates tremendous amounts of cash but does not want to retain and reinvest in growth projects because there may be none.
Why Should You Look at High Yield Dividend Stocks?
A sustainable high yield can generate great amount of regular income from your portfolio – this part is quite obvious and is probably the main reason investors look for stocks like these. However, as a value investor, I am often drawn towards unusual situations as these are where many of the best opportunities lurk. While not a guarantee that one will always find good values when reviewing these stocks, those rare times when you do can turn up stocks with excellent profit potential. An abnormally high dividend yield is one of these unusual situations and it can pay (really well) to dig into the business deeper.
High Yield Dividend Stock List
|Company Name||Symbol||Dividend Yield||Market Capitalization||P/E||Price/Book|
|GREAT NORTHERN IRON ORE PROPERTIES||GNI||44.13%||$34.0M||2.34||3.4|
|ELLINGTON FINANCIAL LLC||EFC||13.16%||$595.3M||5.99||0.95|
|WINDSTREAM HOLDINGS INC||WIN||12.64%||$4.7B||37.5||5.52|
|KCAP FINANCIAL INC||KCAP||12.58%||$265.0M||8.31||0.99|
|PROSPECT CAPITAL CORP||PSEC||11.84%||$3.2B||10.21||1.04|
|TICC CAPITAL CORP||TICC||11.31%||$547.1M||8.88||1.04|
|MIND CTI LTD||MNDO||11.27%||$40.2M||15.7||2.02|
|BLACKROCK KELSO CAPITAL CORP||BKCC||11.16%||$693.4M||11.11||0.99|
|MCG CAPITAL CORP||MCGC||11.01%||$323.3M||12.5||0.89|
Perhaps not surprisingly, a good number of the stocks in this list are what are called “Business Development Company” or BDCs. Their cash flow tend to be uneven as they function like a venture capital company for small/middle market businesses. In the years with great many exits, they have plenty of cash to return to the shareholders. In the dry years, not so much. However, these stocks merit a look in as some BDCs have excellent long term track record.
Let me know in the comments below if you like or own any of these stocks.