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Oddball Dividend Stocks With Big Yields

 

Copyright Wintertwined

The following is an excerpt from 5 “Oddball” Dividend Stocks With Big Yields, originally published on Kiplinger’s.

It’s not the easiest market out there for income investors. With bond yields being depressed for so many years (and still extremely low by any historical standard) investors have scoured the globe for yield, which has pushed the yields on many traditional income investments – namely, bonds and dividend stocks – to levels far too low to be taken seriously.

Even after rising over the past several months, the yield on the 10-year Treasury is still only 2.9%, and the 30-year Treasury yields all of 3.2%. (Don’t spend that all in one place!) The utility sector, which many investors have been using as a bond substitute, yields only 3.4%. Yields on real estate investment trusts (REITs) are almost competitive at 4.4%, but only when you consider the low-yield competition.

Bond yields have been rising since September, due in part to expectations of greater economic growth and the inflation that generally comes with it. This has put pressure on all income-focused stocks. This little yield spike might not be over just yet, either – especially if inflation creeps higher this year.

Even if bond yields top out today and start to drift lower rather than higher, yields just aren’t high enough in most traditional income sectors to be worthwhile. So today, we’re going to cast the net a little wider. We’re going to take a look at five quirky dividend stocks that are a little out of the mainstream. Our goal is to secure high yields while also allowing for fast enough dividend growth to stay in front of inflation.

The GEO Group

Few companies are as quirky – or have quite the pariah status – as The GEO Group (GEO). GEO is a private operator of prisons that is organized as a real estate investment trust, or REIT.

Yes, it’s a prison REIT.

Prison overcrowding has been a problem for years. It seems that while getting tough on crime is popular with voters, paying the bill to build expensive new prisons is not.

This is about as far from a feel-good stock as you can get. It ranks alongside tobacco stocks on the scale of political incorrectness. The sheer ugliness of its business partially explains why it sports such a high dividend yield at well above 8%.

It’s also worth noting that this stock is riskier than everything else on this list. The U.S. is slowly moving in the direction of legalization of soft drugs like marijuana. While full legalization at the federal level isn’t yet on the horizon, you have to consider that a significant potential risk to GEO’s business model. Roughly half of all prisoners in federal prisons are there on drug-related convictions. At the state level, that number is about 16%.

GEO likely would survive drug legalization, as the privatization of public services is part of a bigger trend for cash-strapped governments. But it would definitely slow the REIT’s growth and it would seriously raise questions of dividend sustainability.

Furthermore, prison properties have very little resale value. You can turn an old warehouse into a trendy urban apartment building. But a prison? That’s a tougher sell.

So again, GEO is a riskier pick. But with a yield of more than 8%, you’re at least getting paid well to accept that risk.

To read the rest of the article, please see  5 “Oddball” Dividend Stocks With Big Yields,

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Dividend Achievers Massively Hiking Their Dividends

The following is an excerpt from 7 Dividend Achievers With Big Income Potential

There is an old Wall Street maxim that the safest dividend is the one that’s just been raised. Which is why if you’re not familiar with Dividend Achievers, you should be.

You can always find that occasional company that continued raising its dividend right up until it cut it (Kinder Morgan in 2015). But generally speaking, it’s safe to say that a dividend stock aggressively raising its payout is a healthy company and one that is justifiably confident about its future.

Earnings per share can be aggressively manipulated, as can reported revenues. Even the cash flow statement can be suspect because it ultimately pulls most of its key data points from the income statement, which can be a work of creative fiction.

Paying a dividend requires actual cash on hand. And a dividend hike implies that management is confident that there will be a lot more cash coming down the pipeline to support a higher dividend in the quarters ahead.

But even when it comes to dividends, you have to look out for chicanery and focus on quality. That means paying the dividend out of real profits and cash flows, not debt or new share issuance. As forensic accountant John Del Vecchio, co-manager of the AdvisorShares Ranger Equity Bear ETF (HDGE), says, “Dividends are a distribution of profits; a way for a company to reward its patient shareholders. But a dividend paid from debt or equity proceeds isn’t a dividend at all, but rather a return of capital. Don’t be fooled by a company returning your own money to you while calling it a dividend.”

Today, we’re going to take a look at Dividend Achievers – companies with a history of raising their annual dividends for a minimum of 10 consecutive years – that aren’t just providing token upticks. The idea is that we’re limiting our pool to stable companies with a long history of safely delivering the goods, but that also are well-positioned for growth in the immediate future.

 

Toro Company

Toro Company (TTC), a maker of lawn irrigation systems and high-end riding lawnmowers, might not have a particularly sexy or interesting business, but the industry is a resilient one. Toro has raised its dividend every year since 2003 – the one asterisk is that it kept the quarterly payout level in 2008 amid the market meltdown, but paid more on an annual basis than it did the year prior.

At the end of 2017, Toro raised its dividend by 14%. This followed a nearly 17% dividend hike the year before. Over the past 10 years, the stock has raised its dividend at an annual clip of nearly 20%. The 1.3% current yield might not be exceptionally high, but whatever the stock lacks in yield it more than compensates with dividend growth.

In Toro, you’re getting an aggressive dividend grower backed by strong demographic trends. With the Millennials starting to nest, that high dividend growth should continue for a while.

“As Millennials move through their adult lives, they’ll hit all the familiar milestones, forming families, having children, and putting down roots,” says Rodney Johnson, co-founder of economic forecasting firm Dent Research. “The transition will add growth to our economy as they fundamentally change their spending, moving from lattes to lawn care. Nothing says ‘I’m a homeowner and I’m proud!’ quite like lawn equipment!”

To read the remainder of this article, please see  7 Dividend Achievers With Big Income Potential

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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LyondellBasell: THIS Is What Buybacks Are Supposed to Look Like

Stock buybacks get a bad reputation — and justifiably so. It seems that for most companaies, a share repurchase is little more than an expensive mop to soak up share dilution from executive stock options or other share-based compensation.

So, it’s refreshing to see a company like LyondellBasell Industries (LYB). When Lyondell announces a share buyback, they mean it. The company has reduced its share count by about 10% per year for the past three years while also raising its dividend by nearly 20% per year.

That’s a company that takes care of its shareholders.

I recently added LyondellBasel to my Dividend Growth portfolio.

Disclosures: Long LYB

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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The Best ETFs for Yield-Starved Investors

The following first appeared on InvestorPlace.com as The 10 Best ETFs to Buy for Yield-Starved Investors 

Call it the tyranny of choice, but investors looking for income via dividend exchange-traded funds have almost too many options to choose from these days. A simple screen returns nearly 200 dividend-focused ETFs. But in a list that long, how do go about finding the best ETFs?

Do you simply narrow the list to high-yield ETFs? Or do you try to find a balance between current yield and the potential for growth? And what about international or sector diversification?

It’s hard to believe that the Federal Reserve has been raising rates for nearly two years now. After all, savings and money market accounts still yield next to nothing, and even the 10-year Treasury barely yields 2.4%. It’s still a rotten market out there for yield-hungry investors … which explains why dividend ETFs keep sprouting up like weeds.

Today, we’re going to narrow the list down to 10 of the best ETFs for investors looking for income. This list will include both high-yield ETFs and dividend-growth ETFs, as well as targeted sector and international plays. Diversification is important here, as high-yield ETFs can react very differently than dividend-growth ETFs to changes in bond yields or to Fed policy.

With a new Fed Chairman taking office early next year, there is a little more uncertainty than usual, and we want to be prepared.

So, with no further ado, here are 10 of the best ETFs for investors looking for income.

I’ll start with the granddaddy of dividend ETFs, theiShares Select Dividend ETF (DVY). Dividend investing really came back into style following the bursting of the tech bubble and the 2000-2002 bear market, and the iShares fund was the first ETF to jump on that trend. DVY started trading in late 2003.

DVY tracks the Dow Jones U.S. Select Dividend Index, which is composed of 100 of the highest-yielding stocks in the Dow Jones U.S. Index, excluding REITs. In order to make the cut, a stock has to have had dividend growth over the past five years and must have an average dividend coverage ratio of at least 167% over the past five years. The stocks should also have positive earnings over the past 12 months and should have a market cap of at least $1 billion with an average daily trading volume of at least 200,000 shares. The goal is to limit the selection to high-quality companies that are unlikely to slash their dividends any time soon.

DVY sports a current dividend yield of 3%. That might not be exceptionally high, but its more than 50% higher than the S&P 500 these days.

To read the rest of the article, please see The 10 Best ETFs to Buy for Yield-Starved Investors 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Monthly Dividend Stocks for Income You Can Count On

The following first appeared on Kiplingers.com as 7 Monthly Dividend Stocks for Income You Can Count On

Cash management can be one of the biggest challenges in retirement. Your bills – everything from your mobile phone service to your rent or house payment – come on a monthly cycle. When you work, and get paid every month or two weeks, that isn’t a problem. But once you retire, it can get a lot more complicated.

Sure, your Social Security payment comes monthly. But your dividend stocks generally only pay out quarterly, and bond coupon payments are typically only twice per year. This can cause your cash flows to be lumpy, which can make planning difficult. And frankly, when you’re retired, you do not want to plan cash flow with your free time. That’s what your working years were for.

This is where monthly dividend stocks come in handy.

A monthly dividend calendar better aligns with your living expenses. But the benefits actually go beyond financial planning. If you’re still working and reinvesting your dividends for growth, a monthly dividend will compound faster over time. It won’t make much of a difference in a single year or two, but over an investing lifetime, it adds up. Playing with the numbers, $100,000 invested in a stock delivering a 7% yield compounded quarterly will grow to $801,918.34 over 30 years. That same $100,000 would grow to $811,649.75, if the compounding were switched to monthly.

Today we’re going to look at seven monthly dividend stocks to reliably pay your bills in retirement. Not all pay jaw-dropping high yields – in fact, I tend to avoid exceptionally high-yielding dividend stocks, as those yields generally come with much greater risk. That high dividend won’t do you a lot of good if it gets cut tomorrow. Instead, we’re going to focus on stocks with attractive but sustainable yields.

LTC Properties (LTC)

LTC Properties (LTC) is a real estate investment trust (REIT) specializing in skilled nursing and senior living properties. In fact, “LTC” is short for “long-term care.”

About 86% of LTC’s portfolio is invested in properties in the skilled nursing and assisted living market, with the remainder invested in mortgages and notes backed by properties in the sector. The property portfolio is diverse, spanning 207 properties run by 29 operators in 28 states. And perhaps best of all, the properties are rented on a triple-net basis, meaning that taxes, insurance and maintenance are the responsibility of the tenants. Once the properties are operational, LTC’s responsibility is limited to collecting the rent checks.

And thankfully, most of the revenues backing those rent checks is paid by private patients and their insurers, not Medicare or Medicaid.

REIT expert Brad Thomas, editor of Forbes Real Estate Investor, recently wrote that due to the triple-net model, “There is no operator risk and the total portfolio is 52% private pay … I consider LTC a high-quality monthly dividend payer that can now be purchased at sound value.”

Since 2005, the company has raised its dividend at a 4.9% compound annual rate, well above the rate of inflation. And today, you can collect a respectable 4.8% current yield.

LTC is the sort of reliable dividend payer you want in a retirement portfolio. Its business model is simple, and demographic trends – namely the aging of the Baby Boomers – suggest healthy growth for the foreseeable future.

Read the rest of the article at Kiplingers.com

Disclosures: Charles Sizemore was long LTC at time of writing.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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