Insiders Are Buying These High Dividend Stocks
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We track insider purchases because stocks bought by insiders tend to outperform market indices (see our analysis of studies on insider trading). While this is somewhat interesting on its own, the relationship becomes considerably stronger (though it still does not work in many cases) when considering stocks that multiple insiders, or a “consensus” are buying (Read more about consensus insider purchases). We looked through our database of insider trading filings to find some high yield stocks that insiders like, in case income investors think that insider purchases are an important enough signal to help them identify good stocks for further research. Here are five stocks at least five different insiders have been buying in the last three months that pay dividend yields of over 5% at current prices:
Multiple insiders have bought shares of Inland Real Estate (NYSE: IRC), a real estate investment trust which owns shopping centers and other retail properties (See a history of insider buys at the company). Real estate investment trusts receive preferential tax treatment conditional on distributing a large share of the income to shareholders and so tend to pay high dividend yields. Inland Real Estate is in line with this trend, with a yield of over 6% going by recent dividend payments and the current stock price. Of course, we’d expect the stock to have substantial exposure to retail activity in the U.S. so prospective investors should look into that if they choose to do more research on the company.
Another real estate investment trust, Healthcare Trust Of America (NYSE: HTA), also shows up as a high yield stock (the current dividend yield is between 5% and 6%) with multiple insiders buying in the last three months. As is suggested by the name, Healthcare Trust of America invests in medical office buildings and other healthcare facilities. While many of the individual insider purchases have been fairly small, there has been a good mix of buys from Board members and company officers at about $10 per share. We would note that the company is a recent IPO, going public in June 2012.
New Mountain Finance (NYSE: NMFC) has been another popular insider buy with multiple insiders purchasing significant amounts of stock in December at prices as high as $14.50 per share (the current market price is about $14.90). New Mountain is an investment management company which primarily invests in debt securities. The dividend yield, based on quarterly payments of 34 cents per share the last few quarters, is over 9%. The stock is up 14% from its levels shortly after its June IPO, though with 12% of the outstanding shares held short, there are clearly quite a few investors bearish on the stock despite the high yield.
Since the beginning of November multiple insiders have bought shares of MFA Financial (NYSE: MFA). MFA is another REIT, with a focus on investing in mortgage backed securities. The stock has risen 23% over the last year as the markets have become more confident in a recovery in real estate, and the dividend yield is over 8%. MFA also has a higher market capitalization than many other stocks on this list; the current valuation is over $3 billion. Again, the emphasis on mortgage backed securities is something investors would have to look into and be comfortable with before buying.
Oil and gas pipeline company NuStar Energy L.P. (NYSE: NS) is another high yield stock, paying about $1.10 per share per quarter over the last several quarters and with a good record of increasing payments prior to that. The current yield is close to 9%, though the stock price is down 13% from a year ago. At a market cap of $3.9 billion, NuStar trades at 24 times consensus earnings for 2013. Revenue was down slightly in the third quarter of the year versus a year earlier. While payments have been stable up until this point, we think it would be important to stress test the stock a bit.
This article is written by Matt Doiron and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!