Five High-Yield Dividend Stocks with Significant Insider Buying

Karin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Insiders are the best barometer of a company’s future prospects, right? But insider selling can be for any reason – taxes, portfolio diversification, personal reasons. So it’s hard to judge a company by its insider selling (unless there’s an enormous wave, then it probably means you should get out of the way!). But there’s only one reason for insider buying – the insiders think the price is going higher.

I took a look at 25 companies listed by Dividend Channel as having insider buying over the past six months, and I came up with five high-yielders that had over a million dollars’ worth of insider buying. With numbers like those, I decided to take a closer look at these five.

I know these companies aren’t going to be the stable, reliable dividend champions with many years of consistently paying and raising dividends. But I’ll look at other factors, which may or may not make them a good candidate for my portfolio.

The first company on the list, with $5 million in insider buying, is Javelin Mortgage Investment Corp (NYSE: JMI). This is a REIT that has only been trading since October, but note that it is externally managed by the highly successful Armour Residential. The stock is currently trading at approximately $18 per share and yields 15.5%. 4 insiders, including the Chairman of the Board and a Director, have bought a total of 250,000 shares, worth nearly $5 million. Since its debut, Deutsche Bank and Citigroup have initiated coverage with Buy ratings, and a Neutral at Credit Suisse.

Given the lack of history with this company, this stock is definitely a risky play, but the 15.5% dividend is certainly tempting.

Newcastle Investment (NYSE: NCT) is a REIT that has not been adversely affected by QE3. It is trading at the top of its 52-week range, at $8 per share, and yields 10.7%. There were two insiders who made large purchases: the CEO/President, and one Director, who together purchased 450,000 shares for a total of $3.0 million. These insiders bought back in July, however, when the price was significantly lower; they paid an average cost of $6.70 per share. Newcastle’s share price is up 67% for the year, with an additional 13% in dividends paid out.

I like Newcastle for a small position in a stable dividend portfolio.

CYS Investments (NYSE: CYS) another mREIT, CYS trades at $14 per share. It is currently yielding 14.1%, and was recently purchased by two insiders: the President/CEO and one of the Directors bought a total of 125,000 shares worth $1.6 million. This company has suffered this quarter, like other mREITS, due to the effects of QE3 on long-term interest rates, by focusing on agency mortgage-backed securities. QE3 contributed to a decline in net interest margin for the mREITs, and has affected all of their share prices negatively. The insiders have taken advantage of the price decline and have purchased in the $12.75-13.00 range.

Annaly Capital Management (NYSE: NLY), another mREIT, had only one insider buy, but it was the company’s President, Kevin Keyes, and he purchased 100,000 shares on Nov. 15 at very nearly the 52-week low, for a cool $1.4 million. Annaly is trading at $14 per share and yields 13.7%. The company’s shares are down at the lower end of its 52-week range, due in part to QE3. The company has also reduced its dividend payouts twice in 2012.

This is a company that I will keep on my radar and watch for a few more quarters. The yield is tempting, and the conviction of the President is reassuring, but I would like to see some payout stability before I jump in.

And the final company on the list is KKR Financial Holdings (NYSE: KFN).  KKR also had only one insider buying its shares, but it was a Director who purchased 110,000 shares at $9.16 in August, for a total of $1.0 million. Since then, KFN is trading 13% higher, near its 52-week high, at $10.32. It yields 8.0% and is up 19% in the past twelve months.

In conclusion, I would look deeper at Javelin, Newcastle, and KKR Financial. All of these look good for a small position emphasizing higher reward with higher risk. I’ll keep CYS and Annaly on the back burner and check on them over the next six months or so, to see if they stabilize.


khern0203 has no positions in the stocks mentioned above. The Motley Fool owns shares of Annaly Capital Management. 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!

blog comments powered by Disqus