Five High Yield Companies With Insider Buying

By Karin Hernandez - January 12, 2013 | Tickers: EPAX, AGNC, MTGE, VNR, WMC | 0 Comments

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They say that there are many reasons for an insider to sell, but there’s only one reason for insider buying – insiders think the price is going higher.

I found four high-yield companies that had over a half-million dollars’ worth of insider buying in the last few months.

I know these companies aren’t going to be the stable, reliable dividend champions with many years of consistently paying and raising dividends, the ones that are making up the foundation of my dividend portfolio.

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 $610,000 in insider buying, is Vanguard Natural Resource LLC (NASDAQ: VNR). This is an oil and natural gas production company, an MLP, and as such its investors enjoy the extremely attractive tax deferral advantages inherent in an MLP. The stock is currently trading at approximately $28 per share and yields 8.9%. Three insiders, including the VP of Engineering and the EVP and CFO, have bought a total of 23,500 shares since Sept. 1. The stock is trading at 8% off its 52-week high, which was reached in October. The company has been paying and raising dividends consistently since 2008, and has an excellent 3-year Dividend Growth Rate (DGR) of 11.89%.

I like this company for a small higher-risk, higher-reward position in a stable dividend portfolio.

American Capital Agency Corp (NASDAQ: AGNC) is a REIT with a juicy 16.1% yield. Four insiders made large purchases since August, including the CEO, a Director, and the President/CIO; together they purchased 36,000 shares for a total of $1.1 million. The company cut its dividend in early 2011, however, and the current monetary policy makes mortgage REITs look still vulnerable to yield declines. The Fed has said that they will not consider raising interest rates until the unemployment level gets down to 6.5%, which could be quite a while.

Western Asset Mortgage Capital Corp. (NYSE: WMC) is another REIT and trades at $21 per share. It is currently yielding 16.9%, and was purchased recently by three insiders, the Chariman of the Board, the President/CEO and the COO, with a total of 36,000 shares worth $733,000. This company suffered last quarter, like other REITS, due to the effects of QE3 on long-term interest rates, and looks vulnerable going into 2013.

American Capital Mortgage Investment Corp.  (NASDAQ: MTGE), another REIT, is currently trading at $25 and yields 14.3%. The insiders included the CEO, a Director, and the President and CIO, with a total purchase of 33,000 shares worth $785,000. American Capital Mortgage has not suffered as badly as other REITs, and is trading at only 6% off its 52-week high. The company has only existed since August, 2011, but it did return 51% over the past twelve months, even despite the losses thanks to QE3. This is a company to keep on my radar.

And the final company on the list is Ambassadors Group (NASDAQ: EPAX).  This is neither an energy MLP, nor a REIT, but an education company that arranges travel “ambassador” programs for students and professionals. The company is trading at $4.50 and yields 5.1%. Two insiders, a Director and one of the private investors, purchased a total of 200,000 shares worth over $1 million. The company has a 5-year DGR of 32%. The company has recently been the focus of a group of institutional value investors who are known for their shareholder activism, and they control over 22% of the outstanding shares of the company and are expected to bring out shareholder value through dividends and share buyback programs.

In conclusion, I would look deeper at Vanguard Natural Resource and Ambassadors Group. These look good for a small position emphasizing higher reward with higher risk. I’ll keep the REITs on the back burner and check on them over the next six months or so, to see if they stabilize.

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