Lesser Known Stocks With Quality Dividends
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If any of you have been paying attention to my columns over the last few months you know that I'm a big fan of dividends. When I had a brokerage a while back – before I retired from the life – I was a strong proponent that my clients maintain at least some of their investments in stocks with a high dividend yield instead of having it all in mutual funds or bonds. Both have their place in a portfolio, of course, but there should also be room to get both growth and income out of an investment, especially for older investors with a limited time horizon until retirement.
However, there can be a bewildering array of choices. And sometimes the most obvious ones aren't always the best. Sure, a broker can point you at some stocks that will pay a consistent 2 or 3% yield, and that's great. But what about when you have some money that you'd like to see return a little more income than that? Some stock that will provide a little more cash return instead of growth. That's when you should widen your search outside the usual boundaries and hit some of these stocks.
In the column, and a subsequent one, I'm going to be focusing on stocks with a high dividend yield that aren't the usual names you see pop up in investment advisors' windows. Stocks you might need to bring up to your broker and see what they have to say. Or, do the research yourself and see where it leads you.
Box Ships (NYSE: TEU)
An interesting stock, Box Ships provides … well … shipping. It takes containers from one port to another and thereby provides the lubrication for international business development. Hello globalization! The firm doesn't have a lot of ships, relatively speaking, but it does make money with the ones it has, so there's that to look at.
In 2011 the firm had an operating margin of 45%. Get used to that number. The market cap on the firm is only $89 million, but it's making a great return and paying a 15.97% dividend. I don't know too many places you can get your hands on that sort of return. The stock suffers a bit with the company being based in Greece. Troubles there provide an unsteady platform for the company and make it a less attractive buy than it would be if it were based in England or France.
Portugal Telecom (NYSE: PT)
While I know there will be objections to this pick due to it's location in troubled Europe, there's a lot more to Portugal Telecom than you'd know from the name. It's the largest telecom provider in Portugal, sure. But it also provides service to Brazil, the PRC and a host of nations in the developing world. It provides telephone and mobile service, as well as other products, around the world. With a market cap of more than $4 billion it can look small to medium on the scale of some telecoms, but it does well.
The stock has climbed 31.4% since June 1, 2012 on a fairly steady curve. Peaks and valleys, sure, but overall steadily up. Combine that with its habit of a once-per-year dividend with a yield of 16.28% and the fact that the stock is around $5 per share, and you've got a keeper if you feel like holding an international telecom with a third-world presence.
Navios Maritime Partners (NYSE: NMM)
A part of Navios Maritime Holdings, NMP specializes is shipping bulk goods from producers to the places those resources – such as iron ore, coal and grains – can be refined into value-added goods. Another Greek firm, so the same warning applies here as above: Political instability can provide a real headache for investors. Make sure you have the stomach for that sort of thing before investing.
Still, this is another stock with an operating margin of 46% last year (even higher in Q4). There's a lot to like, here. Since late 2008, the stock has grown from $3.36 to $13.61 so that's a win for holders. Toss in that the firm has grown its dividend five times over that span to a yield of 13.01% and you might have something there. Invest, be cautious, but it's a good thing.
Windstream Corporation (NASDAQ: WIN)
A more mainstream company that most serious investors should have heard of, I found that this one still flew under the radar of most of my clients. Windstream provides telecom services inside the U.S. as well as providing broadband and other communications to rural consumers. It's an interesting market for them to be in.
The firm posted a 19% operating margin its last fiscal year and a 15% margin in Q3 of last year, so there's money being made. Combine that with a dividend yield of 11.45% and a low stock price (about $8.73 while I write) and it looks like you could do well, here. The stock has been either flat or trending slightly downward on fears that it is in too deep on landlines instead of mobile telecom, but there's still some value here.
Memorial Production Partners (NASDAQ: MEMP)
A new stock, MEMP was formed by a parent, Memorial Resource, to try to own and exploit oil and natural gas resources in the U.S. and elsewhere. The stock only came into existence in late 2011, so there's not a long track record here. It's also been busy making acquisitions of proven resources in Southern California and Texas from other, more established providers.
The stock is all over the place, honestly. It's generally been around $18 per share but it's been as high as $20.50 and as low as $15.98. Still, I don't find that too wide a spread for a firm that's both in start-up acquisition mode and is paying a dividend yield of 10.99%. I'd rather have this than Facebook. At least I know where this firm plans to make its money.
Dividends are, to most investors, a good thing. Combining a stock's potential for growth with a proven record of a cash return – which you can keep or reinvest at your discretion – should be a steady way forward for a buy-and-hold investor--which is what I hope you all are. Stick with good, solid stocks that pay dividends and you're building the basis of a solid, enhanced portfolio.
Follow Nate on Twitter: @natewooley
More columns from Nate Wooley:
- Yahoo, Marissa Mayer and the Tough Times Telecommuting
- The Investor Abides, Man: Stocks for the Long Term
- Google, Facebook and the Social Media War
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