4 High Yielding Dividend Investments
Piyush is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As the famous proverb goes, “when the going gets tough, the tough get going”, applies to the current market situation very aptly. The markets are choppy most of the time, mainly because of the EURO, and there is no clear indication as to when this rough patch is going to end. One can pick up a value stock or a growth stock, and make big bucks out of them, but that involves a significant amount of risk as well. Well as they say, less the risk, lesser is the reward, but what if you could reduce your market risk, and retain the market rewards.
Dividend yielding stocks with strong fundamentals are the way to ride the current market conditions. These stocks not only offer growth prospects but also provide income. The idea here is to pick dividend paying companies that are undervalued, have good financials, and are attractive to investors. This way, not only one can earn bucks by dividends, but also by the appreciation in the stock’s price.
Here are 4 picks that came up on my radar, as solid investment options:-
1) Capital Product Partners L.P (NASDAQ: CPLP) tops our list of being the most undervalued stock, with a dividend of nearly 12%, and a payout ratio of nearly 60%. The company with a market capitalization of over $570 million, recently posted its results, and the revenues stood at $37.8 million compared to $27.9 million, both being the revenues of second quarters of 2012 and 2011, respectively. The stock trades at a 4.87x P/E, and a 0.97x PEG. The shipping company provides transportation services for products that require seaborne transportation like crude oil, refined oil, petrol, diesel, gasoline, fuel oil, ethanol, edible oils. Europe may not be kicking right now, but the rest of the world has begun kicking, and a healthy global economy needs logistics in every stratum, making the stock hard to miss.
2) CYS Investments Inc. (NYSE: CYS) has a market cap of $2.32 billion. The financial firm has a dividend yield 14.39%, paying out 66.25% of its total earnings in the form of dividends. The stock trades at a 5.38x P/E and a 0.88x PEG. The company holds a portfolio comprised of mortgages, with federal agencies backing the payments in case of defaults. The results posted recently showed a significant jump in net income, from $69.1 million in the previous year to $101.7 million this year. With the current market valuations, and growth prospects in mind, this stock would be a great pick.
3) Legacy Reserves L.P (NASDAQ: LGCY) our third most undervalued stock, with a market capitalization of $1.3 billion, has a dividend yield of 8.29%, and a payout ratio of 65.47%. The stock trades at a 7.7x P/E and a 0.72x PEG. Legacy Reserves involved in acquiring and developing oil properties, primarily in West Texas and Mexico. The firm was holding 498 fields in the same region as of December 31, 2011. The most recent results show that the revenues jumped to $92.6 million from $72.8 million in the last year’s quarter. The firm benefits directly by rising crude prices, and with oil prices on a gradual rise, this pick again is both an good income stock as well as a great growth stock.
4) PennyMac Mortgage Investment Trust (NYSE: PMT) has a market capitalization of around $915 million, and offers a dividend of 9.98%, and pays out 76.98% of its earnings in dividends to its shareholders. The stock trades at a 7.72x P/E and a 0.31x PEG. The results declared recently show a whopping 38% increase in the company’s quarterly net investment income, and the cash flows increased by as much as 46%. The REIT buys troubled residential mortgages, directly from banks and insurance companies, which are guaranteed by companies like Freddie Mac and Fannie Mae. With the US economies taking a gradual shift towards normal, residential property prices are deemed to rise, thereby bringing the bucks in the pockets of PennyMac and its shareholders, thus a buy rating.
Having a dividend yielding portfolio is considered to be conservative in nature, and having growth stocks in your portfolio maybe considered aggressive, but having a portfolio of growth stocks that have high yields, is called being smart. The stocks mentioned above not only are cheap in valuations, but also have sound revenue growth. It is always advisable to create a portfolio of stocks, than to pick and rely on just one pick. As the legendary Buffett says, “Don’t put all your eggs in the same basket,” so having a range of the above investments will spread your rewards, and reduce your risks.
PiyushArora has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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.If you have questions about this post or the Fool’s blog network, click here for information.