Artificially low interest rates by central banks around the world continue to make it challenging to find attractive yield. With that in mind, we have provided detailed analysis (and reports) for twenty big yield investments that we believe are worth considering. The list includes common stocks, preferred stocks, REITs, MLPs and BDCs, and we’ve broken it down into two groups: (1) Big yield investments with low volatility, and (2) Big yield investments with higher volatility and higher price appreciation potential.
Numbers 20 – 16 are Big Yield Investments with Low Volatility:
20. AmeriGas (8.2%, MLP)
AmeriGas Partners (APU) is a master limited partnership that offers a big, safe, 8.2% yield. It has a low beta, low volatility, and exceptionally high returns on its invested capital. It is currently trading an attractive price. And even though AmeriGas operates in an industry (propane sales) with downward long-term price pressure, its big distribution payments are still very safe for many years to come, especially relative to other big yield opportunities. AmeriGas is a standout “widows and orphans” investment. You can read our full AmeriGas report here.
19. Main Street Capital (6.6%, BDC)
Main Street Capital (MAIN) is a business development company with an attractive 6.6% dividend yield. And if you factor in the company’s periodic supplemental dividend payments then the dividend yield jumps to nearly 9%. Main Street’s business is focused on providing debt and equity financing to smaller mid-sized companies. In additional to its big dividend payments, we believe Main Street is an extremely attractive option for long-term investors because of its strong internal management team, diversified risk exposures, and low volatility. You can read our full Main Street Capital report here.
18. Liberty Property Trust (5.0%, REIT)
Liberty Property Trust is a big dividend REIT (5.3% yield) that has already climbed over 30% since we first highlighted it earlier this year. However, we believe it still has significantly more upside potential ahead, and it offers very low volatility. Liberty is greatly underappreciated by the market because it cut its dividend back during the financial crisis (and hasn’t increased it since then), and because it is in the middle of a multi-year transition to change its focus to industrial properties (and out of suburban office properties). We believe the transition is wise, LPT still offers more upside than many of its peers, and the company may resume dividend increases within the next year. You can read our full Liberty Property Trust write-up here.
17. HCP Inc. (6.9%, REIT)
HCP, Inc. (HCP) invests primarily in real estate serving the healthcare industry in the United States. The company currently yields 6.9%, and it has increased its annual dividend payment for 31 consecutive years. Regardless of HCP’s plans to spin-off its HCR ManorCare business in the second half of this year, we believe HCP presents a very attractive long-term investment opportunity right now. You can read our full HCP report here.
16. Frontier Communications (8.0%, Common Stock)
Frontier Communications (FTR) is a big dividend (8.0%) telecom stock that has carved out a niche for itself by operating in regions that are heavily subsidized. And they recently depended their foothold in that space with their April 1st $10.5 billion acquisition of assets from Verizon. We believe Frontier’s niche is attractive, the company easily covers its dividend payments, its current valuation is compelling, and the recent acquisition will give Frontier the cash flow to pay down debt and ultimately position for continued long-term success. You can read our full Frontier report here.
Numbers 15 – 11 are Big Yield Investments with higher volatility but more price appreciation potential:
15. American Capital (12.6%, REIT)
American Capital Agency (AGNC) currently presents an extremely attractive investment opportunity for income hungry investors to pick up big steady dividend payments (12.6%). The company’s most significant risks are another housing crisis and/or rapidly increasing interest rates, both of which seem very unlikely. In addition to it’s big dividend payment, we like American Capital because its market price is below its book value, we agree with management’s view of “lower for longer” interest rates, and the tail risks are remote. You can read our full American Capital report here.
14. Enterprise Products (5.6%, MLP)
Enterprise Products in a big dividend (5.6%) midstream energy services MLP that has only just begun to make up some of its losses since late 2014. We believe it is safer than many of its peers because of its continued access to growth capital. It inappropriately sold off with other MLPs, and it continues to present an attractive investment opportunity right now for income-focused investors. You can read our full Enterprise Products report here.
13. Plains All American (11.3%, MLP)
Plaines All American (PAA) is a high-yield MLP that currently trades for only slightly more than its book value, and a basic distribution discount model suggests the market is already pricing in a 40% distribution cut. We believe a distribution cut of this magnitude (or one at all) is unlikely given PAA’s high level of energy price agnostic fee business, the credit worthiness of its counterparties, and the fact that it is currently well capitalized. We also believe PAA has significant price appreciation potential, it will continue to pay attractive distributions, and it could be a valuable addition to the higher risk portion of a diversified, income-focused, investment portfolio. You can read our full Plains report here.
12. New Residential Mortgage (13.4%, REIT)
New Residential Mortgage (NRZ) is a big dividend (13.4%) mREIT that continues to trade at a discounted price. The company emerged in the mortgage servicing space following the financial crisis as banks had to shed risk and the mortgage markets became more complex. And we believe NRZ’s business can continue for many more years into the future. You can read our full NRZ report here.
11. Teekay Offshore (9.6%, Preferred Stock)
Teekay Offshore Partners is a marine energy transportation, storage and production company, and its preferred units currently offer an attractive 9.6% distribution yield. Teekay’s common units have declined over 70% in the last year, while the preferred units have declined around 15% during that same time period. The common units drastically cut their distribution payment earlier this year due to energy market and liquidity challenges, however we believe the cut is actually a good thing for the preferred units. Specifically, the common unit distribution cut frees up more cash to support the big preferred distribution payments which happen to be cumulative meaning Teekay must backpay unitholders if they ever skip or reduce a distribution payment (this is not the case for the common units). We believe Teekay preferred stock offers a great investment opportunity for income-focused investors, and you can read our full Teekay report here.
The remaining Top 10 Big Yield Investments Worth Considering are reserved for members only. You can view them in this week's Blue Harbinger Weekly. If you are not currently a member, consider a subscription.