This report shares data on over 100 Big-Dividend REITs, BDCs, CEFs and MLPs, and then highlights our top 8, including 2 from each category. And while these types of investments may seem dramatically different (they are), they all offer attractive high yields, and we currently own 7 out of the 8.
We start out this report by sharing data on 25+ big dividend opportunities from each category, and then we get into our top 8 in part 2 of this report.
25+ Big-Dividend REITs
Real Estate Investments Trusts, or REITs, are often an income-investor favorite because they can pay big steady dividends and because they give many investors a sense of long-term stability that helps them sleep well at night. REITs are also a lot easier to invest in than going out and buying actual real estate properties on your own (plus they’re a lot more liquid too).
To give you a sense of recent performance and dividend yields, the following table contains 25+ big-dividend REITs (sorted by industry).
The above table also provides a variety of additional metrics, including consecutive years of dividend growth, FFO coverage ratios, market cap, REIT industry, and others. You may recognize a few of you favorites on this list.
25+ Big-Dividend BDCs
Business Development Companies, or BDCs, basically provide financing (usually loans) to middle-market-sized companies. These are often the types of companies that are too small or too risky for traditional big banks to deal with (especially as big bank regulations have become increasingly stringent in recent market cycles). However, by bringing unique sills and by constructing a diversified portfolio of investments, BDCs can reduce some of the risks and provide compelling big-dividend investment opportunities.
To give you a sense of recent performance and dividend yields, the following table contains 25+ big-dividend BDCs (sorted by market caps).
The above table also provides a variety of additional metrics, including price to book ratios (a popular BDC valuation metric), market cap, and more.
25+ Big-Dividend CEFs
Closed-End Funds, or CEFs, are another income-investor favorite because they can offer very high yields and highly interesting price premiums and discounts versus the value of their underlying holdings (i.e. net asset value, “NAV”). Like mutual funds and exchange traded funds (“ETFs”), CEFs are pooled vehicles that hold many underlying investments (such as stocks and/or bonds, depending on the particular CEF strategy). However, unlike mutual funds and ETFs, there is no immediate mechanism in place to ensure CEF market price stay close to their NAVs, and as such—CEFs can trade at wide premiums and discounts (thereby creating unique risks and opportunities).
To give you a sense of recent performance, as well as premiums/discounts versus NAV, the following table contains 25+ big-dividend CEFs (sorted by strategies).
The above table also includes a variety of additional metrics, including leverage ratio (borrowed money), discount or premium (versus net asset value) and strategy/category.
25+ Big-Distribution MLPs
Master Limited Partnerships, or MLPs, provide another vehicle through which investors can capture high yields. However, MLPs offer their own unique sets of risks and benefits.
For starters, MLPs are basically publicly traded limited partnerships, that offer the tax benefits of of a private partnership, but also the liquidity benefits of a publicly traded company. And MLPs are effectively limited to the natural resources (and real estate) sectors.
However, investors should also keep in mind that MLPs generally come with the additional burden of annual K-1 tax filings, and they can create tax liabilities when held within supposedly tax deferred retirement accounts.
To give you a sense of recent performance and yields, the following table contains 25+ big-distribution MLPs, sorted alphabetically (note, the table also includes several midstream companies that technically are not MLPs, but still offer large yields). Midstream activities include the processing, storing, transporting and marketing of oil, natural gas, and natural gas liquids.
The above table also includes a variety of additional metrics, including EV/EBITDA, consecutive years of dividend growth, and forward (announced) dividend growth.
Top 2 Big-Dividend REITs:
WP Carey (WPC) is an attractively valued, 5.6% dividend yield, REIT that specializes in a diversified range of “operationally-critical, single-tenant” commercial real estate properties, including industrial, warehouse, office, retail, self-storage and others. WPC’s property portfolio displayed strong resiliency to the pandemic in 2020 and helped it come out of pandemic challenges relatively unscathed (especially as compared to other REITs). And looking ahead, WPC has a highly visible growth trajectory coming from built-in rent escalators, and from the aggressive investments it is making in the acquisition of properties, which is well supported by its ability access capital markets across geographies at beneficial pricing. We recently completed a detailed write-up on WPC, and you can access that report here.
AGNC Investment Corp (AGNC) is a is a mortgage REIT offering a 9.0% dividend yield (paid monthly). Significantly different than property REITs (such as WPC), AGNC invests primarily in agency Mortgage Backed Securities (MBS). Agency MBS are safer than the non-agency MBS that many of AGNC’s peers are investing in (agency MBS are essentially backed by US Government Agencies). And AGNC currently trades at a discounted 0.92 price-to-book ratio, which we consider attractive. You can view our previous full report (from earlier this year) on AGNC here.
Top 2 Big-Dividend BDCs:
Ares Capital Corporation (ARCC) is a business development company (BDC) that provides direct loans and other investments to privately-held US middle-market companies (usually with annual EBITDA (earnings before interest taxes depreciation and amortization) between $10 million and $250 million). And it currently offers an attractive 7.9% dividend yield. Furthermore, AGNC is healthy and has advantages over its peers, such as its large size, seasoned management team and strong balance sheet. It also has a track record of 46 consecutive quarters to stable or growing dividend payments. Further still, the company’s loan portfolio and investment income continue to grow faster than its share price (a good thing). You can access our previous full report (from earlier this year) on Ares Capital here.
Owl Rock Capital Cop (ORCC) is an externally managed business development company (“BDC”), offering an 8.8% dividend yield, and focused on providing debt financing and other investments, primarily to US based middle-market companies. It was founded in 2016 and went public in 2019, and in a relatively short span of time, ORCC has grown into the second largest publicly traded BDC in the US. It has a strong balance sheet, impressive access to deal flow, and currently trades at an attractively discounted price to book value (0.95x). We wrote this one up (back in June), and for all the details you can access that report here.
Top 2 Big-Dividend CEFs:
PIMCO’s Dynamic Credit and Mortgage Income Fund (PCI) is an attractive, multi-sector, fixed-income BDC, currently offering a 9.7% yield (paid monthly), and relatively attractive price versus NAV (especially) for a PIMCO fund. This fund will imminently be merged into a similar PIMCO CEF (PDI) within the next month, and we may even see a slight dividend reduction; however the assets the two funds hold are attractive, and will continue to be attractive following the merger. You can read our recent full report on this pending merger here.
BlackRock’s Credit Allocation Trust (BTZ) is another attractive multi-sector, fixed-income BDC that pays monthly and currently offers an attractive 6.6% yield. And this one will help you avoid the drama of PIMCO. BTZ also trades at a small discount to NAV (a very good thing in our view). It also has lower fees, lower leverage, and less drama than PIMCO. BlackRock is worldclass, and we continue to own these shares for the attractive holdings and the attractive, steady, long-term income.
Top 2 Big-Dividend MLPs
Enterprise Products Partners L.P. (EPD) operates one of the largest integrated networks of midstream infrastructure for natural gas, natural gas liquids (NGL), crude oil, petrochemical and refined products in the US. And it has grown it’s dividend (currently yielding 7.8%) for more than 10 consecutive years (as you can see in our chart above). This one has only gained in strength as energy prices have strengthened, and you can view our previous full reports on EPD here.
Energy Transfer (ET) is one of the largest and most diversified midstream pipeline operators in the US, and it currently offers an attractive 6.3% distribution yield. In recent quarters, Energy Transfer has been successfully deleveraging its balance sheet and positioning for future distribution increases (and strengthening energy prices have helped a lot). Yet despite the recent strong price gains, the company continues to trade at discount to peers and has more upside ahead considering the healthy fundamentals. You can access our previous full report on Energy Transfer here.
The Bottom Line
If you are an income-focused investor, it can make a lot of sense to select attractive opportunities from across a variety of categories, such as those described in this report. By prudently diversifying your high-income investments, you can reduce your total portfolio risk. And even when market prices get volatile, it’s very nice to keep receiving those big steady income payments.
For reference, you can view all of our current holdings here.