I have been turning up the dial to add more income to my portfolio. That’s because the low interest rate…low economic growth environment says it’s the easiest game in town for investors to find outperformance.
So yes, its not hard finding stocks paying more than paltry 1.6% yield of the 10 year Treasury. Nor is it difficult finding other conservative growth companies paying 2-5% yields. My recent articles are chock full of those picks:
However, this article is not about adding a little more income to your portfolio. It is about getting “downright greedy” with income stocks paying well above the market norms.
For example, the 8% yield from Oaktree Capital Group (OAK - Get Rating). This investment management firm also has increased their dividend by an average of 11.4% per year over the last 5 years. So it tells you the income should keep growing and flowing into the future.
But guess what?
Oaktree Capitals is actually the lowest dividend yield payer in this group of 8 elite income stocks. As you dig in deeper into the list you will find yields all the way up to 11.1%.
However, focusing on just top dividend payers is a treacherous game. Often they are fundamentally weak companies whose future growth potential harms their ability to maintain or increase the dividend payments into the future.
Because of this concern I put in some additional checks and balances into my stock search to increase the odds of owning healthy income stocks. And by healthy, it means where I see good odds for them to actually increase dividend payments into the future.
Let’s dig into the specifics of this stock search to appreciate the unique attractiveness of these top end income payers:
1471 stocks with a POWR Ratings of A and B. Always gotta start the party with our proprietary ratings model that finds stocks with the best momentum and timeliness.
70 of those stocks have 8% dividend yield or higher. So this single criteria quickly got rid of 95% of the potential candidates.
19 of those stocks have grown dividend payments by greater than 5% per year for the past 5 years. And as you will see in the table below, actually more than half of the final selections had dividend growth north of 10%.
The logic of this criteria should be apparent. That these stocks with increased dividends in the past are more likely to keep up that trend in the future. But also it is hard to pay more dividends if the company is not producing enough earnings and cash flow to make it happen. So this is an important health check on the operational strength of the firm.
8 of those stocks have seen earnings estimates stable to higher over the 4 weeks. This is in place because we just came through earnings season. So under the heading of “what have you done for me lately?”…we want to see if the recent earnings results led Wall Street analysts to cut estimates. If so, that is a warning sign and a reason to shy away from those shares.
OK…you get the idea. These are not just your ordinary high yield stocks. They have been specifically selected to also provide proof of operational strength, history of dividend increases, growth prospects in tact and ample momentum. See all 8 below.
|Company||Ticker||Price||Market Cap ($mil)||Div Yield %||Div Growth %|
|Holly Egy Ptnrs||HEP||$27.67||$2,918||9.72||6.29|
|Arbor Rlty Trst||ABR||$12.54||$1,183||9.25||18.41|
|Great Ajax Corp||AJX||$14.61||$287||8.76||25.27|
|Newtek Bus Svcs||NEWT||$22.40||$429||8.21||22.57|
|Oaktree Cap Grp||OAK||$52.22||$8,336||8.04||11.43|
What to Do Next?
Click on the tickers for the stocks that appeal to you the most. That will take you to the quote page on StockNews.com where you can research these stocks further.
Here is another idea.
Like I said up top, I am adding a lot more income to my portfolio of late. In fact, I have 6 quality dividend payers that also have attractive capital appreciation potential. Plus 3 more aggressive picks with the right combination of growth, value and momentum.
OAK shares were unchanged in after-hours trading Thursday. Year-to-date, OAK has gained 36.61%, versus a 18.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|OAK||Get Rating||Get Rating||Get Rating|
|DKL||Get Rating||Get Rating||Get Rating|
|EVA||Get Rating||Get Rating||Get Rating|
|HEP||Get Rating||Get Rating||Get Rating|
|NEWT||Get Rating||Get Rating||Get Rating|