The best US dividend-paying stocks

The best US dividend-paying stocks


Today, we will touch upon the companies whose dividends are not only high, but also consistent with profits and are steadily paid over the years. Long-term investors seek dividend stocks as a source of passive, non-speculative income, however it is crucial to find a balance between the size of the dividend and the investment’s overall risk level.

Today we’re talking about the US companies meeting the following criteria:

— The dividend is steadily paid at least for the past 7 years.

— The dividend does not exceed the company’s profits. In other words, the company’s P/E ratio multiplied by the dividend payout ratio does not exceed 100%.

— The company has a P/E ratio of at least 3. That means the company is not extremely undervalued.

— The company has a market cap of at least $150M.

— If the company’s shares fell over the year and the slide was not more than 60%.

As a result, we’ve got a selection of interesting companies with high investment attractiveness. Not only all of them have very high dividend yields (10–12%), but their P/E ratios are also quite low (3–9), so they are unlikely to face a significant drop in share prices. Most of these companies are investment funds. Some of these funds, such as Income are fundamentally focused on paying high and stable dividends.

The review is based on data from The letter «M» stands for millions, «B» for billions.

1. TICC Capital

TICC Capital office

— Symbol: TICC

— Exchange: NASDAQ

— Market cap: $351M

— Annual turnover: $69M

— P/E ratio: 4.1

— Dividend yield: 11.8%

— Payout ratio: 49%

— Consecutive years of dividend payment: >13

— Share price change YoY: +17%

Description. An investment company that invests primarily in corporate debt securities, both independently and jointly with other financial organizations.

Chart. The company’s shares were relatively high in 2012–2013, but then in 2014–2015 they halved, and now are slowly climbing back again. The company pays dividend quarterly, the dividend yield is very stable and almost does not depend on the share price. Only in 2016, when the shares dipped to a record low, the company halted the dividend payment, but since then have returned to the usual schedule.

Pros. Extremely stable dividends, largest in this review, low P/E ratio.

Cons. No significant disadvantages were found.

In our previous forecasts. TICC Capital was featured in our similar review in the second half of June 2017. At the time we ranked its investment attractiveness as high, with about the same advantages as we have noted now. The shares then traded at about $6.34–7.13. Now the price is $6.70, and since then the dividends of $ 0.20 per share have been paid once. Thus, depending on the time of purchase of shares, the profit could be from −0.23 to +0.56 per share, which is within the standard error.

2. AllianzGI Convertible & Income Fund I, II

Allianz office

— Symbols: NCZ, NCV

— Exchange: NYSE (New York Stock Exchange)

— Market cap: $467M, $632M

— Annual turnover: $55M, $72M

— P/E ratio: 3.2, 3.4

— Dividend yield: 11.0%, 10.9%

— Payout ratio: 36%, 37%

— Consecutive years of dividend payment: >14

— Share price change YoY: +6

Description. Two similar investment funds run by Allianz Global Investors. They invest in US bonds and stocks in various industries, including tech, finance, retail, healthcare, energy, media, and telecommunications. Both funds aim at providing their investors with a high permanent income. Their dividend yield is usually about the same, and the stock prices move in the same direction.

Chart (NCV). The shares of AllianzGI Convertible & Income, much like the ones of TICC Capital, were relatively high in 2013–2014, then halved in 2015, and now are traded somewhere in between. The company pays dividends on a monthly basis; their size is very stable and only in 2015 it was reduced from $0.09 to $0.07 per share due to the decline in the share price (and it is worth noting that the shares fell much more than the dividends).

Pros. Huge and extremely stable dividends with a long record of consecutive payment, lowest payout ratio in this review, very low P/E ratio.

Cons. No significant disadvantages were found.

3. Alliance Holdings GP (LP), Alliance Resource Partners (LP)

Workers at the Alliance factory

— Symbols: AHGP, ARLP

— Exchange: NASDAQ

— Market cap: $1.6B, $2.5B

— Annual turnover: $1.9B, $1.9B

— P/E ratio: 7.9, 4.5

— Dividend yield: 10.6%, 10.5%

— Payout ratio: 84%, 47%

— Consecutive years of dividend payment: >11, >16

— Share price change YoY: +5, –14

Description. Two limited partnerships operating as parts of Alliance Resource family of companies (est. 1971). The companies produce mostly steam coal. It’s common for mining and energy enterprises to have a complex structure, where industrial businesses, management companies and investment partnerships are present as separate entities. All of them are traded as separate companies. It’s also common for limited partnerships to pay steady dividends but show high volatility in terms of stock prices. However, their success depends mostly on the whole family, or even the entire industry.

Chart (AHGP). The shares of Alliance Holdings saw an all-time high in 2014, followed by a dramatic decline caused by the crisis in the mining industry in general. In 2016, the crisis eased, and the company’s shares rose again. The company’s dividends depend on the share price, although until early 2016 they remained very high. Then the dividends declined, but they are still very high in relation to the share price.

Pros. Huge and stable dividends with a longest record of consecutive payment in this review (ARLP); low P/E ratio.

Cons. Overall hazy prospects of coal industry.

In our previous forecasts. Alliance Holdings (AHGP) was featured in our similar review in August 2016. Then we evaluated this company as formally investment-worthy, but not completely reliable due to the industry’s problems. At the moment the company’s shares are traded at $20–25. Now the share price is $27, and the dividends have been paid steadily, with a sharp increase in August 2017. That means, those who had invested in these stocks in August 2016 could now receive a profit of $4–9 per share, or 16 to 45 per cent. Not bad at all!

4. Chimera Investment

Image from the Chimera’s site

— Symbol: CIM

— Exchange: NYSE

— Market cap: $3.6B

— Annual turnover: $952M

— P/E ratio: 5.5

— Dividend yield: 10.5%

— Payout ratio: 57%

— Consecutive years of dividend payment: >10

— Share price change YoY: +19%

Description. A major investor in real estate. The сompany invests both in real estate development and in real estate-related securities.

Chart. Chimera Investment’s shares hit a local peak in 2011, but by mid-2012 fell twofold. In 2013, the stock has partially regained its value and is traded between $14 and $17 since then. The company pays dividends four times a year. The dividends are quite stable at about $2 per share.

Pros. Huge and stable dividends, stable share price, low P/E ratio.

Cons. No significant disadvantages were found.

In our previous forecasts. We have mentioned Chimera Investment in our review in January, 2017. At the time we ranked its investment attractiveness as high, with merely the same advantages as we have mentioned in this review. The company’s shares then traded at about $17.5, and now the price is $19. There were 4 dividend payments for a total of $2 per share. Thus, the investors could receive profit of about $3.5 per share, or more than 20 per cent, in less than a year.

5. Guggenheim Strategic Opportunities Fund

Guggenheim office

— Symbol: GOF

— Exchange: NYSE

— Market cap: $394M

— Annual turnover: $39M

— P/E ratio: 5.3

— Dividend yield: 10.3%

— Payout ratio: 54%

— Consecutive years of dividend payment: >10

— Share price change YoY: +11%

Description. An investment fund focused mainly on fixed income securities: income funds, corporate and government bonds, preferred shares, etc. The fund also diversifies risks by investing in ordinary shares. The fund is managed by the famous investment agency- Guggenheim.

Chart. The fund’s share price hit an all-time high in 2013. Then in 2015 it fell almost by half, but bounced back in 2016. The company pays an extremely stable annual dividend of $2.16 monthly.

Pros. Huge and extremely stable dividends, low P/E, good share price trend in 2016.

Cons. No significant disadvantages were found.

In our previous forecasts. Guggenheim Strategic Opportunities Fund was featured in our similar review in the second half of June 2017. At the time we ranked its investment attractiveness as high, with about the same advantages as we have now. The company’s shares traded back then between $21.02 and $21.15, and now the price is $21.27. There were 2 dividend payments for a total of $0.36 per share. That means, the investor’s profit could amount to $0.50–0.61, or 2.4–2.9 per cent, in just 3.5 months.

6. Apollo Commercial Real Estate Finance

Image from the Apollo’s site

— Symbol: ARI

— Exchange: NYSE

— Market cap: $1.9B

— Annual turnover: $264M

— P/E ratio: 8.7

— Dividend yield: 10.1%

— Payout ratio: 88%

— Consecutive years of dividend payment: >7

— Share price change YoY: +11%

Description. A major real estate investment trust. The company manages commercial first mortgage loans and invests in various commercial real estate-related securities.

Chart. The shares of Apollo Commercial Real Estate are quite stable. Over the past few years, their prices have been fluctuating in the range of $15–19, with a slight positive trend. The dividends — paid four times a year — are very stable and they gradually grow (from $0.40 to $0.46 since 2014).

Pros. Huge and stable dividends, stable share price tending to grow.

Cons. The shortest record of consecutive payment in this review, highest P/E ratio in this review (although not too high by common standards).

7. Dynex Capital

Dynex Capital’s top management

— Symbol: DX

— Exchange: NYSE

— Market cap: $352M

— Annual turnover: $92B

— P/E ratio: 4.3

— Dividend yield: 10.1%

— Payout ratio: 47%

— Consecutive years of dividend payment: 10

— Share price change YoY: –4%

Description. A real estate investment trust, aiming to provide investors with stable dividend income. The company invests mostly in mortgage loans and securities.

Chart. The Dynex’s shares, similar to some other companies in this review, hit the local peak in 2013 and bottomed in early 2016. Now the stock is still relatively cheap. The company pays dividends four times a year, their size depending on the share price. Today the dividends are not as high as before, but it’s still a great deal.

Pros. Huge dividends, low P/E ratio.

Cons. No significant disadvantages were found.

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