3 High Dividend Stocks Going Ex-Dividend Next Week

There are several dividend stocks going ex-dividend next week, (3/25/13 – 3/3/29/13) from the Financials section of our High Dividend Stocks By Sector Tables. The following 3 stocks are mortgage Real Estate Investment Trusts, or “mREITS”, as they are popularly known. They invest in mortgage-related securities, issued by government agencies, such as Fannie Mae and Freddie Mac, and use leverage to achieve high dividend yields.

Dividends: CMO increased its quarterly dividend to $.31, from $.30, while NLY and RSO maintained their dividend payouts this quarter. RSO maintained a $.25 quarterly dividend from late 2009 through 2011, but it dropped its quarterly payout to $.20 in 2012. Prior to the housing crisis, RSO paid as high as $.41. NLY dropped its dividend payout twice in 2012, to $.55, and then to $.50, before seemingly stabilizing at $.45 in Dec. 2012.

CMO-NLY-EXDIV

As REIT’s, they must pay out at least 90% of their income, in exchange for paying no corporate income taxes, hence their high dividend yields. Even with the decrease in dividend payouts, these yields are still quite high:

CMO-NLY-DIVYD

Current Valuations: The smallest stock by Market Cap, RSO’s P/E is closest to the low end of its 5-year P/E range, but CMO is the cheapest on a Price/Book basis:

CMO-NLY-PB

Options: Although all 3 of these stocks have options, we don’t list them in our Covered Calls Table or our Cash Secured Puts Table, due to low options yields. However, there over 30 other high yield trades in each of those free tables, which are maintained daily.

Financials: All 3 firms have similar Returns On Equity. RSO carries the least debt, and lags in Return On Investment and Interest Coverage:

CMO-NLY-ROE

Performance/Ownership: RSO has outperformed CMO and NLY in 2013, and over the past 52 weeks, partly due to its higher support from institutional and inside buyers:

CMO-NLY-PERF

Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author owned CMO and NLY shares at the time of this writing.

 

3 High Dividend Stocks With Heavy Institutional Buying

By Robert Hauver

Wondering what high dividend stocks the big boys have been buying during the pullback? So were we, so we screened for high dividend paying stocks with heavy institutional buying over the past quarter, and came up with 3 foreign dividend stocks –  2 Energy stocks, and a Utility stock, all 3 of which are listed in our High Dividend Stocks by Sector Tables :

NGG-PGH-YPF-INSTIT

Even with these big increases in institutional buying, these 3 foreign dividend stocks still have a lot of room to grow for more institutional ownership.

Financial Metrics:

NGG-PGH-ROE

YPF and NGG pay semi-annual dividends, which is fairly typical of many foreign stocks, while PGH is a former trust which converted to a corporation on Jan. 1, 2011, as did many Canadian trusts, due to the change in Canadian tax laws.

PGH’s anemic Return on Equity of only 4.24% is typical of many Canadian Oil & Gas exploration firms, which finance their expansion through issuing shares, vs. taking on a heavy debt load. Their dividend payout ratio is also misleading, since, like many energy firms and MLP’s, PGH typically gauges its dividends more on distributable cash flow. Their annual earnings release stated that, “During 2010, Pengrowth’s distributions declared and capital expenditures were 95% of operating cash flow (before changes in working capital) with the remaining cash being used for debt reduction.”

Valuations:

NGG-PGH-PEG

Not surprisingly, energy stocks PGH and YPF sport much lower PEG’s for their next fiscal years than utility stock NGG does.  It’s tough to find utility stocks with attractive growth figures, due to the heavy regulation in the utility industry.  Analysts aren’t currently impressed with PGH’s long-term growth prospects however, while YPF has the most attractive 5-year PEG valuation of the group.

PGH’s 1.24 Price/Book valuation is much lower than its peer group avg. of 2.55, while YPF’s 3.54 P/Book is higher than its Integrated Oil & gas peers’ avg. of 2.16.  NGG’s 2.26 P/Book is also higher than its peers.

So, other than high dividend yields, what else is attracting institutional buyers to these stocks?

Here are 2 compelling metrics that may be the answer:

NGG-PGH-EBITDA

2 out of 3 firms have low EV/EBITDA ratios, while all 3 have much lower Price/Cash Flow/Share than their Industry peer groups.

Share Performance/Technical Data:

NGG-PGH-PERF

Another attraction is probably the low beta’s for NGG and YPF. As a utility, NGG has also benefited from its defensive sector being the second leading sector year-to-date, and in the past quarter.

Covered Calls:

You can easily double your dividends by selling covered call options for these foreign dividend stocks, as all 3 have call options that equal or exceed their dividend payouts over the next 7-8 months:

NGG-PGH-CALLS

You can find more details for these and other covered call sales in our Covered Calls Table.

Cash Secured Puts:

If you to be more conservative, selling cash secured put options will give you a lower break-even price, with fairly high option yields also.

You can find more details for these and other put options sales in our Cash Secured Puts Table.

NGG-PGH-PUTS

Note: Put sellers don’t receive dividends – we only list them in our tables for comparison. In the above examples, the put options range up to over 2.5 times the dividends’ values.

Disclosure: No positions yet.

Disclaimer: This article is written for informational purposes only, and isn’t intended as investment advice.

2 Undervalued Financial High Dividend Stocks

By Robert Hauver

Looking for undervalued high dividend stocks? Check out the unloved Financials sector, which is barely up 1% year to date, and lags all other sectors.  Business Development Companies, (BDC’s), are a sparsely-covered Financials sub-industry with some high dividend paying stocks, and low PEG ratios.  In this article we’ve also included an undervalued private equity firm which uses mezzanine debt.

BDC’s are similar to venture capital funds, in that they’re created to help grow small companies in the early development stages. Many BDCs are set up much like closed-end investment funds and are listed on the NYSE, AMEX and Nasdaq. A big difference between a BDC and a venture capital fund is that BDCs allow smaller investors to invest in startups. BDCs have become popular because they provide permanent capital to their management, they allow investments by the general public and they use mezzanine financing opportunities, among other reasons.

Here are 2 dividend stocks we found that currently look undervalued on a PEG ratio basis. (We’ve also added them to our High Dividend Stocks by Sector Tables🙂

Prospect Capital (PSEC): Founded in 1988, with an IPO in 2004.  A mezzanine debt and private equity firm that manages a publicly-traded, closed-end, dividend-focused investment company which completed its IPO in 2004. PSEC primarily provides non-control debt financing to management teams or financial sponsors as well as selectively making control acquisitions by providing multiple levels of the capital structure. Using both partnership and publicly traded closed-end structures, Prospect has invested more than $2.5 billion since its inception in 1988 in multiple asset classes. Prospect seeks investments with historical cash flows, asset collateral, or contracted pro forma cash flows. Prospect’s mutual fund has paid a continuous, regular dividend since inception.  Although its past expertise has been in the energy and industrial sectors, Prospect Capital has broadened its scope to include healthcare, manufacturing, and specialty minerals among others.

Solar Capital (SLRC): Founded in 2007, SLRC invests primarily in leveraged, middle-market companies in the form of senior secured loans, mezzanine loans and equity securities. SLRC invests in a very broad range of industries, and also invests in equity securities, such as preferred stock, common stock, warrants and other equity interests received in connection with its debt investments or through direct investments. The firm also invests in United States government securities, high-quality debt investments that mature in one year or less, high-yield bonds, distressed debt, non-United States investments, or securities of public companies that are not thinly traded.

Financial Ratios:

PSEC-SLRC-ROE

Both firms have similar operating margins, but SLRC has the edge on Mgt. ratios, and it has a lower overall debt load.

Dividends:

PSEC-SLRC-DIVS

Both firms currently have high dividend yields, but the dividend history for SLRC is very short – they just started paying dividends in March 2010. PSEC converted to monthly dividends in June 2010 – its next monthly ex-dividend date is May 26, and it has already posted monthly ex-dividend dates and payout dates through August on its website.

Valuations:

PSEC-SLRC-PEG

PSEC is trading near its 5-year low P/E. Both firms are also way below the Benjamin Graham 22.5 ceiling for P/E times Price/Book, with PSEC at 9.53, and SLRC at only 6.16. SLRC looks undervalued in the near term, with a 12 month PEG of only .48, whereas PSEC has a lower long-term PEG of .64.

Performance/Technical:

PSEC-SLRC-PERFCE

Both stocks have room to grow for more institutional ownership, although PSEC looks like it has much more. PSEC is also closer to oversold territory, with a Relative Strength Index of 41.87.

Disclosure: No positions as of yet.

Disclaimer: This article is written for informational purposes only

Calling Down Under-2 Foreign High Dividend Stocks In The Telecoms Sector

By Robert Hauver

The Telecoms sector has stood out as one of the few sectors that maintained its high dividend yields through the financial crisis.  Indeed, both wireless and land-line dividend paying stocks in this sector have continued to reward investors with high dividend payouts, even as other sectors, (notably Financials), had to eliminate or slash their payouts:

SP-2010-SectorDivAvgs

(Data Source: Standard & Poor’s)

As the above table illustrates, the Financial sector slashed its dividends over 68%, and several sectors’ current dividend yields fall below the current S&P avg. dividend yield of 1.81%.  An interesting development, (hopefully an ongoing trend), is that the Tech and Energy sectors actually increased their avg. dividend payouts by over 32% and 42% respectively.

If you follow the logic of diversifying your portfolio overseas, but still maintaining an attractive dividend yield, here are 2 foreign Telecoms that are listed in our High Dividend Stocks by Sector Tables, that you may want to research further:

New Zealand telecom (NZT): NZT is the dominant firm in the New Zealand market, and is made up of five customer-facing businesses: Chorus; Telecom Wholesale & International; Telecom Retail; Gen-i and AAPT..

NZT pays dividends quarterly, and their next ex-dividend date is Feb. 23rd, and the payment date is March 18th, with a payout of 13.31 cents/ADS. (One ADS American Depository Share equals 5 ordinary New Zealand shares.

For 2011 NZ Telecom will target a dividend payout ratio of approximately 90% of adjusted net earnings. Subject to there being no adverse change in operating outlook, a dividend of 3.5 cents per share, (5 x this for ADS shares), will be paid for the first three quarters and the dividend for the fourth quarter will be set to reflect the full year targeted payout ratio.”   Reduced tax rates (often 15%) generally apply to non-resident shareholders who are entitled to the benefit of an international tax treaty (such as US, Australian and UK shareholders with less than 10% holdings in Telecom – for which NRWT is deducted at 15%). NZT will also pay a supplementary dividend of 0.6176 cps to those shareholders who are not tax resident in New Zealand.” (Source: NZT website)

Telstra (TLSYY): Australia’s dominant market player, and offers a full range of services and compete in all telecommunications markets throughout Australia, providing more than 8.6 million Australian fixed line and 10.5 million mobile services, including 8.2 million 3G services.

Telstra also owns 50% of FOXTEL, whose international businesses include:

  • The Telstra International global networks and managed services business that has more than 1,100 Points-of-Presence throughout Australia, Asia Pacific, Europe and the U.S.
  • CSL– Hong Kong’s leading mobile network operator.
  • China search and advertising businesses, including the Sequal businesses – Pcpop, IT168, Autohome and CHE 168, the Octave businesses – Sharp Point and ChinaM and LMobile and China Bar.
  • 50% cable joint venture with PCCW in REACH – a premier provider of international voice and satellite services in Asia.

Telstra will benefit from the newly Government-approved plan to build a nationwide broadband infrastructure.

Here’s an excerpt from the Wall St. Journal’s Feb. 10, 2011 interview with Jason Brady, CFA, Managing Director for Thornburg Investment Management:

TWST: What are some of your major holdings right now in each fund and why do they hold those positions?

Mr. Brady: Let’s start with the Income Builder. Our bigger holdings are dividend-paying stocks. One of the biggest overweights on stocks we have from the sector perspective is global telecom.

Our largest holding right now is Telstra (TLS.AX,TLSYY), which is basically the incumbent telecom provider of Australia and is not tremendously expensive. Using Bloomberg numbers, the forward p/e is about 10. The gross yield before taxes is about 14%. Obviously, there are some taxes and other fees there, but there is a significant income component, and we believe that this company has stable cash flows and earning power. If you are getting a 10%-plus income stream and a 3% to 5% earnings growth, that is a nice holding. It is not a tremendously complex business. That’s a pretty attractive holding for us. It’s got some growth, it’s certainly got income, and that combination and the parameters of the company make it one of our largest holdings. (Source: Wall St. Journal)

Although their interim 6-month earnings ending 12/31/10 declined, Telstra picked up almost 1 million additional customers in the past 6 months, (around half of them for mobile services), their highest subscription rate in the past 10 years.

Telstra pays dividends twice a year, in February and August. Their next ex-date is approx. Feb. 18th, with a payout date of March 25th., and an approx. dividend payout of $.70/ADS, depending upon currency exchange.  (One Telstra ADS = 5 Australian ordinary shares.)

Telstra trades in the U.S. on the Pinksheets, and New Zealand Telecom ADS’s also trade in the U.S., on the NYSE.

Here are selected metrics for both firms:

NZT-roe-2011-02-11

In addition to offering higher dividend yields than industry avgs., both firms appear to be conservatively leveraged, and have high gross margins.

Valuations:

NZT-PEG-2011-02-11

Disclosure: Author is long shares of NZT and TLSYY.

Disclaimer: This article is written for informational purposes only.