Average dividend yields available in the market place.
I am an income investor and a yield chaser.
I have built my investment portfolio on a foundation of preferred stocks & ETD securities
Introducing the Hot & Spicy Preferred Stock Portfolio with 15 issues that offer yields of 7.9% to 9.6%
I consider myself to be an “income investor”. I focus 99.9% of my efforts into investing in securities that provide at least a 6% yield. This focus has come about from realizing that I have not been a successful investor who invests for appreciation. I slowly began to see the value in investing in securities that offered regular income. As this change took place, I began to recognize the different ways to invest for income and in the many classes of companies and securities that paid dividends or interest. Here is a breakdown of the average yields that are currently available in the marketplace from various classes of investments. Much of the information is obtained from the stocks that I track.
Dividend Champions. 135 public companies that have increased
dividend 25+ years in a row
Dividend Contenders. 222 public companies that have increased
dividend 11-24 years in a row
Dividend Challengers. 517 public companies that have increased
dividend 5 – 10 years in a row
Real Estate ETF. Broad holdings of REITS, mortgage REITS, financials,
diversified financials, real estate sectors
Traditional preferred cumulative stocks. 283 issues.
Commercial REITS. 16 public commercial REITS.
Business Development Companies. 40 public companies.
Midstream / MLP. 40 public companies that are
involved with midstream energy and pipelines
Mortgage REITS. 22 public mortgage REITS.
Yield and Risk
general, as the yield increases, the risk also increases. The lowest yield class are from companies
designated as Dividend Champions. These are companies that have a history of
increasing their dividends for 25 and more years in a row. That is quite a record. They deserve to be classified as low
risk. At the other end of the table are
the companies that have the highest yield, the mortgage REIT companies. That top spot does not come easily. Investors have voted with their dollars. Investors have said that the only way they
will invest in them is if the yield is high enough to compensate for the risk.
Each of these classes provide benefits to investors; however, as an income investor that invests on higher yielding securities, I have built my investment portfolio on a foundation of securities that yield more than 6%. As an admitted “Yield Chaser”, I have learned the hard way that risk must be taken into account. Yield and Risk are the 2 sides of my investment scale.
Preferred Stocks & ETD Securities
Over the last 10 years, I gravitated to companies
with high yields that provided reasonable risks for safety and the ability to
pay their distributions on a sustainable basis. Higher yields generally meant
lower or no dividend growth, but I was happy with generating a higher immediate
return rather than waiting for the income to grow over time. The good news for me is that there are many
choices especially when I focused my search on Preferred Stocks and ETD
securities. From viewing the above
table, there are several asset classes with yields higher than preferred stocks
& ETD securities, but the risks are generally higher. It is
interesting that many of the stocks in the higher yield classes have issued
preferred stocks where risks are lower. There
are currently 8 cREITS, 14 mREITS and 29 BDC that have issued preferred stocks
or ETD securities.
I am currently
tracking over 600 preferred stocks & ETD securities with a par value of $25
(I do not count convertibles). These
include 283 preferred cumulative stocks, 143 preferred non-cum stocks, 18 trust
preferreds and 170 ETD Securities. I now
consider Preferred stocks and ETD securities as the foundation of my Income
There are several
reasons why I feel comfortable owning a large number of preferred stocks &
ETD securities. First, I consider myself
to be a long-term investor. I do not
trade. I buy for the long haul. Preferred stocks are safer than the common
stock of their parent company and ETD securities are safer than the preferred
stocks. Next, preferred stocks cannot
stop paying the dividend unless they are in real trouble and not before they
stop paying the dividend on their common stock.
That is very important as it provides a buffer or hurdle that must be
crossed before the parent company can stop paying the preferred dividend. Then, most preferred stocks have the benefit
of being “cumulative”. This means
that if they are forced to stop or delay paying the dividend, they must
accumulate those missed payments and pay them back to the investor within a
certain period of time.
These are not all the
benefits, but it gives you an idea of some of the beneficial features of owning
a traditional preferred stock. Yes,
there are preferred non-cum stocks, but those are issued by companies that are generally
considered stronger than the traditional cumulative preferreds. There are also
ETD securities, which are even safer than preferreds as they are a debt and
debts are higher on the list if it comes to the company being liquidated.
Interest Rates & Preferred & ETD
One of the issues
that many investors point to for not investing in preferred stocks & ETD
securities is that they are sensitive to interest rate fluctuations. If interest rates rise, then market prices
have a tendency to drop. I recognize
that this relationship is true, but many have missed out on this great class of
investments for many years only to find that most preferreds & ETDs are
currently at or above par. If you are a
long-term investor, the key is income, not the price. Interest rates fluctuate just like the economy
does. If interest rates increase today
and into the future, they will eventually change direction and fall once the
economy falters. Learn to take advantage
of those changes.
Yes, interest rates
have increased, but many analysts feel that interest rates have peaked or
stabilized. We can see this trend in the
10-year treasury rate. During 2018, it
increased to over 3%, but has now dropped to around 2.5%. These are sweet words for the preferred
stock investor as stable rates means a stable market for interest sensitive
Hot & SpicyPortfolio of Higher
Yielding Preferreds Stocks
Besides being an income investor, I admit that I am a “Yield Chaser”. However, that doesn’t mean I throw caution to the wind. I do my best to limit the risk while still reaching for higher yields. While tracking over 600 Preferred stocks & ETD securities, I have created several portfolios of issues that help to narrow the list of acceptable securities. One of the portfolios is the Hot & Spicy portfolio of 15 preferred issues with yields from 7.9% to 9.6%. We all know that yields this high usually mean higher risks, but after doing research using some of the metrics shown below, I have found the rewards just may be worth the risk. I think that many investors may also feel comfortable adding a few of these Hot & Spicy issues to their portfolio.
Here is more
information about each preferred stock listed in the Hot & Spicy portfolio.
AHT-G. Parent is AHT. Ashford Hospitality Trust is a
real estate investment trust (REIT) focused on investing opportunistically in
the hospitality industry in upper upscale, full-service hotels. The current
price is $22.96 with a yield of 8%. Even though the GAAP earning is poor, the
Non-GAAP AFFO earnings shows a much better record of earnings. The parent has a dividend payout ratio of
.41 and a preferred stock dividend payout ratio of .40. Achilles Research wrote an article on 3/26/19
with a positive takeaway.
CAI-A. Parent is CAI. CAI International, Inc. operates as
transportation finance and logistics company in the United States and internationally.
The company operates through three segments: Container Leasing, Rail Leasing,
and Logistics. It leases, re-leases, and disposes equipment; and contracts for
the repair, repositioning, and storage of equipment. The current price is $25.10 with a yield of
8.5%. CAI reports the last 5 years as
being profitable and 4 out of 5 quarters being positive. The parent does not pay a stock dividend, but
the preferred stock dividend has a very respectable payout ratio of .07. There have been several recent positive articles
from SA authors.
CHMI-A. Parent is CHMI. Cherry Hill Mortgage Investment Corporation,
a residential real estate finance company, acquires, invests in, and manages
residential mortgage assets in the United States. The company manages a
portfolio of servicing related assets, residential mortgage-backed securities
(RMBS), and prime residential mortgage loans, as well as other residential
mortgage assets. The current price of CHMI-A is $25.25 with a yield of
8.1%. CHMI has reported 5 consecutive
years of profits and 4 out of 5 quarters of profits. It reports a stock dividend payout ratio of
.71 and a preferred stock dividend payout ratio of .14.
CMRE-D. Parent is CMRE. Costamare Inc. owns and charters
containerships to liner companies worldwide. As of February 27, 2019, it had a
fleet of 78 containerships. The company was founded in 1974 and is based in
Monaco. The current price of the
preferred is $24.98 with a yield of 8.8%.
The company has reported 5 consecutive years of GAAP profits and 4 out
of 5 quarters of profits. However, on a
Non-GAAP basis, the record increases to 5 out of 5 profitable years and 5 out
of 5 profitable quarters. The stock dividend
payout ratio is .93 and the preferred dividend payout ratio is .39. In addition, the debt to equity is 1.2 with
price to book of .44. Two SA authors,
Rida Morwa and J Mintzmyer, have recently written positive articles.
CODI-B. Parent is CODI. Compass Diversified Holdings LLC is a private
equity firm specializing in acquisitions, buyouts, industry consolidation,
recapitalization, and middle market investments. It seeks to invest in niche
industrial or branded consumer companies, manufacturing, distribution, consumer
products, business services sector, safety & security, electronic
components, food, foodservice. The
current price of the preferred is $23.10 with a yield of 8.5%. Based on CAD, the last 5 years and 5 quarters
have been positive with the stock dividend payout ratio of .93 and the
preferred stock dividend payout ratio of .07.
One SA author recently wrote a positive article on CODI and the
CSSEP. Parent is CSSE. Chicken Soup for the Soul Entertainment,
Inc., a media company, produces, distributes, and licenses video content in the
United States and internationally. It distributes and exhibits video on-demand
(VOD) content directly to consumers through digital platforms, such as
smartphones, tablets, gaming consoles, and the Web through Popcornflix and A
Plus networks, as well as operates a series of direct-to consumer advertising
supported channels. Current price is
$25.35 with a yield of 9.6%. This is a young company that appears to have a
good future in the entertainment business.
The have a limited earnings history and do not pay a common stock. But within the last 2 weeks, their common
stock jumped to all time highs after reporting excellent news. On 4/1/19, SA wrote: “Shares rose 36% Friday after news
of the deal and the company’s earnings, which
sported a revenue gain (full year) of more than 150% and EBITDA gains of 180%. Benchmark
responded to the company news by boosting its price target on “one of the
hottest small properties in the media landscape.” It’s set its new target
at $18, up from $16 and currently implying 65% upside.”
DCP-B. Parent is DCP.
DCP Midstream, LP, together with its subsidiaries, owns, operates,
acquires, and develops a portfolio of midstream energy assets in the United
States. The company operates in two segments, Logistics and Marketing, and
Gathering and Processing. Current price
is $24.42 with a yield of 8.1%. DCP has
been profitable 5 out of 5 years and 5 out of the last 5 quarters. Based on
Distributable Cash Flow (DCF), its stock dividend payout ratio is .90 and the
preferred dividend payout ratio is .24.
Double Dividend Stocks recently wrote a positive article and mentioned
that DCP has increased guidance for EBITDA, DCF and dividend coverage. I personally feel that many MLP and midstream
companies are undervalued with a positive outlook for energy.
GLOP-A. Parent is GLOP. GasLog Partners LP owns, operates, and
acquires liquefied natural gas (LNG) carriers under multi-year charters. As of
February 26, 2019, its fleet consists of 14 LNG carriers. Current price for the preferred is $25.19
with a yield of 8.6%. Shipping stocks
are a challenge, but many analysts feel that LNG is one of the bright spots. GLOP reports 5 profitable years of GAAP
earnings and 5 out of 5 profitable quarters.
It also reports DCF with a dividend payout ratio of .96 and preferred
stock dividend payout ratio of .17. Dividends paid by these preferred shares are
eligible for the preferential income tax rate of 15% to a maximum of 20%
depending on the holder’s tax bracket.
There have been several recent positive articles from Seeking Alpha
LMRKO. Parent is LMRK. Landmark Infrastructure Partners LP acquires,
develops, owns, and manages a portfolio of real property interests and
infrastructure assets in the United States. The company leases its real
property interests and infrastructure assets to companies operating in the
wireless communication, outdoor advertising, and renewable power generation
industries. Current price is $25.13 with
a yield of 7.9%. LMRK has a good history
of GAAP earnings with 4 out of 5 years of profits and 4 out of 5 quarters of
profits. The company has struggled to
cover its stock dividend but its preferred stock has a dividend payout ratio of
.25. There is much written about LMRK as
many analysts feel that the company is improving and should be in great shape
over the coming quarters. Brad Thomas
(SA Author) has written the latest positive article.
NGL-B. Parent is NGL. NGL Energy Partners LP, together with its
subsidiaries, engages in the crude oil logistics, water solutions, liquids,
retail propane, and refined products and renewables businesses. Current price is $23.94 with a yield of
9.4%. Like many midstream companies, the
last few years have been a challenge, but their fortunes appear to be turning
for the positive. Their distributable
cash flow gives them a dividend payout ratio of .84 and a preferred dividend
ratio of .27. There have been 3 recent
positive articles written about NGL.
NS-C. Parent is NS.
NuStar Energy L.P. engages in the terminalling, storage, and marketing
of petroleum products. The company also engages in the transportation of
petroleum products and anhydrous ammonia. It operates through three segments:
Pipeline, Storage, and Fuels Marketing.
Current preferred stock price is $24.77 with a yield of 9.1%. Another midstream company that has faced
challenges over the last few years, but with rising oil prices and renewed
energy sector, the future looks much improved.
The stock distributable payout ratio is .68 and the preferred dividend
payout ratio is .15. Besides the
preferred shares, they also have an ETD with yield at approx. 9%.
NYMTN. Parent is NYMT. New York Mortgage Trust, Inc. acquires,
invests in, finances, and manages mortgage-related and residential
housing-related assets in the United States. The current price of this
preferred is $24.06 with a yield of 8.3.
Their GAAP earnings has been good with 5 out of the last 5 years being
profitable and 4 out of 5 quarters being profitable. Even thought the earnings are not sufficient
to pay the stock dividend, the preferred dividend has a payout ratio of .23. Rida Morwa has written a recent article with
positive comments about the industry and NYMTN.
PMT-B. Parent is PMT. PennyMac Mortgage Investment Trust, a
specialty finance company, invests primarily in residential mortgage loans and
mortgage-related assets in the United States.
The current price is $25.23 with a yield of 7.9%. The company has perfect record of earnings
with 5 profitable years and 5 profitable quarters in a row. The stock dividend payout ratio is .94 and
the preferred stock payout ratio is .17.
Debt to equity is .6 and Price to book is 1. With interest rates falling, mortgage REITS
appear to be very good shape.
SOHOB. Parent is SOHO. Sotherly Hotels Inc. is a self-managed and
self-administered lodging REIT focused on the acquisition, renovation, up branding
and repositioning of upscale to upper-upscale full-service hotels in the
Southern United States. Current price is
$25.15 with yield of 8.0%. REITS cannot
use GAAP earnings as a measurement for earnings because of high depreciation
amounts. Therefore, AFFO is used to
determine earnings available for dividends.
Using AFFO, their stock payout ratio is .48 and their preferred stock
dividend payout ratio is .24. Parent has
recently increased the common stock dividend and is classified as a dividend
diamond with 8 consecutive years of increasing their dividend.
SSW-I. Parent is SSW. Seaspan Corporation operates as an
independent charter owner and manager of containerships in Hong Kong. The
company charters its containerships under long-term and fixed-rate time
charters to various container liner companies. As of March 1, 2019, it operated
a fleet of 112 containerships. Current price is $24.85 with a yield of 8%. Seaspan is the world’s largest containership
company. They recently announced that it
had partially prepaid two credit facilities and expanded its pool of
unencumbered vessels to 37 from 32.
Their CFO stated that “We continue to execute on our near-term
capital strategy to strengthen our balance sheet by deleveraging, increasing
our unencumbered fleet, and consolidating our secured credit facilities”. SSW has a stock dividend payout ratio of .17
and a preferred stock dividend payout ratio of .13.
During the last 3 months of 2018,
the market dropped into bear territory.
With the scare of rising interest rates, preferreds stocks and other
interest sensitive securities fell along with the market. However, 2019 has been a very positive story
with many preferreds returning to their previous highs after the fed made it
clear that interest rates would stabilize.
But even with new highs, there are still many relatively safe and
reliable preferred stocks that are available with high yields. The Hot and Spicy portfolio lists 15 preferreds stocks that
offer high yields from companies that offer a good risk/reward ratio, with most
handily able to cover both their common stock and their preferred stock
dividends. All 15 are well off their 52 week lows and
fast approaching 52 week highs. With the
economy doing well and interest rates low and dropping, preferred stocks offer
some great values and appealing yields.
Take a close look at the list. You
may find one or more gems that can be added to your portfolios.