In much the same way those investing in high yield dividend stocks, can do certain things to increase their chance of success...
Evaluate High Yield Stocks CarefullyWhen a stock carries a high yield, there is an underlying reason. Here are some questions to consider to help you understand the stock:
- Is the high yield a result of a sudden drop in price?
- Is the high yield above the industry average?
- Is the high yield above the stocks average?
- Is the high yield a result of a widespread economic downturn?
- Is the high yield a result of a company specific problem?
Be Honest In Your EvaluationThey say statistics can be used to prove anything. In the same vein, if you are determined to buy a stock, an analysis can be constructed to support the position. Instead of trying to find a reason to buy the stock, look for all the reasons NOT to buy the stock. Then weigh the positives against the negatives. Does the stock still look as appealing?
Start With List of Higher Quality StocksIf you are looking for high yield, the temptation is to use a stock screen to search for yield and apply it to the entire universe of stocks. As this screen demonstrates, yield is easy to find. Add in growth and sustainability, then the list will dramatically shrink. Currently, I track 198 dividend growth stocks. The list is made up of Dividend Aristocrats, Achievers, Champions and few other dividend stocks for good measure. Below is a list of the stocks from my database yielding more than 5% and with 15 more years of consecutive dividend growth:
Urstadt Biddle Properties (UBA) is a real estate investment trust that acquires, owns and manages commercial real estate properties primarily in the northeastern United States.
Yield: 5.5% | Years of Growth: 21
AT&T Inc. (T) provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless).
Yield: 5.6% | Years of Growth: 32
Health Care Property Investors, Inc. (HCP) is a California based equity-oriented real estate investment trust that has direct or joint venture investments in health care-related facilities across the U.S.
Yield: 5.7% | Years of Growth: 30
National Health Investors (NHI) is a real estate investment trust that invests in income-producing health care properties primarily in the long-term care industry.
Yield: 5.8% | Years of Growth: 15
ConocoPhillips Co. (COP) is of the largest independent oil and gas exploration and production (E&P) companies in the world, COP spun off its downstream assets in May 2012.
Yield: 6.2% | Years of Growth: 15
W. P. Carey Inc. (WPC) is an investment firm that provides long-term sale-leaseback and build-to-suit transactions for companies worldwide.
Yield: 6.3% | Years of Growth: 16
Plains All American Pipeline LP (PAA) is a limited partnership that engages in interstate and intrastate crude oil transportation, terminalling and storage, as well as crude oil gathering and marketing.
Yield: 5.5% | Years of Growth: 15
The above yields aren't nearly as eye-popping as those from the screen. Investments that usually show up in a screen like this are REITs (interest rate risk), telecommunications (technology risk), financials (equity and interest rate risks), along with MLPs and utilities (slow growth). Ultimately, we want to determine if the yield is sustainable. If we go looking for high yield, we will find it, but it may not be what we really want.
Full Disclosure: Long T, HCP, COP in my Dividend Growth Stocks Portfolio, long UBA, NHI in my High-Yield Portfolio. See a list of all my dividend growth holdings here.
- Stock Dividends - The Gift of Nothing
- What's More Powerful Than Compound Interest?
- Dividends vs. Stock Buybacks
- 5 Lessons Learned About Investing In Dividend Growth Stocks
- 6 High-Yielding Mega-Cap Stocks
(Photo: Gravity X9)
Tags: UBA, T, HCP, NHI, WPC, COP, PAA,