The wild swings that the equity markets saw during the third quarter resulted in several stocks taking a huge beating. While that period was painful for many investors, it actually was a bit of a blessing in disguise for fixed income investors. For several years before the third quarter of 2015, the broader market and many individual stocks underwent a gradual rally without any significant corrections. This not only made it hard for fixed income investors to buy their favorite stocks at a reasonable valuation, but also made the annual dividend yield of such stocks less lucrative. However, the third quarter changed all that, with several companies losing more than one-fourth of their market capitalization. Considering that the equity markets have now stabilized and some of the small-cap stocks that took a beating are still trading significantly lower than what they were before the tumult, we at Insider Monkey decided to compile a list of 10 ultra-high dividend stocks that our readers, especially those who value fixed income, must know about. In a previous post we revealed the top five stocks that made it to our list and in this post we are going to reveal and discuss the remaining five.
But before we proceed to the list, let’s first understand why we track hedge fund activity. From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 38-month period beginning from September 2012, returning 102% (read the details here).
Senior Housing Properties Trust (NYSE:SNH)
– Elite Investors with Long Positions (as of September 30): 14
– Aggregate Value of Elite Investors’ Holdings (as of September 30): $53.24 million
Like the stocks of most other REITs, Senior Housing Properties Trust (NYSE:SNH)’s stock has also slumped hard this year. However, the magnitude of its decline is far larger (down by 36.77% year-to-date) when compared to its peers, since it started to decline quite early in the year, in February. During the third quarter, when Senior Housing Properties Trust (NYSE:SNH)’s stock lost 5.5%, the ownership of the company among funds tracked by Insider Monkey came down by three and the aggregate value of investors’ holdings in it saw a decline of over $7 million. Since Senior Housing Properties Trust has managed to keep its quarterly dividend payout of $0.39 per share constant even after suffering such hard declines, it now boasts an annual dividend yield of 11.16%. This attractive dividend yield might have prompted quant fund Renaissance Technologies to initiate a stake in Senior Housing Properties Trust by purchasing 621,577 shares of the company during the July-to-September period.
Ship Finance International Limited (NYSE:SFL)
– Elite Investors with Long Positions (as of September 30): 16
– Aggregate Value of Elite Investors’ Holdings (as of September 30): $28.7 million
Perhaps Ship Finance International Limited (NYSE:SFL) wouldn’t have made it to our list if its stock hadn’t fallen by more than 13% over the past two weeks, after it reported its fiscal year 2015 second quarter results on November 24. The EPS of $0.49 on revenue of $111 million that the company reported for the quarter was lower than the EPS of $0.53 on revenue of $112.74 million that analysts had expected. In spite of suffering such a drastic decline, the stock of Ship Finance International Limited (NYSE:SFL) still trades up by 8.5% year-to-date and the quarterly dividend of $0.45 per share that the company pays translates into an annual dividend yield of 11.75%. Maintaining its 7.1 million shares of Ship Finance International Limited was enough for Kenneth Tropin‘s Graham Capital Management to remain the company’s largest shareholder at the end of September among the firms that we track.