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Arlington Asset Investment Corp (AI), Windstream Corporation (WIN): The Highest Yielding Dividend Stocks in May

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Arlington Asset Investment Corp (NYSE:AI)Dividend investing is popular again. Investors have taken to heart Jeremy Siegel’s studies, which show that top-yielding dividend stocks tend to offer greater returns over time than low- or no-yield stocks.

The top-yielding dividend stocks can be very tantalizing. As long as a stock yielding 15% doesn’t lose value, you’ll make 15% in one year! In more cases than not, however, an astronomical yield is a bad sign for a stock. Since dividend yields and stock prices move in opposite directions, a high yield usually means that investors have begun to worry about the business and driven down its stock price.

However, certain types of companies such as real estate investment trusts, or REITs, have to pay out most of their income as dividends, so their yields will be higher than “normal.” Dividends are not guaranteed; you need to make sure that a business is generating enough cash to pay its dividend or your investment could be disastrous.

I ran a screen for the top-yielding dividend stocks. The limitations I’ve set this time is that the stocks must have a market cap greater than $400 million, be primarily listed in the U.S., and must be a corporation, so no REITs or master limited partnerships (MLPs.) I’ve also excluded stocks for which a special dividend heavily influenced the yield.

Here are the top 25 highest-yielding stocks the screen produced:

Company Market Cap (millions) Dividend Yield
1 Arlington Asset Investment Corp (NYSE:AI) $445 13.00%
2 Windstream Corporation (NASDAQ:WIN) $4,955 12.00%
3 Vector Group $1,423 10.10%
4 Frontier Communications Corp (NASDAQ:FTR) $4,020 9.93%
5 Ship Finance International $1,437 9.25%
6 Seadrill Limited $18,202 8.65%
7 Consolidated Communications $723 8.60%
8 Compass Diversified $809 8.60%
9 R.R. Donnelley & Sons Company $2,209 8.54%
10 First Financial Bancorp. $885 7.80%
11 PDL BioPharma $1,096 7.66%
12 New York Community Bancorp $5,859 7.52%
13 VimpelCom $18,701 7.48%
14 Home Loan Servicing Solutions $1,286 7.43%
15 Nordic American Tankers $559 7.39%
16 Daktronics $420 7.36%
17 Werner Enterprises $1,704 7.31%
18 Valley National Bancorp $1,815 7.13%
19 Capitol Federal Financial $1,762 6.93%
20 Costamare $1,239 6.52%
21 TAL International Group $1,351 6.52%
22 OneBeacon Insurance Group $1,294 6.19%
23 United Online $609 6.05%
24 Intersil $1,010 6.05%
25 CenturyLink $22,826 5.82%

Source: S&P Capital IQ. Data as of May 5.

These stocks are a good place to start your research, but they’re not formal recommendations.

Compared to April, the biggest change is that Pitney Bowes Inc. (NYSE:PBI) dropped from third to out of the top 25. In April, I warned that “there’s a good chance Pitney Bowes Inc. (NYSE:PBI) will have to cut its quarterly dividend. I’d pass on this one.” Last Tuesday, the mail services company dropped 15.6% after it missed earnings expectations and cut its quarterly dividend in half, from $0.375 to $0.1875 per share. While the stock has recovered, most of the drop the forward yield is now 4.85%. Long term, cutting the dividend is good for the company as it gives it more cash for its transition away from physical mail to business services.

Let’s take a look at the top 2:

The top-yielding dividend stock was again Arlington Asset Investment Corp (NYSE:AI). The company is basically a mortgage REIT. However, it is structured as a corporation to take advantage of operating and capital loss carry-forwards. I examined Arlington Asset Investment Corp (NYSE:AI) last month and you can read about it here.

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