High-yield dividend stock investing is popular again. Investors have taken to heart Jeremy Siegel's studies, which show that higher-yielding stocks tend to offer greater returns over time than low- or no-yield stocks.
The highest dividend yields 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 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 highest-yielding stocks; the only limitations I've set this time is that the dividend stocks must have a market cap greater than $400 million, must be primarily listed in the U.S. (no ADRs), and must be a corporation (no REITs or MLPs).
Here are the top 25 highest-yielding stocks the screen produced:
|Company||Market Cap (millions)||Dividend Yield (%)|
|1||Arlington Asset Investment||$449||12.90%|
|3||Vector Group (NYSE:VGR)||$1,453||9.90%|
|5||Ship Finance International||$1,434||9.27%|
|9||R.R. Donnelley & Sons||$2,271||8.31%|
|11||New York Community Bancorp||$5,714||7.72%|
|12||Nordic American Tankers||$550||7.68%|
|14||First Financial Bancorp||$870||7.31%|
|15||Valley National Bancorp||$1,811||7.15%|
|17||Capitol Federal Financial||$1,756||6.96%|
|19||TAL International Group||$1,378||6.39%|
|20||Cohen & Steers||$1,612||6.31%|
|22||OneBeacon Insurance Group||$1,344||5.96%|
Source: S&P Capital IQ. Data as of June 10.
These stocks are a good place to start your research, but they're not formal recommendations.
Vector Group Ltd (NYSE:VGR) is the third-highest-yielding dividend stock in June with a trailing yield of 9.9%. The company has two main businesse: tobacco and real estate. The company manufactures and sells cigarettes through its Liggett Group and Vector Tobacco subsidiaries under the Pyramid, Grand Prix, Liggett Select, and Eve brands. The company is the fourth-largest cigarette manufacturer in the U.S. behind giants Altria Group Inc (NYSE:MO), Lorillard Inc. (NYSE:LO), and Reynolds American, Inc. (NYSE:RAI). There are some advantages to being small. Vector Group Ltd (NYSE:VGR) has a cost advantage stemming from the settlement between Vector Group Ltd (NYSE:VGR) and the U.S.: The company does not have to make annual payments unless its market share exceeds 1.65% of the U.S. market. As such, the company positions its brands as discount cigarettes to capitalize on its advantage.
The company also invests in real estate through its New Valley subsidiary. New Valley owns a 50% stake in the largest residential real estate broker in the New York metropolitan area and stakes in various real estate properties across the country. It should be noted that Vector Group Ltd (NYSE:VGR)'s ownership in New Valley is accounted for under the equity method of accounting, so its results do not flow through into Vector Group Ltd (NYSE:VGR)'s financial statements.