Investing in dividend stocks can be a profitable strategy to build wealth, and especially, to build a decent portfolio for retirement. Because of the stability of most dividend stocks, an investor can estimate the cash flow that a portfolio will generate, which is helpful once dividend payments replace paychecks as an investor’s sole means of income. On the other hand, the same cash flow stability can be provided by bonds, which are less risky (a bankrupt company will first repay its debtholders before its shareholders) or even risk-free (government bonds). However, investing in dividend stocks provides more liquidity and can also provide investors with a premium due to the stock’s appreciating value. In addition, in a low-interest-rate environment, investing in bonds is less rewarding than investing in dividend stocks. So in the end, the question of whether to invest in dividend stocks or bonds has to take into account the risk-awareness and the investment horizon, though literature generally suggests investing in a mix of the two.
Buying high dividend stocks has its advantages over high growth stocks. Companies that are not paying dividends are reinvesting all of their profits into their business instead of paying off shareholders, which can generate even more shareholder value in the future if things go smoothly. However, companies that are paying dividends are usually well-established and have solid financial positions. Moreover, they are committed to rewarding their shareholders even in troubled times. For example, Johnson & Johnson (NYSE:JNJ) paid dividends (and even increased them) during the financial crisis (2007-2009).
If an investor decides to add some dividend stocks to his/her portfolio, the question is: which ones to choose? There are dividend aristocrats, which are companies that have increased their dividends every year for at least 25 years, and dividend kings, which have raised their dividends for at least 50 years in a row. Another choice is to invest in an ETF that focuses on dividend stocks, like the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG), which will provide exposure to a basket of dividend stocks.
However, there also are some ultra high dividend stocks that the broader public is less familiar with, because the media usually talks about large and well-known companies. These stocks, aside from sporting sky-high dividend yields, also have the potential to appreciate greatly in value due to their growing businesses. However, they can also be more volatile and risky. In any case, investing in these stocks requires a lot of research. Nevertheless, there is a way to benefit from the research that was done by someone else, that being hedge funds and other large institutional investors, which employ a lot of resources when determining which stocks to invest in.
In this way, following hedge funds into their dividend stocks can be a good strategy to beat the market. Here’s where our research can come in handy. We follow some of the best-performing hedge funds and other institutional investors and analyze their quarterly 13F filings to identify the stocks that they are collectively bullish on. We use the data to compile a portfolio that we share with our premium subscribers. Our flagship strategy has gained 44% since February 2016 and our stock picks released in the middle of February gained over 5 percentage points in the three months that followed. Our latest stock picks were released last month, which investors can take advantage of by accessing this link.
In this article, we won’t talk about the stocks that make up our strategy, but will instead focus on dividend stocks that the funds tracked by us are collectively bullish on. More specifically, we are going to take a closer look at five ultra high dividend stocks that registered a substantial increase in the number of bullish investors during the first three months of 2017. The companies in question are: Iron Mountain Incorporated (Delaware) REIT (NYSE:IRM), Windstream Holdings, Inc. (NASDAQ:WIN), Washington Prime Group Inc (NYSE:WPG), Seagate Technology PLC (NASDAQ:STX), and Park Hotels & Resorts Inc (NYSE:PK).
Check out the details of each of these stocks beginning on the next page.