Five stocks with outrageously high dividend yields


There’s no getting away from risk when you invest in the stock market. Those companies you think are going to grow quickly might grow slowly, causing the stock price to fall. Those giant companies that stand astride the world like colossi sometimes slip, and when they do, they have a long way to fall. Even if you put your money in cash, you run the risk that stocks, bonds, gold, and everything else will appreciate in value, making you poorer by comparison.

That said, it is now my duty to explain that the stocks on today’s list are risky. A high yield can never be otherwise, since when risk goes away, the market simply bids the price of the stock higher, making dividend yield proportionally lower. It follows that these companies, somewhat out of the norm in terms of yield, are also out of the norm in terms of risk. With the market as high as it is, though, it certainly wouldn’t hurt to switch out of some of your growth stocks (which, let’s face it, are high risk too) and get into some income producing stocks.

As always, remember to consider these ideas to be just that, ideas, and do your own research before investing.

Seagate Technology (STX)

The reason the stock is depressed at present is that everyone in tech is talking about solid-state drives, and it seems logical to suppose that solid-state drives will replace spinning hard drives, such as are made by Seagate. And they may, eventually, or not. Solid state is not necessarily a panacea, and it will be some time before solid-state drives can hold as much as traditional hard drives, and even longer before their price is reasonable. The main cause of misconception here is that techies love solid state drives, and all the chatter in computing comes from techies. The buying, however, is still done, in large part, by Mom and Pop. Remember how much techies loved super-disks? Well, Mom and Pop couldn’t figure out why they should want a super-disk drive, and so they didn’t sell. Much the same may happen with solid state drives.

Seagate Technology has a forward annual dividend yield of 7.43%.

Pier 1 Imports (PIR)

Pier 1 has had a rough go over the last few years, and the reasons were numerous. First, there were the internal problems of unprofitable stores and stale offerings, but the company has dealt with these by closing money-losing stores and re-vamping its offerings. Second, there is the wage stagnation that has caused US consumers to be more careful of their dollars than they have in the past, and that hurts Pier 1, as its products are far from necessities. This is opinion only now, but consumer weakness is really the only remaining problem here, and the Street is just punishing the stock for the company’s past sloppiness. Also, the consumer is now getting a subtle but significant double-boost from the rather strong labor market and the falling price of gas.

Pier 1’s forward annual dividend yield is 6.03%.

CenturyLink (CTL)

Telecom is an industry where revenue is relatively easy to predict: a lot of things have to go wrong before people stop paying the phone bill. That has meant that telecom companies have historically been free to operate at permanently high-leverage, high-debt, and narrow profit margins. For that reason, the unexpected drop in borrowing rates this year has been quite a boon. Of course, the competition in this industry is famously cutthroat, but CenturyLink’s earnings are on the rise this year, while its revenue is only slightly lower. Since there doesn’t seem to be much danger here of a dividend cut, the dividend yield should be quite achievable.

CenturyLink’s forward annual dividend yield is 7.56%.

Hospitality Properties Trust (HPT)

Hospitality Properties Trust is a REIT that owns hotels focused on business, government, and family travelers. This is a fairly straightforward play, and to the extent that I like it more than the rest of the market does, it is because of the current strength in the labor market, and the inevitable economic strength that comes with that. Because this company owns business and not vacation related properties, it will be among the first to benefit from a rising economic tide. Not only is the company’s revenue rising, but a renovation campaign caused occupancy rates to rise from 72.2% in the first quarter to 81.6% in the second, which is pretty fantastic, no matter how you slice it.

Hospitality Properties Trust’s forward annual dividend yield is 6.68%

Suburban Propane Partners (SPH)

It has been a while since I wrote about any company with an annual dividend yield above 10%, but I like this company’s chances. Propane prices have fallen over the last couple of years, and we are currently coming out of the warmest winter on record, yet even in this difficult climate, the company is keeping its ship in order. In the most recent quarter the company improved a net loss of $0.67 per share in 2015 to a loss of just $0.41 in 2016. (Bear in mind that due to the seasonal nature of the business, propane companies expect to lose money in the summer.) 2016 is going to be a bad year—after the warm winter, there is no getting around that, but all this company needs to be back in record profits is for it to get cold, or for the price of propane to rise.

Suburban Propane Partners’s forward annual dividend yield is 10.59%.

Julian Close

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

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