For decades, mature, established companies that pay consistent dividends have been relied on to provide investors with a steady stream of income. Utility companies and industrial conglomerates are often placed in this category, but almost any large-cap company that has paid a sizable dividend consistently over the years can probably be counted on to continue doing so. (To learn more about the benefits of dividends, check out Dividends Still Look Good After All These Years.)
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Dividends or Growth
Investing in dividend-paying stocks definitely has its advantages. After all, stocks with high dividend yields generally offer more downside risk protection than growth stocks. In this economy maybe you should be looking for growth stocks if you could take on a little more risk.
If you are not looking for growth, these dividend stocks provide investors peace of mind when the going gets rough. Dividend-paying stocks typically do not fall as fast or as far as high-flying growth stocks (that typically lack a regular dividend payout) when the market turns south. (For more on this, check out How Dividends Work For Investors.)
Ups and Downs
By extension, a portfolio of stocks with high dividend yields may experience less price volatility than a portfolio built entirely of sexy growth stocks, for example.
But it is important to note that a regular dividend will only help to keep a stock's price stable as long as the dividend payment keeps getting paid out. If a company decides to decrease its regular dividend amount, or cease it altogether, a stock that was once considered solid can easily take a nasty tumble. So, if you are looking to beef up your portfolio with some stocks that pay out a portion of their earnings, usually the best place to start hunting is with stocks that have paid out increasing dividends consistently over a period of years. Generally speaking, the longer a company has paid out a high dividend yield, the more likely it is to continue doing so in the future.
With that in mind, here are five financial stocks with sizable current dividend yields:
|Company||Current Dividend Yield||Market Cap|
|Apollo Investment Corporation (Nasdaq:AINV)||9.3%||2.15B|
|Banco Santander, S.A. (NYSE:STD)||4.8%||121B|
|Fidelity National Financial, Inc. (NYSE:FNF)||4.3%||3.23B|
|New York Community Bancorp, Inc (NYSE:NYB)||6.0%||7.13B|
|People\'s United Financial Inc. (Nasdaq:PBCT)||3.9%||5.5B|
Each of the above financial stocks pays a significant dividend, but People's United Financial Inc. and New York Community Bancorp, Inc both have high payout ratios of 203% and 88% respectively.
|Company||Current Dividend Yield||Market Cap|
|Annaly Capital Management Inc. (NYSE:NLY)||16.3%||10B|
|Chimera Investment Corporation (NYSE:CIM)||17%||2.68B|
|Equity Residential (NYSE:EQR)||3.5%||10.6B|
|HRPT Properties Trust (NYSE:HRP)||6.6%||1.66B|
|MFA Financial, Inc. (NYSE:MFA)||15.2%||2B|
What Are REITS?
A real estate investment trust (REIT) is a real estate company that offers common shares to the public. In this way, an REIT stock is similar to any other stock that represents ownership in an operating business. But a REIT has two unique features: its primary business is managing groups of income-producing properties and it must distribute most of its profits as dividends.
Annaly Capital Managemant was downgraded by JPMorgan Securities from a Market Outperform to a Market Perform and MFA Financial was downgraded from a Buy to a Hold. This could be a precursor for the others, but it is also not a surprise. Housing sales and construction are dipping. Existing Home Sales were down 7.3% in January to 5.05 million units, compared to December's numbers.
Dividends for the Long Haul
You certainly have to appreciate the staying power dividend-paying stocks can add to your portfolio over the long haul.(To learn more about the compound nature of dividend returns, check out The Power of Dividend Growth.)
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