Going on six years of the lowest interest rates may have done wonders for the stock market, but for income investors and savers it has been a nightmare. At the turn of the century, the major money center banks were offering five-year certificates of deposit (CDs) paying 7%.
Now a five-year jumbo CD pays in the neighborhood of 2.3%. That has been a kick in the interest rate pocketbook that is not going away anytime soon.
We scanned our 24/7 research database for some quality income names that investors looking to receive higher dividend payouts may want to consider. We also utilized research targets from UBS or from FBR Capital Markets on most of these in the analysis.
It is important to remember that none of these ideas are anywhere close to having their principal guaranteed like an FDIC-insured CD. While not meant to dominate an income portfolio, these may help boost overall income generation.
Again, none of these for top stocks are suitable for investors that absolutely cannot lose principal. However, for investors seeking to bolster the overall yield of a well-rounded and diversified income portfolio, they make extremely good sense. Solid management combined with long histories of meeting dividend objectives make them a good addition to any portfolio with higher risk tolerance.
Apollo Commercial Real Estate Finance Inc. (NYSE: ARI) is a name that the analysts at FBR have really warmed up to, and with good reason. They point out in a new research note that the company is trading at book value with close to a 10% yield. They feel it is the cheapest risk-adjusted name in the commercial real estate space with great downside protection. Apollo has paid out $0.40 consistently over the past 16 quarters. The FBR team feels there is no doubt that the dividend will remain safe. Investors are paid a current dividend of 9.6%. FBR rates it at Outperform, and the target price for the stock is set at $17.50. The Thomson/First Call price objective is $17.25. Apollo closed Friday at $16.40 a share.
Apollo Global Management LLC (NYSE: APO) is rated Outperform at UBS. As one of the top alternative asset managers on Wall Street, the firm has had an enviable track record of success. The company declared a monster $1.08 per share dividend as capital was returned to shareholders following the sale of some high-profile assets. Based on the higher quarterly distribution, shareholders are paid an outstanding 12.7% dividend, which could be higher depending on distributions that rest of the year. The UBS price target is $33, and the consensus is at $34.11. Apollo closed Friday at $27.66.
Prospect Capital Corp. (NASDAQ: PSEC) is a quality business development company (BDC) that makes its money by making loans to small and medium-sized businesses at higher rates than they borrow for. The stock was hit hard this spring over an accounting issue that has since been resolved with the SEC, and the stock has started to rebound. Its shares trading at a discount to the stock’s net asset value of $10.68, the company has paid investors solid dividends for years. We reported on the solid insider buying the stock has seen when the CEO, COO and CFO bought a total of 255,000 shares between $10.25 and $10.7 valued at $2.6 million. Investors are paid a 12.61% dividend. The consensus price target is $11.53. Prospect closed Friday at $10.52.
Two Harbors Investment Corp. (NYSE: TWO) is one of the mortgage real estate investment trusts (REITs) that were hit hard when interest rates started to rise this time last year. The analysts at UBS think that the company’s diversified portfolio and move to a more defensive posture on rates makes it a top real estate name to buy in 2014 and beyond. Investors are paid an outstanding 9.65% dividend. The UBS price target for the stock, which is rated Outperform, is $11, and a consensus target was not posted. Two Harbors closed Friday at $10.77.