Investing

5 Analyst Stocks to Buy Yielding 10% or More

After many years of very low interest rates, stock investors have had plenty to cheer about — the market is up almost 200% since the lows in March of 2009. Every asset class at one time or another during those five years has managed sizable gains. That includes Treasury bonds as well. The biggest loser? Income investors, who count on income-yielding securities to help pay for the cost of living.

Periodically at 24/7 Wall Street we refresh our screens that look for income producing stocks and investment vehicles. This also includes master limited partnerships (MLPs), limited partnerships and limited liability companies (LLCs), which technically are not really “stocks” even if they are units of ownership. None of them are anywhere close to as safe as a certificate of deposit (CD) or a government bond, and they are not suggested to replace that kind of guaranteed investment. What we screen for is top-yielding stocks that have wide analysts’ coverage on Wall Street. Typically if the stock is high yielding and has a Buy rating, the analyst will closely track the company’s ability to maintain the dividend or distribution.

Now consider this: some stocks and entities have dividends or distributions that are north of 10%. We have used recent Buy ratings for stocks and entities yielding 10% or more from various brokerage firm research reports. Again, none are going to have any sort of government guarantee and none will be considered safe havens for suitability tests. No widows and orphans funds should ever chase these as there is no sort of principal assurance, and these can be very volatile.

With all caveats in mind, some of these could be a great addition to an overall income portfolio looking to add higher yielding components for more current income. Here are five top analyst picks that all yield in excess of 10% and all are rated as Buy at known brokerage firms.

Apollo Global Management LLC (NYSE: APO) is rated Outperform at UBS and rated Buy at Merrill Lynch. As one of the top alternative asset managers on Wall Street, the firm has had an enviable track record of success. Apollo 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, Apollo’s holders are paid an outstanding quarterly 12.7% dividend, which could be higher depending distributions the rest of the year. The UBS price target is posted at $33, and the Merrill Lynch target is higher at $35. The Thomson/First Call consensus price target is at $32.89. Apollo closed Wednesday at $27.62 a share.

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Atlas Resource Partners L.P. (NYSE: ARP) is a high-yielding MLP with outstanding growth potential. The analysts at RBC like Atlas and are anxious for its update on the partnership drilling capital program amount to be raised in 2015. The entity is an exploration and production MLP that owns an interest in over 13,000 producing natural gas and oil wells, and it is also the largest sponsor of natural gas and oil investment partnerships in the United States.

Investors are paid a giant 11.5% distribution, which may include return of principal. The RBC price target is $26 on Atlas with a Buy rating. The consensus target is at $23, and Atlas closed Wednesday at $20.53.

New York Mortgage Trust Inc. (NASDAQ: NYMT) is well liked on Wall Street. The company invests in mortgage-related and financial assets and targets multifamily commercial mortgage-backed securities (CMBS), direct financing to owners of multifamily properties through mezzanine loans and preferred equity investments, residential mortgage loans and many other real estate related derivative and debt obligations.

The company dodged many of the bullets last year by shifting a larger percentage of its capital into CMBS and distressed residential loans in 2012 and 2013. This ultimately allowed the company to emerge from the 2013 mortgage real estate investment trust (REIT) meltdown reasonably unscathed. Investors are paid a huge 14.02% dividend quarterly. UBS is a fan, rating the stock at Buy with a $10 price target. The consensus target is $7.99, and shares closed Wednesday at $7.70.

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Prospect Capital Corp. (NASDAQ: PSEC) is also very well liked on Wall Street, with numerous firms providing recommendations. The company is a quality business development company (BDC) that makes its money by loaning money to small and medium-sized businesses at higher rates than they borrow for.

Prospect Capital was hit hard this spring over an accounting issue that has since been resolved with the SEC. The stock has rallied and now trades at a small premium to the company’s $10.68 net asset value. Investors are paid an outstanding 12.17% dividend monthly. Wunderlich has a rating of Buy on the stock and a $13 target. Barclays also has a rating of Buy and a $12 price target. The consensus target is $11.53. Prospect Capital closed Wednesday at $10.90.

QR Energy L.P. (NYSE: QRE) is another high-yielding MLP that is well liked across Wall Street. It has a higher liquids proportion of 69%, versus a peer average of 51%. The company also supports its cash flow with a very aggressive hedging strategy covering about 80% of its production.

QR Energy investors are paid a huge 10.3% distribution quarterly. Stifel has rating of Buy and a $21 target. Credit Suisse has a rating of Outperform and a $20 target. UBS a rating of Buy with a $20 target as well. The consensus target is $19.40, and QR Energy closed Wednesday at $18.87.

Again, it is a given that income investors love high-yield investments. Just be mindful of those caveats and risks, because they are higher than normal.

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