As I’m researching lists of stocks for new ideas, my first concern is for stocks that have a total return of at least 8% annually. Occasionally I find a company that pays out most of its earnings in the form of dividends with very little retained for growth. The dividend it pays out comes in handy for buying additional shares of the same company or for taking advantage of those many new opportunities. In the past I’ve mentioned one such company that has captured my interest - Prospect Capital Corporation (PSEC). This is a great company and is organized as a Business Development Company (BDC).
For tax reasons BDCs pay out most of its income in the form of a dividend to its shareholders. This type of investment has worked out well for me because although the stock really doesn’t increase in value over time, it throws off a lot of cash to it’s shareholders. I’ve used these dividends to buy into those new investments rather than using my hard earned money to finance new buys.
Another company I’ve been watching for some time is a company named Vanguard Natural Resources (VNR). VNR, through its subsidiaries, engages in the acquisition and development of oil and natural gas properties in the United States.
VNR also pays out most of it’s earnings in dividends. At its current price of $28.85 it has paid out an annualized dividend of $2.49 this year (see downloadable pdf below) which is an APR of a little more than 8.6%. Based on its chart above you can see that the company’s stock price has had a very slight increase in it’s share price over the last few years. The share price itself is not what interests me but it is a nice little bonus. It’s the dividend and the dividend’s ability to help me fund additional investing ideas. I don’t want a lot of these types of investments because I’m still interested in a certain level of growth in my portfolio, but a couple of these types of investments have been beneficial to my ability to accumulate additional shares in other companies.
Both of these companies pay their dividends on a monthly basis (see below) which makes it more advantageous to me because it provides me with the ability to add to my investments on a monthly basis. I find that ability to be very appealing as a special purpose investment vehicle and similar to the specialized purpose I find in selling covered calls and puts. In moderation these investments have been very beneficial to my accounts.
Below you can download a pdf file containing the dividend history of Prospect Capital Corporation. Information was gathered from the company website.
Below you can download a pdf file containing the dividend history of Vanguard Natural Resources. Information was gathered from the company website.