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Arlington Asset: High Yield and Stability

03/01/2017 7:00 am EST


Keith Fitz-Gerald

Chief Investment Strategist, The Money Map Report

Arlington Asset Investment Corp. (AI) is one of my favorite double-digit dividend payers that have the business models that can sustain high yields for years to come, asserts growth and income expert Keith Fitz-Gerald, editor of Total Wealth Research.

Headquartered in Arlington, Virginia, Arlington Asset is a publicly traded investment firm that mixes the stability of muni investing with the high income rewards of Business Development Companies (BDCs).

I’ve been on the record for months recommending AI as a promising income play with its juicy 16.28% yield. And recently, some of the brightest minds in finance have shown that they agree.

Looking at the long list of famous names that upped their stakes in AI dramatically last fall, the firm that jumps out at me immediately is Renaissance Technologies, which increased its ownership of AI shares by snatching up another 87,000 shares, to pad the 624,000-share holding it had previously laid claim to.

If the name Renaissance Technologies doesn’t ring a bell, it’s the firm founded by the legendary Dr. James Simon. Heralded by some as “the world’s smartest billionaire,” this former Harvard math professor has amassed a fortune of more than $16 billion by brilliantly exploiting market inefficiencies.

The firm’s beta is an extremely stable 1.09 (the closer to 1, the lower the volatility), making this a strong retirement investment option for people who first and foremost are concerned with not losing what they have.

This stability, by the way, is exactly what you’d expect from a business gathering income through U.S. government-backed mortgages. It may not be the most exciting field, but it sure pays the bills.

As of September 30, 2016, the company’s agency investment portfolio totaled $4.83 billion, consisting of $3.66 billion of agency mortgage-backed securities and $1.170 billion of net long to-be-announced agency securities.

The firm has 38.81% profit margins and a dividend yield of 16.28%. These payouts have grown over the years. The company has $3.72 billion cash on hand, meaning its generous income stream for investors isn’t likely to dry up in the coming years.

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