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Three Ways to Earn Double-Digit Yields

07/31/2019 5:00 am EST


Tim Plaehn

Lead Income Analyst, The Dividend Hunter

A high yield is the indicator that the market has built in the probability of a dividend reduction. A dividend reduction cuts twice, first your income gets reduced, and second, the reduction usually produces a significant share price drop, cautions Tim Plaehn, income specialist and editor of The Dividend Hunter.

Your goal as an income stock investor is to seek out higher yield stocks where you also have conviction the dividend is secure. If you can find stocks with 10% plus yields and the dividends keep coming, you have a good chance to outperform the stock market for the rest of 2019.

To get you started, here are three stocks with yields over 10% where currently the dividend looks secure. They are good ideas for where to begin your research.

GasLog Partners LP (GLOP) is a publicly traded partnership that owns a fleet of 15 liquid natural gas carrier vessels. Most of the fleet is on long term lease to Royal Dutch Shell plc (RDS.A).

The leases provide predictable cash flow, and even with its high yield, GLOP has been growing its dividend by 3% to 5% each year.

The danger is that dividend coverage is very tight, with a first-quarter distributable cash flow of just 1.03 times the dividend. Global LNG trade is a growth business, which is positive for the long-term success of GasLog Partners. The stock currently yields 10.1%.

Global Net Lease (GNL) is a $1.6 billion market cap real estate investment trust. The company focuses on sale/leaseback transactions, where it buys commercial properties and leases them back on triple-net leases to the selling company.

Portfolio properties are evenly split between the U.S. and Europe, with 55% of the portfolio being office buildings. The danger for GNL is after the initial lease period expires if the tenant company doesn’t renew, the expense to retrofit and release will be very high. The shares currently yield 11.2%.

New Residential Investment Company (NRZ) is a finance REIT which has operations in the various phases of the residential mortgage market. Its primary investments are in mortgage servicing rights (MSR). These are fee stream paid on every individual residential mortgage.

The danger to NRZ is that high refinancing activity will deplete the MSR payments stream. To counter this, New Residential has diversified into other sectors of the mortgage business. The shares currently yield 13.1%.

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