Three High-Yield Picks

07/09/2014 7:00 am EST

Focus: INCOME

Chloe Jensen

Chief Analyst, Cabot Dividend Investor

Cabot Dividend Investor's Chloe Jensen shares three high-yield stocks that are currently out of favor.

SPEAKER:  Hi, I’m here with Chloe Jensen, Chief Analyst at Cabot Dividend Investor, and she likes high yielding stocks and growth and income stocks.  We’re going to talk about how investors should position their portfolio with income stocks.

CHLOE:  That’s right.  I think that dividend stocks and high-yield stocks can be a much better place to look for income today than in the fixed income market, and some of the stocks I like are particularly high yielding because they haven’t been doing very well recently and they’re in somewhat beaten-down sectors.  One sector I like a lot is offshore driller stocks.  They have had a really rough year, because there are some industry trends that have been scaring people off, but those are going to turn around and it might take a little while, but right now, some of the stocks in that industry are yielding six, seven, eight; even 11%.

SPEAKER:  And how do you find these?  How can people sort of look for them themselves?

CHLOE: Well, you can start by screening for stocks with high yield, and then look for things like a history of dividend increases; no dividend cuts.  You want to see cash coming in high enough to cover the dividend.  That’s the big three, really.

SPEAKER:  So a lot of the same fundamental analyses.

CHLOE:  Yeah.  It’s not really that tricky, but you do have to dig into the numbers a little bit.

SPEAKER:  And do you look at price and volume, a little technical analysis?

CHLOE:  Oh, yes.  That’s very important if you care about risk.  If you are used to investing in fixed income type stuff, then you want to know where the more low-volatility, reliable sort of stock.

SPEAKER:  And can you share a few names that you like right now?

CHLOE:  Absolutely. 

SPEAKER:  And it could get into currently.

CHLOE:  From the fixed income sector, I like SDRO, symbol SDRO.  Their yield is crazy-high – 11% - and that’s because they’ve had a very rough year, and the industry has not recovered yet, so it is a little bit of a contrarian pick, but you get that 11.9 – I think – percent yield for sitting and waiting for the industry to recover basically.  Another great stock in that sector is ENSCO, symbol ESV.  Their yield is a little lower.  I think it’s maybe 6%, but they’ve increased their dividend at something like a 20% rate recently, and if that growth in the dividend keeps going, that’s better than a high-yield bond right there.

SPEAKER:  Is there another one, or is that….

CHLOE:  You could also check out Noble, symbol N.

SPEAKER:  N; simple.

CHLOE:  Yeah, just N – very easy – and they’ve also got a pretty high yield and are also an offshore drilling contractor. 

SPEAKER:  Thanks very much, Chloe.  Thanks for joining us at Moneyshow.com.

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