In this article, we discuss the 9 dividend stocks with over 8% Yield. If you want to skip our detailed analysis of these stocks, go directly to 5 Dividend Stocks with Over 8% Yield.
Despite the market downturn of 2022, dividend payments hit a record, which solidifies the countless studies and researches which claim that dividend stocks outperform the market during difficult times. For example, according to the WSJ, the S&P 500 companies paid out a record $140.6 billion in dividends in the second quarter of this year, as compared to $137.6 billion in the first three months of the year and $123.4 billion in the second quarter last year. The WSJ report also said that annual dividend payouts have posted new highs every year except 2020. The article also quotes Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, who believes dividends are slated to set new records.
The analyst said at the time that dividend payments in 2022 are projected to grow at a faster pace than usual.
While high-yield dividend stocks come with their own risks, several studies prove that high-yield dividend stocks that have a history of dividend increase almost always tend to outperform the broader market. A report by S&P Global says that the S&P High Yield Dividend Aristocrats group consistently posted higher yields when compared to its benchmark between 1999 until 2018. The average yield of this high-yield index was 3.5%, while the S&P Composite 1500 was 1.8%. However, it’s also important to diversify your portfolio for total markets returns. The secret is to never put all your eggs in one basket. The same S&P Global study mentions some interesting data points in this regard. For instance, the study says that the the S&P Composite 1500 generated a total return of 215.2% from 2009 to 2019. About 45% of this return was from dividend income, while 55% came from price appreciation. During the same time period, the S&P High Yield Dividend Aristocrats group generated a total return of 590.3%. 57% of this return came from dividend income while price appreciation accounted for about 43% of this return. However, it's important to note that the stocks in this study had several years of dividend increases. When a company has a solid history of dividend increases, it goes to great lengths to keep that streak. Usually, extremely high-yield dividend stocks cannot keep growing their dividends. Whenever you see a stock with an extremely high payout ratio, do not expect that company to become a dividend aristocrat or dividend king. However, that does not mean that these high-yield dividend stocks are uninvestable. Many high-yield dividend investors make a lot of money by investing in ultra high-yield dividend stocks with a short-term perspective.
Investors who were skeptical of dividend investing started having second thoughts as we entered the second half of 2022. The stock market crash and broader bloodbath causing billions of losses in the equities market forced investors to run towards dividend stocks that are stable and can promise reliable income during these difficult times. Dividend value stocks soared in popularity this year and analysts believe retail and institutional investors will continue to pour money into these stocks because the Federal Reserve is still unable to control inflation and the US economy is entering the stage of broader layoffs. Dividend stocks are known to weather the market downturns. According to a detailed study by Heartland Advisors, dividend stocks easily outperform non-dividend stocks in moderate downturns. Even during major and severe downturns, each quintile of dividend payers in the study substantially outperformed non-dividend payers. The same report also quoted a research report by the Wall Street Journal, which said that during the market downturns of 1981-1982, 1990, 2000-2002, and 2008, dividend-paying companies as a whole outperformed non-dividend companies.
It’s a no-brainer that high-yield dividend investing isn’t always the best way forward, especially for those who want to avoid risks. The Heartland study quotes a report from Credit Suisse, which says that when evaluating dividend yields, companies with low payout ratios have higher returns. That’s because earnings sustain dividend payments, and if a company’s payout ratio is irrationally high, it cannot sustain its high yields and would eventually cut or suspend its dividends. The Heartland study calls this a “yield trap.” Another important mistake in high-yield dividend investing is to have a total disregard for sectors and blindly following yields. A good example would be an investor pouring all his money into the financial services sector in 2007-2008 unbeknownst to the fact that those stocks were headed for a disaster.
The Heartland report also makes an important point that is relevant to today’s dynamics. The report says that when it comes to large institutional investors, it’s difficult to quickly redistribute resources and allocate sizable chunks of portfolios to dividend stocks when a market downturn starts. That’s because the decision making process in large institutions is slow. That’s why, according to the report, it’s always recommended to diversify your portfolio and invest in dividend stocks in all circumstances for risk aversion. This year, we saw that major growth hedge funds which have a strict portfolio allocation strategy with a bias towards growth investing (Cathie Wood comes to mind) suffered huge losses, while Warren Buffett and the likes who have been holding major value stocks that have been paying solid dividends were able to avoid heavy losses.
In this article we picked dividend stocks with over 8% dividend yields. All these yields were recorded as of October 29. It's important to note that many of these stocks do not have the most attractive fundamentals or outlook. The purpose of this article is to give you a list of stocks that are offering high-dividend yields in the current market environment. Because of high payout ratios or other business dynamics, it's possible that these stocks might not be able to sustain their high dividend yields.
9 Dividend Stocks with Over 7% Yield
9. Arbor Realty Trust, Inc. (NYSE:ABR)
Dividend Yield: 11.28%
Arbor Realty Trust, Inc. (NYSE:ABR) is one of the high-yield REIT dividend stocks. Its dividend yield stands at just over 11% as of October 29. It is one of the few companies that is set to benefit from the rising interest rates. That’s because about 97% of its structured loan book is predicated on floating rate terms. JPMorgan analyst Richard Shane recently lowered the stock’s price target to $15 from $16 but kept an Overweight rating on the shares. The analyst said that Arbor Realty Trust, Inc. (NYSE:ABR)’s fundamentals appear to be “stable” in Q3 despite concerns over potential credit issues.
As of the end of the second quarter, 12 hedge funds reported having stakes in Arbor Realty Trust, Inc. (NYSE:ABR). The total worth of these stakes was about $75 million.
8. Great Ajax Corp. (NYSE:AJX)
Dividend Yield: 12.5%
Great Ajax Corp. (NYSE:AJX) is an Oregon-based REIT that invests in and manages a portfolio of residential mortgage and small balance commercial mortgage loans. Great Ajax Corp. (NYSE:AJX)’s dividend yield is about 12.6% as of October 29. In August, the company’s unit Great Ajax Operating Partnership closed a private offering of $110 million 8.875% senior unsecured notes due Sep. 2027. In October, B. Riley analyst Matt Howlett decreased his price target for Great Ajax Corp. (NYSE:AJX) stock to $14 from $17. However, the analyst rated a Buy rating on the shares. Howlett said that he expects a “rocky” third quarter for mortgage-based REITs due volatility in fixed income markets.
7. ARC Document Solutions, Inc. (NYSE:ARC)
Dividend yield: 8.3%
California-based ARC Document Solutions, Inc. (NYSE:ARC) is a digital printing company. The stock has a dividend yield of over 8% as of October 29. Back in August, ARC Document Solutions, Inc. (NYSE:ARC) posted its second quarter results. Non-GAAP EPS in the period came in at $0.08. Revenue in the period jumped 8.4% to total $74.6 million. The company’s CEO said that the second quarter was ARC Document Solutions, Inc. (NYSE:ARC)’s fifth consecutive quarter of year-over-year growth in revenue and earnings.
Of the 895 hedge funds tracked by Insider Monkey, 8 funds had stakes in ARC Document Solutions, Inc. (NYSE:ARC) as of the end of the June quarter. The total value of these stakes was about $12 million.
6. AGNC Investment Corp. (NASDAQ:AGNC)
Dividend yield: 17.6%
With a dividend yield of about 17% as of October 29, AGNC Investment Corp. (NASDAQ:AGNC) is one of the notable high-yield dividend stocks in our list. The stock jumped near the end of October amid a rally in the bonds market because the company invests in the mortgage market. AGNC Investment Corp. (NASDAQ:AGNC) also posted strong third quarter results, thanks to its asset repositioning and hedge positions. Q3 net spread and dollar roll income per share came in at $0.84, crushing the estimate of $0.69 consensus. Analysts believe AGNC Investment Corp. (NASDAQ:AGNC) is slated to grow as the rally in the bonds market is expected to continue.
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Disclosure: None. 9 Dividend Stocks with Over 8% Yield is originally published on Insider Monkey.