Investors are always on the prowl for high returns. They can look for this in the traditional places, of course, the Apples and the Amazons and the Googles, where shares appreciate at fast rates, or they can look at the Microsofts and Mastercards and JPMorgans, where steady share gains are paired with steady dividends. These are viable strategies. But sometimes, investors like to follow the roads less traveled.
The average dividend yield among stocks listed in the S&P 500 index is only 2%. This is – just slightly – higher than Treasury bond yields. But it’s also just an average. There are plenty of stocks with higher yields. Companies may reach those yields – of 7, or 9, or even 15% – for various reasons, but what they all have in common is a strong draw for investors.
We’ve used TipRanks’ Stock Screener tool to pull up some of these lesser-known, but profitable, dividend stocks. Setting the filters to show small-cap stocks with yields exceeding 5%, we narrowed the list from the full database of 6,500 stocks to just 86, a far more manageable number. Here are three that income-minded investors should take note of.
MVC Capital, Inc. (MVC)
We’ll start with business development company. MVC Capital holds a diverse portfolio of investments, which it uses to realize long-term growth for its own investors and shareholders. In recent years, the company has transitioned from a capital loss carry strategy to a yielding investment strategy, with an emphasis on dividend returns.
And it’s not just dividend returns from the company’s portfolio – MVC is a top performer in its niche at paying out dividends to investors. The company has a nine-year history of consistent, regular payments, without missing a quarter, and in recent years has been increasing the payout. The current dividend, at 17 cents quarterly, represents an annual payment of 68 cents per share and impressive yield of 7.12%. That’s 3.5x the S&P average.
MVC maintains its dividend with strong earnings. The company reported $8 million in total income for Q4 2019, up 35% year-over-year. Net operating income, at $3.1 million, was also up significantly – and more important, MVC has a dividend payout ratio of 100%, so all of that income was paid back to company investors.
Michael Diana, 4-star analyst with Maxim Group, looks ahead at MVC’s potential and writes, “Over the next four quarters, we expect: 1) a dividend yield of 7.4%, and 2) stock price appreciation of 40.5%, which should result in an estimated 12-month total return of about 48%. Beyond that timeframe, we expect MVC to grow its yield investments and raise its dividend further.”