High-yield dividend stocks are an attractive buy for many retail investors. And no wonder -- intangible, reinvested profits simply don't satisfy like cold hard cash in your pocket.
So it makes sense to want to snap up stocks with big fat dividend yields, right? Well, that depends.
Remember, dividend yield is a ratio, that shows how much a company pays out in dividends relative to its share price; it's calculated by dividing annual dividends per share by price per share.
If a stock price drops sharply, dividend yield will see a spike -- meaning that high dividend yield is often an indicator of very high risk.
That said, high dividend yield stocks potentially offer a lot of bang for your buck, so it's worth considering them for your portfolio. But you may want to evaluate based on additional criteria.
One way to find ideas is to look at what the short-sellers are doing.
Short-sellers sell high in order to buy low, by borrowing shares from other investors, selling them on the open market, and closing the short by buying back the same number of shares initially borrowed. If the short-seller can buy back the stock at a lower price, turns a profit off the difference.
Simply put, short-sellers bet on stocks to lose.
Short-sellers tend to be a bit more sophisticated than your average investor. After all, they're taking on unlimited risk because they (theoretically) have unlimited downside -- if the stock keeps rising, they keep losing. So it's not a bad idea to pay attention to their trades.
Here's a list of high-yield stocks with loads of cash to back up their dividend payments. For each stock, we'll list the trailing-12-month (TTM) operating cash-flow and levered free cash flow.
In addition, these stocks have very low short float -- meaning that short-sellers think the upside potential of these stocks outweigh the downside. What do you think? (Click here to access free, interactive tools to analyze these ideas.)
1. Intersections (Nasdaq: INTX): Consumer Services Industry. Market cap of $231.1M, dividend yield at 4%. Short-sellers have only shorted 0.11% of the company's total shares, which is equivalent to 0.28 days of average trading volume.
TTM operating cashflow at $48.28M, which translates into $2.69 operating cashflow per share (vs. the annual dividend per share at $0.60, which means that the operating cash flow per share / dividend per share ratio stands at 4.49.
TTM levered free cashflow at $84.92M, which translates into levered free cash flow per share at $4.74 (vs. annual dividend per share at $0.60, which means the levered free cash flow per share / dividend per share ratio stands at 7.89.
2. China Mobile Limited (NYSE: CHL): Wireless Communications Industry. Dividend yield at 3.6%. Short-sellers have only shorted 0.13% of the company's total shares, which is equivalent to 0.85 days of average trading volume.
TTM operating cash flow at $35.61B, which translates into $8.88 operating cashflow per share (vs. the annual dividend per share at $1.64, which means that the operating cash flow per share / dividend per share ratio stands at 5.41.
TTM levered free cash flow at $15.81B, which translates into levered free cash flow per share at $3.94 (vs. annual dividend per share at $1.64, which means the levered free cash flow per share / dividend per share ratio stands at 2.4.
3. Alto Palermo (Nasdaq: APSA): Property Management Industry. Market cap of $342.13M, dividend yield at 5.9%. Short-sellers have only shorted 0.01% of the company's total shares, which is equivalent to 1.12 days of average trading volume.
TTM operating cash flow at $78.26M, which translates into $2.49 operating cashflow per share (vs. the annual dividend per share at $1.01, which means that the operating cash flow per share / dividend per share ratio stands at 2.46.
TTM levered free cash flow at $86.98M, which translates into levered free cash flow per share at $2.76 (vs. annual dividend per share at $1.01, which means the levered free cash flow per share / dividend per share ratio stands at 2.73.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.
Kapitall's Eben Esterhuizen does not own shares of any companies mentioned.
