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Its been a frustrating year for investors in the U.S. stock market, with the S&P 500 in negative territory since the start of the year. However, investors with portfolios that are full of dividend-paying stocks have still been receiving regular infusions of cash, regardless of how the market is performing.
To help our readers turbocharge their portfolios' ability to pay dividends, we asked our team of Fool contributors to share a stock idea that offers investors a high dividend payment that they believe is worth putting real money behind. Read on to see if you agree with their suggestions.
Todd Campbell: When it comes to buying high-dividend stocks, investors are best served by being skeptical. Too often, companies issue high dividends in order to counteract share prices falling as a result of faltering business models. However, that may not be the case at New York Community Bancorp (NYCB +1.48%).
New York Community Bancorp traces its roots to 1859, and that means it's seen its fair share of economic storms, including the financial debacle that caused the Great Recession. Yet New York Community Bancorp's focus on rent-controlled apartments primarily in New York City has generally led its loan portfolio and its shares to outperform its peers during even the toughest periods.
Over the past 20 years, New York Community Bancorp's net charge-off rate represents just 0.04% of average loans, and in 2008, its -27.9% return was 20 percentage points better than the S&P Bank ETF's (KBE +1.10%) 47.3% tumble and roughly 10% better than the S&P 500 ETF's return. Additionally, New York Community Bancorp's shares returned 92% between the market's low in March 2009 and the end of 2010; again outpacing both the S&P Bank ETF and the S&P 500.
Importantly, over the past 10 years, New York Community Bancorp's dividend yield has remained above 5%, which suggests that it has the kind of quality and dividend friendly staying power that investors shouldn't ignore. Keep in mind that NYCB's dividend might dip in the future because of expansion. The bank is currently right at the edge of the $50 billion threshold that would require the bank to be compliant with Dodd-Frank regulations. In order to avoid going over, NYCB has been paying out a ton in dividends. The board has already stated that when they choose to pass the $50 billion threshold, it will be deliberate and it will likely be through an acquisition that makes them significantly larger. When this occurs, expect dividends to drop in order to finance the move.
Brian Feroldi: Most stocks that yield more than 9% should be approached with caution, as yields don't often get that high unless there is something seriously wrong with the company's business. However, one company I've followed for a long time, Seaspan Corporation (SSW +0.00%), is currently yielding 9.25% even though its business continues to hum along nicely, which could make right now a great time to buy shares.
Seaspan buys container ships and leases them out on long-term, fixed-rate charters to major shipping companies such as Yang Ming and Maersk. Since those leases often run for years on end, they provide the company with tremendous revenue and profit visibility for years into the future, which allows the company to take a portion of its profits and send it back to its shareholders in the form of a generous dividend payment.
With each passing year the company continues to grow as it adds more ships to its fleet. The company currently has 85 ships on the water, and another 18 will be delivered by 2017. More ships on the water means that revenue and cash available for distribution to common shareholders will continue to rise, as they grew 14% and 55%, respectively, in the most recent quarter.
With more revenue coming in, Seaspan should have plenty of capital to continue to raise its dividend for several more years, so investors who buy shares today are getting a very high yield alongside dependable dividend growth, which is a one-two punch that makes Seaspan my favorite dividend name to buy right now.
Matt Frankel: One high-dividend stock that's definitely worth a look is Health Care Property Investors (HCP +1.09%), known simply as HCP. The stock currently has a dividend yield of about 5.9% and has increased its payout for a stunning 30 consecutive years.
HCP is a real estate investment trust that, as its name implies, owns healthcare properties. The majority of the company's 1,200 properties are senior living facilities, but there are also substantial medical office and life sciences buildings as well.
Basically, I like HCP not only for its stunning track record of 15.6% average annual returns since its 1985 IPO, but also because demographic trends point toward a high level of performance in the future. I mentioned that HCP specializes in senior living facilities. Well, the U.S. population is aging rapidly -- in fact, the 85-plus segment of the U.S. population is expected to steadily grow from 40 million in 2010 to 90 million by 2050.
In other words, demand for this type of property is going to soar, and HCP's size, experience, and financial flexibility will allow it to capitalize on development and acquisition opportunities as they present themselves. And, I'm confident that investors will see their dividends and shares continue to grow at a market-beating rate for decades to come.
Selena Maranjian: Chevron Corporation (CVX +0.66%) has been hurt by low oil prices because of its significant exploration and production exposure. It has also been free-cash-flow negative in the past few years and has taken on more debt. Concerns about the company have led to a drop in market value of more than $100 billion, making it look rather attractive to believers.
After all, plenty is still going right for Chevron. It's a very diversified company, with its refining and distribution operations generating profits. Some have speculated that, if the energy industry remains in a slump because of low oil prices, there could be a lot of consolidation with Chevron as a prime buyer.
Meanwhile, the company has been investing heavily in projects that can spur a lot of growth down the road, such as LNG (liquefied natural gas) facilities in Australia and a petrochemical manufacturing joint venture with Phillips 66. Chevron expects that various projects under way will help boost production by 20% between 2014 and 2017.
Chevron has a lot to offer investors -- including a dividend yield that was recently at 5.25% and that has been increased by an annual average of 8% over the past five years. Indeed, the company has increased its payout for some 27 years in a row and is committed to maintaining it -- in part by shedding non-critical assets and suspending its stock buyback program.
Sean Williams: When you think of high-yield dividends, you think of coal, right? I know, it sounds borderline sadistic, considering how weak coal prices and demand have been over the past couple of years, but there's one perfectly positioned company within the sector that looks poised to keep generating market-topping dividends: Alliance Resource Partners (ARLP 0.04%).
Three things in particular make Alliance Resource Partners a potentially attractive buy.
First, Alliance Resource isn't flying by the seat of its pants. It negotiates production contracts years in advance, locking up a substantial percentage of its coal for future delivery and minimizing its exposure to volatile wholesale prices. This makes the company's cash flow predictable, and has been a sticking point that's allowed it to boost its dividend for 29 consecutive quarters. That's more than seven years.
Secondly, Alliance Resource Partners' low-cost structure and superior balance sheet afford it luxuries that its peers do not have. With roughly $830 million in net debt and operating cash flow of nearly $700 million over the trailing 12-month period, Alliance Resource has the flexibility to make earnings accretive purchases as it sees fit. This is what spurred the company to purchase White Oak Resources in recent months for $50 million plus possible contingent considerations in the future.
Finally, Alliance Resource Partners is a master-limited partnership (in fact, the first energy MLP to ever be publicly traded), which means that it's a pass-through corporation and isn't required to pay corporate taxes like a standard business. The catch? It has to return a substantial portion of its profits to investors. This is why Alliance Resource Partners is currently yielding upwards of 12%. Best of all, MLP dividends aren't taxed like regular dividends. They actually lower your cost basis until you've recouped the entirety of your original investment, or until you sell the stock, at which point you'll pay capital gains taxes. Luckily, long-term capital gains taxes for income derived from MLPs is much lower than regular capital gains taxes.
