4 All-American Dividends Yielding Up to 10%

Brett Owens, Chief Investment Strategist
Updated: July 3, 2017

The Fourth of July is right around the bend, which means it’s time for financial pundits to flood readers with their favorite all-American stocks. But as I’ll illustrate in a moment via four all-American high-yield dividend stocks, there’s plenty more incentive to “buy American” than just a date on the calendar.

The U.S. is the largest economy in the world, making up 22% of the world’s nominal gross domestic product (GDP) at about $18.46 trillion as of 2016. California alone – at about $2.6 trillion – would represent the world’s sixth-largest economy if it were an independent country, snuggly tucked between the United Kingdom and France.

Thus, even anemic growth rates – like sub-2% GDP growth – can still generate an enormous amount of market excitement, even for companies that don’t have a speck of international exposure.

Another reason to go all-American? The U.S. dollar has been persistently strong for a couple years now, and a combination of tight Federal Reserve policies and cheap international money should preserve the status quo. That’s great for tourists, but misery for U.S.-domiciled multinationals that derive a high percentage of their revenues abroad. American-centric companies don’t face that headwind.

In other words, the following four all-American dividend stocks – which yield as much as 10.1% – don’t deserve the spotlight because the Fourth of July is on the horizon.

They deserve it because they provide secure income streams up to 10.1%.

Southern Company (SO)
Dividend Yield: 4.6%

Southern Company (SO) literally helps power America via a host of businesses, including electric operations, natural gas distribution, national wholesale generation and even wireless communications. Southern isn’t just a safe company like most utilities tend to be – it also offers slow, steady growth through occasional price hikes and via businesses like wholesale dark fiber optic solutions.

It’s also an ally to numerous swaths of the country, boasting accolades such as “Top Military Employer” (U.S. DoD), “Top Employer for Hispanics” (Hispanic Network) and “40 Best Companies for Diversity” (Black Enterprise)

Southern has been a serial dividend raiser for more than a decade, notching its 16th consecutive increase in April – right on schedule. In fact, investors got a hint of extra sugar as SO, which had boosted its dividend by precisely 1.75 cents for several consecutive years, but upped the ante by a full pair of red pennies!

OK, it doesn’t sound like much … but we’re pleased to see anytime a dividend payer acknowledges that investors deserve a little bit more. Especially when that dividend payer is as reliable as Southern Company.

Southern Company (SO): Ol’ Reliable

NRG Yield (NYLD)
Dividend Yield: 5.6%

NRG Yield (NYLD) is at the forefront of America’s energy revolution, existing as one of the earliest “yieldcos” – a business structure designed to hold predictable cash flow-generating assets, typically in renewable energy. If it sounds similar to master limited partnerships, that’s because it is, including the attractive yields.

NRG Yield was formed back in 2012 to hold thermal, wind and solar assets for NRG Energy (NRG). In short, NRG Energy acquires various electricity-generating plants, then throws them off to NRG Yield via their “drop-down” relationship. For instance, over the past year, the company has brought on assets from California Valley Solar Ranch and agreed to bring on utility-scale solar projects in Utah and Arizona.

NYLD shares have been steadily improving over the past 18 months, but more importantly, the dividend has been ticking higher every quarter. They’re significant hikes, too, totaling about 35% improvement in just two years.

There aren’t many big winners in the alternative energy space, but NYLD has the potential to be a rare gem on that front.

NRG Yield’s (NYLD) Dividend Is Relentless

Gaming and Leisure Properties (GLPI)
Dividend Yield: 6.4%

Gaming and Leisure Properties (GLPI) is a niche player in the REIT space, leasing out real estate to casino operators in 14 states, including numerous locations under the Hollywood Casino and Ameristar brands. The company’s current strategy is to continue “aggressively” acquiring gaming real estate to lease out, though it eventually plans on branching outside of the casino space.

This is not the first name in casinos, boasting little presence in Las Vegas, and instead operating heavily in states such as Ohio, Louisiana and Missouri. But the relatively low profile has been paying off in big growth, with revenues nearly quadrupling over the past five years, and net income exploding from just $23 million in 2012 to $289 million last year.

In its most recent quarter, adjusted funds from operations came to 79.1 cents per share, translating into a payout ratio of less than 80% on a dividend of 62 cents — a roughly 20% better quarterly sum than what it was offering just three years ago.

Who needs Macau?

Beat the House With Gaming and Leisure Properties (GLPI)

New Senior Investment Group (SNR)
Dividend Yield: 10.1%

New Senior Investment Group (SNR) is one of several plays on one of my favorite mega-trends: the aging of America’s baby boomers. Between 2012 and 2032, roughly 10,000 baby boomers will reach retirement age every single day, pushing the need for various types of senior housing.

SNR owns 150 properties in 37 states, including 105 independent living properties, 40 assisted living/memory care properties and five continuing care retirement communities. Of these, 58 are “triple net leases,” the holy grail of REITs in which tenants are on the hook for real estate taxes, insurance and maintenance – a simpler and more stable model for REITs.

What I love about New Senior Investment Group right this very moment, though, is the security and value proposition of this extremely high yield. SNR is doling out just more than 10% in dividends on a payout that’s less than 90% of trailing 12-month FFO, meaning it’s easily sustainable. And at the moment, SNR is trading at less than 9 times FFO – an early bird special if I’ve ever seen one!

New Senior Investment (SNR) Is a Budding Boomer Play

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