Some of the highest paying dividend stocks are not the most popular companies that get all the mainstream media attention. These are the under-the-radar stocks that are often overlooked by investors despite paying out big dividend yields with plenty of room for growth.
Three stocks that aren’t on many investors’ radar but have all the cogs of big money makers are black stone (BX 2.28%), Hannon Armstrong Sustainable Infrastructure Capital (HASI 3.15%)and Rhythm Capital (RITM 4.49%). Let’s take a closer look at these dividend stocks and why three Motley Fool contributors think they could make you richer.
This alternative asset manager is a major steal right now
Liz Brumer Smith (Black stone): Recent market volatility and general economic uncertainty have many investors looking for yield alternative assets such as real estate, public and private debt securities and life science investments. Rather than investing in these assets directly, which requires a lot of money and a sophisticated level of knowledge, investors are choosing alternative asset management firms like Blackstone to do the work for them.
Blackstone is one of the largest alternative asset management companies in the world, with $951 billion in assets under management (AUM). The company has absolutely crushed it over the past few years, with its latest quarterly results beating analysts’ expectations.
The company’s main revenue comes from its management fees. The more assets it manages for investors, the more commissions it receives. Its fee-based revenue (FRE) grew 51% year-over-year, while its total assets under management increased $11 billion from the prior quarter. FRE’s impressive jump was largely related to its fee-based performance income, which is a bonus the company earns if it exceeds expected performance levels for certain funds and investments.
Given the state of the stock market and the economy, there is a good chance that its AUM and fee income will continue to grow as investors seek stable returns. Even though the market continues to deteriorate, Blackstone is very good at investing in bear markets. The company managed assets quite profitably during the Great Recession.
Despite the company’s strong performance, the stock is down 31% year-to-date with a forward price-to-earnings ratio of 17.5, suggesting now is a good time to buy. In addition, its dividend yield is 5.5%, three times higher. that the S&P500.
Saving the planet, one tasty dividend at a time
Kristi Waterworth (Hannon Armstrong Sustainable Infrastructure Capital): The whole point of investing is to make your money make more money, but it never hurts if you can do it with an action that also makes you feel a little better about the future. . Hannon Armstrong Sustainable Infrastructure Capital is a confidence in real estate investment (REIT) which provides leases and financing for green infrastructure projects like solar farms, wind farms and even stormwater management projects.
At the end of 2021, it held approximately $3.6 billion of these projects on its balance sheets and managed an additional $5.2 billion in green power-backed assets. Although the bulk of these assets are in the form of bonds, the relevant land leases are structured as triple net leases, which means the tenant is responsible for all major bills including construction, maintenance, taxes and any utility costs involved. This significantly increases the REIT’s profit margins.
Despite an $8 million write-off during the second quarter of 2022 resulting from a lease termination in 2017, revenue increased 6.64% from the second quarter of 2021 to the second quarter of 2022, from approximately 58.9 million to $62.8 million, and the company continues to consistently meet or exceed earnings forecasts.
Over the past five years, the green energy sector has seen renewed interest and Hannon Armstrong Sustainable Infrastructure has grown at over 11% per year, on average. Dividends also continue to grow steadily, from an initial $0.06 per share quarterly on August 16, 2013 to $0.375 per share quarterly on October 11, 2022. This is a 575% increase in payouts. of dividends over just nine years, with a dividend yield of 5.5% as of November 2.
Dance to the rhythm of the dividends
Mike Price (Rith Capital): Mortgage REITs (MREIT) are not the most exciting investments, but they produce the highest and most consistent dividends. Financial companies borrow money at a low rate and use it to buy mortgages or mortgage-backed securities, earning income on the spread.
Many mortgage REITs have dividend yields above 10% and most of them are currently trading at a discount due to interest rate fears – when interest rates rise, REITs pay more for refinance (they usually borrow short-term) but are locked into lower rates for decades with the mortgages they purchased.
Rithm Capital pays a 12% dividend yield while maintaining a 40% payout ratio, and its shares trade at just 0.69 times book value, but it doesn’t have as much interest rate risk. than most mREITs.
Rithm holds $623 billion in Mortgage Servicing Rights (MSR); its family of companies is a top five mortgage originator and administrator. Financial companies buy MSRs to service mortgages (meaning they collect and distribute escrow and principal and interest payments) for a flat fee. MSR values rise when interest rates do because there is less chance that mortgagees will refinance, rendering the right worthless.
Rithm also temporarily lowered its profits as it paid a one-time termination fee of $325 million to its former outside manager. It will be managed internally in the future and management projects will save the company up to $65 million per year.
The new internal management is a pleasure to see. Management is focused on reducing operating expenses, maintaining a strong balance sheet and allocating capital based on the returns it will generate.
Once earnings normalize and higher interest rates become the new normal, Rithm shares could get a boost as investors pile into the company and its dividend yield of more than 12% .