Five Smart (and Safe) Dividend Investments for 2013 Dividends Income Daily

Post on: 15 Май, 2015 No Comment

Five Smart (and Safe) Dividend Investments for 2013 Dividends Income Daily

If Ive learned one thing over the past decade in the financial publishing business, its this: You want less filler and more beef.

Or put simply, little to no commentary and more actionable investment ideas.

Accordingly, Im not going to bore you with a forecast about what the New Year holds for dividend investors. Not today, at least.

Instead, Im simply wishing you a happy New Year. (Happy New Year!)

Im also breaking down five dividend investments that performed well in 2012 and should be poised for another banner year in 2013.

So without further ado heres the beef!

Smart Dividend Play #1: Home Loan Servicing Solutions (HLSS )

Home Loan is a mortgage servicing company that collects and processes payments on mortgages and receives a fee in return. Headed into 2013, the real estate recovery is gaining steam. which means that Home Loans business should enjoy a notable uptick, too.

Translation: After rising 38% in 2012, the stock should keep trending higher.

As for the dividend, its growing. Quickly. Since going public in March 2012, Home Loan has already increased its monthly dividend three times. It currently stands at $0.12 per share per month.

As for future dividend growth, Home Loan is expected to increase its dividend by 24.74% over the next three years, based on Bloomberg estimates. And its relatively low dividend payout ratio of 49.7% gives it the headroom to do just that.

Its current yield clocks in at 7.7%, over double the S&Ps average. Whats more, the stock isnt expensive, trading at 13.7 times earnings.

Smart Dividend Play #2: Health Care REIT (HCN )

Founded in 1970, Health Care REIT is the first Real Estate Investment Trust (REIT) to invest exclusively in healthcare facilities. It currently owns a diversified portfolio of 956 facilities in 46 states, worth an estimated $13 billion.

Years ago, management made a decision to retool and concentrate on two of the most lucrative and stable segments in the market medical office space and senior housing.

The beauty of these two segments is that they dont rely on the government. Almost 90% of Health Care REITs revenue from senior housing facilities comes from private payers. Only 13% comes from Medicaid and Medicare payments.

Americas aging population and increased insurance coverage heading into 2013 promise to provide a tailwind for the company and, in turn, share prices.

As for the dividend, the REIT currently pays an annual dividend of $2.96 per share, equal to a 4.9% yield. Thats nearly triple the yield of 10-year U.S. Treasuries and similarly safe, in our opinion.

Smart Dividend Play #3: Chubb Corp. (CB )

The insurance business boils down to sound underwriting collecting slightly more than enough premiums to cover losses and expenses.

No doubt about it, Chubb is a master. Its combined ratio a measure of profitability in the insurance industry consistently checks in around 90%, versus an industry average of 106%.

That means it routinely collects 10% more in premiums than it needs to cover losses and expenses, while the average insurer doesnt collect enough and needs to make up the gap with investment returns.

In terms of the dividend, its definitely safe. It endured the financial crisis, so it can endure anything. Moreover, the companys low DPR of 23.5% means it can afford to increase the dividend. And it does so religiously.

Management has increased the quarterly dividend for 47 years and counting. Raises typically come in the first quarter of the year, making now a particularly compelling time to enter a position.

Five Smart (and Safe) Dividend Investments for 2013 Dividends Income Daily

Especially since industry fundamentals are working in the companys favor, too. Morningstar analyst Drew Woodbury says that Chubb is destined to benefit from an improving pricing market in 2013. We concur.

Smart Dividend Play #4: Automatic Data Processing (ADP )

ADP is the worlds largest human resources services company. Its paid and increased its dividend for 38 years in a row. And unless you think the economy is going to collapse to zero, literally, ADP is going to be in business, and will keep paying out its dividend, for years to come.

Forget the dividend for a moment, though. The reason were so bullish on the stock heading into 2013 is because it doubles as an inflation hedge. And as we all know, the Feds runaway money printing is bound to lead to inflation.

You see, ADPs core business involves collecting cash from its customers and then issuing paychecks, making deposits in retirement accounts and transferring funds to pay taxes (over $1 trillion in total each year).

And although it doesnt hold on to these funds for a long time, ADP gets to keep any interest it earns. Guess what? That interest adds up. In recent years, its accounted for more than 30% of ADPs pre-tax profits.

Of course, as interest rates inevitably rise, so, too, will the income ADP earns on this float. And higher earnings ultimately translate into higher share prices.

Smart Dividend Play #5: SPDR EURO STOXX 50 ETF (FEZ )

The thought of investing in Europe right now, given all its fiscal and political woes, probably repulses you. But all bad times eventually pass. And that day is approaching for Europes biggest and safest companies.

And the easiest way to capitalize on it and earn a respectable yield in the process is to buy the SPDR EURO STOXX 50 ETF.

The exchange-traded fund tracks the EURO STOXX 50 Index, investing in 50 of Europes bluest of blue-chip stocks. As such, it provides a solid dose of diversification, which reduces downside risk.

The fund charges a reasonable expense ratio of 0.29%. Best of all, though, it currently yields 3.95%. Thats more than double the yield on 10-year U.S. Treasury bonds. And since options are traded on the fund, we can juice our income by writing covered calls. if we want.

There you have it. All beef and (almost) no filler. Expect plenty more of the same in the year ahead.


Categories
Options  
Tags
Here your chance to leave a comment!