In this article, we will be looking at the 10 best high yield finance dividend stocks. If you want to skip our detailed analysis of financial stocks, you can go directly to see the 5 Best High Yield Finance Dividend Stocks.
The coronavirus pandemic leading to a market crash and recession alongside a range of other factors had resulted in most financial and banking stocks like Morgan Stanley (NYSE: MS), Bank of America Corporation (NYSE: BAC), and JPMorgan Chase & Co. (NYSE: JPM), among others, facing the full brunt of the crisis. However, with the surge of COVID-19 vaccination rates and widening treasury yield spreads, finance stocks are beginning to pick up the pace yet again, with, for instance, investment banking becoming a hot practice again in light of expectations that the worst of the pandemic is finally over. And with the recovering economy, we are also beginning to witness certain unavoidable changes brought about by COVID-19 influence social distancing measures, such as the rise of neobanking as a popular finance practice. Bloomberg has cited research that estimated, for instance, that the global market for neobanking, or online banking, is now expected to reach about $722.6 billion by 2028, growing at a CAGR of 47.7% from 2021 to 2028.
As investment trends change, the need for stable stocks to pour money into becomes ever clearer. Dividend stocks can be among those options that one can consider when looking to benefit from not only an ever-growing and recovering industry like the financial industry, but also reap the dual benefits of investing in stocks like these. Moreover, these stocks can be considered to be more effective investments than non-dividend yielding stocks as dividend stocks have been estimated to have outperformed the market at large by 77.8% between 1930 and 2020, according to Hartford Funds. Similarly, those dividend stocks that have higher yields were notably outperforming other dividend stocks with lower yields by at least 1.7% per year between 1928 and 2013. Hence, we have compiled a list of the best high yield finance dividend stocks.
Apart from the two factors mentioned above, a range of other realities must be taken into account when considering investing in dividend stocks. One such factor is the payout ratio of the dividend stock, with Credit Suisse’s quantitative research having estimated in 2006 that between 1990 and 2006, stocks with lower payout ratios were able to outperform those with higher payout ratios by a whopping 8.2% per year. Other important factors to take into account include the consistency in dividend yield increases, lower volatility, and lower P/E ratio, among a range of others, and help one make the right decision when looking at where to invest.
Investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Without further ado, let’s look at the 10 best high yield finance dividend stocks.
Using the data of about 866 hedge funds compiled by Insider Monkey, we have selected finance dividend stocks that are among the most popular with hedge funds. Each stock has a dividend yield of over 7% and has mostly positive analyst ratings and strong fundamentals.
Best High Yield Finance Dividend Stocks
10. Newtek Business Services Corp. (NASDAQ: NEWT)
Number of Hedge Fund Holders: 5
Dividend Yield: 8.8%
Newtek Business Services Corp. (NASDAQ: NEWT), a capital market company, ranks 10th on our list of the best high yield finance dividend stocks. The company is headquartered in New York and its subsidiaries include Newtek Small Business Finance, Inc.
This June, Compass Point’s Merrill Ross raised the price target on Newtek Business Services Corp. (NASDAQ: NEWT) shares from $33 to $38. Ross also holds a Neutral rating on the company’s stock.
In the first quarter of 2021, Newtek Business Services Corp. (NASDAQ: NEWT) had an NII of $1.05, higher than the $0.44 NII of the previous quarter. The company’s TII was $34.69 million, up 119.55% year over year and beating estimates by $5.39 million. Newtek Business Services Corp. (NASDAQ: NEWT) has also gained 16.23% in the past 6 months and 31.85% year to date.
By the end of the first quarter of 2021, 5 hedge funds out of the 866 tracked by Insider Monkey held stakes in Newtek Business Services Corp. (NASDAQ: NEWT) worth roughly $5.22 million. This is compared to 6 hedge funds in the previous quarter with a total stake value of approximately $5.76 million.
Like Morgan Stanley (NYSE: MS), Bank of America Corporation (NYSE: BAC), and JPMorgan Chase & Co. (NYSE: JPM), Newtek Business Services Corp. (NASDAQ: NEWT) is a good stock to invest in.
9. New Mountain Finance Corporation (NASDAQ: NMFC)
Number of Hedge Fund Holders: 9
Dividend Yield: 8.9%
New Mountain Finance Corporation (NASDAQ: NMFC), a business development company, specializes in lending to middle-market companies in defensive growth industries. The company ranks 9th on our list of the best high yield finance dividend stocks.
Hovde Group analyst Bryce Rowe, after initiating coverage of New Mountain Finance Corporation (NASDAQ: NMFC) shares, placed a Market Perform rating on the stock. The rating was accompanied by a $13.50 price target as well.
In the first quarter of 2021, New Mountain Finance Corporation (NASDAQ: NMFC) had an NII of $0.26, higher than the previous quarter’s NII of $0.12. The company’s TII was $67.71 million, beating estimates by $1.13 million. New Mountain Finance Corporation (NASDAQ: NMFC) has also gained 12.66% in the past 6 months and 17.52% year to date.
By the end of the first quarter of 2021, 9 hedge funds out of the 866 tracked by Insider Monkey held stakes in New Mountain Finance Corporation (NASDAQ: NMFC) worth roughly $18.7 million. This is compared to 10 hedge funds in the previous quarter with a total stake value of approximately $26.2 million.
Like Morgan Stanley (NYSE: MS), Bank of America Corporation (NYSE: BAC), and JPMorgan Chase & Co. (NYSE: JPM), New Mountain Finance Corporation (NASDAQ: NMFC) is a good stock to invest in.
8. WhiteHorse Finance, Inc. (NASDAQ: WHF)
Number of Hedge Fund Holders: 3
Dividend Yield: 9%
WhiteHorse Finance, Inc. (NASDAQ: WHF), headquartered in Miami, Florida, is a management investment company treated as a business development company under the Investment Company Act, 1940. It ranks 8th on our list of the best high yield finance dividend stocks.
B. Riley Securities raised its price target on WhiteHorse Finance, Inc. (NASDAQ: WHF) shares from $11 to $13 with analyst Michael Smyth also retaining a Neutral rating on the shares.
In the first quarter of 2021, WhiteHorse Finance, Inc. (NASDAQ: WHF) had an NII of $0.38, beating estimates by $0.01. The company’s TII was $17.97 million, up 23.65% year over year and also beating the previous quarter’s $16.85 million TII. WhiteHorse Finance, Inc. (NASDAQ: WHF) has also gained 7.42% in the past 6 months and 12.75% year to date.
By the end of the first quarter of 2021, 3 hedge funds out of the 866 tracked by Insider Monkey held stakes in WhiteHorse Finance, Inc. (NASDAQ: WHF) worth roughly $2.14 million. This is compared to 2 hedge funds in the previous quarter with a total stake value of approximately $1.78 million.
Like Morgan Stanley (NYSE: MS), Bank of America Corporation (NYSE: BAC), and JPMorgan Chase & Co. (NYSE: JPM), WhiteHorse Finance, Inc. (NASDAQ: WHF) is a good stock to invest in.
7. Monroe Capital Corporation (NASDAQ: MRCC)
Number of Hedge Fund Holders: 3
Dividend Yield: 9%
Monroe Capital Corporation (NASDAQ: MRCC), an asset management firm, ranks 7th on our list of the best high yield finance dividend stocks. The company focuses on private credit markets and has been offering financial services to clients in the US and Canada since 2004.
This May, Monroe Capital Corporation (NASDAQ: MRCC) increased its NAV by $0.08 per share to $236.2 million or $11.08 per share. The company’s CEO commented that their strong financial results and pipeline may lead to a positive impact on the company’s earnings in the future.
In the first quarter of 2021, Monroe Capital Corporation (NASDAQ: MRCC) had an NII of $0.25, beating estimates by $0.01. The company’s TII was $13.21 million, beating its previous quarter’s TII of $12.55 million. Monroe Capital Corporation (NASDAQ: MRCC) has also gained 23.65% in the past 6 months and 33.29% year to date.
By the end of the first quarter of 2021, 3 hedge funds out of the 866 tracked by Insider Monkey held stakes in Monroe Capital Corporation (NASDAQ: MRCC) worth roughly $2.47 million. This is compared to 5 hedge funds in the previous quarter with a total stake value of approximately $3.91 million.
Like Morgan Stanley (NYSE: MS), Bank of America Corporation (NYSE: BAC), and JPMorgan Chase & Co. (NYSE: JPM), Monroe Capital Corporation (NASDAQ: MRCC) is a good stock to invest in.
6. Goldman Sachs BDC, Inc. (NYSE: GSBD)
Number of Hedge Fund Holders: 5
Dividend Yield: 9.1%
Goldman Sachs BDC, Inc. (NYSE: GSBD) operates at a specialty finance company. It focuses on lending to middle-market companies in the US mainly and ranks 6th on our list of the best high yield finance dividend stocks.
In the first quarter of 2021, Goldman Sachs BDC, Inc. (NYSE: GSBD) had an NII of $0.57, beating estimates by $0.07. The company’s TII was $82.62 million, up 158.41% year over year and also beating estimates by $4.74 million. Goldman Sachs BDC, Inc. (NYSE: GSBD) has also gained 5.01% in the past 6 months and 2.83% year to date.
By the end of the first quarter of 2021, 5 hedge funds out of the 866 tracked by Insider Monkey held stakes in Goldman Sachs BDC, Inc. (NYSE: GSBD) worth roughly $5.21 million. This is compared to 2 hedge funds in the previous quarter with a total stake value of approximately $4.25 million.
Like Morgan Stanley (NYSE: MS), Bank of America Corporation (NYSE: BAC), and JPMorgan Chase & Co. (NYSE: JPM), Goldman Sachs BDC, Inc. (NYSE: GSBD) is a good stock to invest in.
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Disclosure: None. 10 Best High Yield Finance Dividend Stocks is originally published on Insider Monkey.
