In this article, we will be taking a look at 10 high-yield dividend stocks with payout ratio less than 55%. To skip our detailed analysis of dividend investing, you can go directly to see the 5 High-Yield Dividend Stocks with Payout Ratio Less than 55%.
Dividend stocks are among some of the most popular investment choices out there, with income investors and those looking to secure themselves in times of financial crisis, rising unemployment, and retirement, tending to pour money into dividend stocks with the idea of setting up a passive income stream. This is not an unreasonable way to approach investment either, as many investors and billionaires have been known to make fortunes out of dividend payments alone. As of August 2021, for instance, billionaire investor Warren Buffett, who is the seventh-richest man in the world at present, was reported to have made about $4.6 billion from dividend payments alone. As such, investing in dividend stocks such as Wells Fargo & Company (NYSE: WFC), Verizon Communications (NYSE: VZ), Medtronic plc (NYSE: MDT), and Moody’s Corporation (NYSE: MCO) can be a deciding factor in an individual’s financial status, by either making or breaking their portfolio.
The above doesn’t go to say, of course, that all dividend stocks are created equal, or that investing in just any dividend stock will yield unimaginable fortunes for the investor in question. We’re not all Warren Buffetts, after all. However, you can still make a living out of dividends, provided you take the right factors into account before deciding to pour all your money into all sorts of stocks. One critical metric to consider before investing in dividends is thus the dividend payout ratio of the company you are looking to invest in.
Why is the payout ratio so important, you ask? The reason for that is very simple. Research and analysts have revealed, time and again, that companies with lower payout ratios tend to outperform those with higher payout ratios. There are a number of reasons for this, with the most obvious one being that when a company spends all its earnings on paying out dividends to its shareholders, it is left with barely anything to reinvest into its own future growth. Comparatively, those companies with lower payout ratios and respectable or attractive yields tend to be able to pay consistent dividends while investing enough money into themselves to ensure they can keep the payments coming, and maybe even increase their value over time. As such, everyone goes home happy.
To fully understand this concept, we have research cited by Hartford Funds in a report on the power of dividends, where Wellington Management and Hartford Funds managed to explain the importance of payout ratios as well. By dividing the dividend stocks studied into five quintiles, it was seen that dividend stocks in the second quintile with high but not the highest of yields, and with marginally lower payout ratios as compared to higher-yielding stocks in the first quintile were outperforming the market and other stocks. These stocks in the second quintile had an average dividend payout ratio of about 41% from about 1979 to 2020 and managed to outperform stocks in the rest of the four quintiles about 77.8% of the time between 1930 and 2020. When taken against the S&P 500 as well, it was observed that these stocks had a much higher compound annual growth rate (CAGR). For instance, between 1930 and 1939, the CAGR of these stocks was 0.61% as compared to -0.20% for the S&P 500. Later from 2000 to 2009, the CAGR of stocks in the second quintile was 4.15%, as compared to the S&P 500’s -0.44% CAGR. As such, we can clearly see the importance of the payout ratio as a metric.
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Without further ado, let’s take a look at the 10 high-yield dividend stocks with payout ratio less than 55%.
Our Methodology
Insider Monkey tracks the data of about 873 hedge funds, and we have used this data to pick dividend stocks that are highly popular among hedge funds today. For each stock we have mentioned its yield and the number of hedge fund holders holding a stake in it, ranking them from the highest to the lowest payout ratios, with the highest payout ratio listed being 55%. Finally, we have used analysts’ ratings to determine which stocks are favorably placed in analyst and investor circles, picking stocks with mostly positive ratings and strong fundamentals.
High-Yield Dividend Stocks with Payout Ratio Less than 55%
10. New York Mortgage Trust, Inc. (NASDAQ: NYMT)
Number of Hedge Fund Holders: 16
Dividend Yield: 9.52%
Payout Ratio: 55%
New York Mortgage Trust, Inc. (NASDAQ: NYMT) works to acquire, invest in, finance, and manage mortgage-related single-family and multi-family residential assets in the US. The company ranks 10th on our list of high-yield dividend stocks with payout ratio less than 55%. It targets residential loans, second mortgages, and business purpose loans among other investments.
Matt Howlett, an analyst at B. Riley, began covering shares of New York Mortgage Trust, Inc. (NASDAQ: NYMT) this May with a Buy rating. The analyst has also placed a $6 price target on shares of the company.
In the second quarter of 2021, New York Mortgage Trust, Inc. (NASDAQ: NYMT) had an FFO of $0.11, in line with estimates. The company’s revenue was $31.48 million, up 10.34% year over year and beating the previous quarter’s revenue of $30.34 million. New York Mortgage Trust, Inc. (NASDAQ: NYMT) has gained 0.96% in the past 6 months and 16.67% year to date.
By the end of the second quarter of 2021, 16 hedge funds out of the 873 tracked by Insider Monkey held stakes in New York Mortgage Trust, Inc. (NASDAQ: NYMT) worth roughly $32.3 million. This is compared to 12 hedge funds in the previous quarter with a total stake value of approximately $29.1 million.
Like Wells Fargo & Company (NYSE: WFC), Verizon Communications (NYSE: VZ), Medtronic plc (NYSE: MDT), and Moody’s Corporation (NYSE: MCO), New York Mortgage Trust, Inc. (NASDAQ: NYMT) is a good stock to invest in.
9. New York Community Bancorp, Inc. (NYSE: NYCB)
Number of Hedge Fund Holders: 30
Dividend Yield: 5.63%
Payout Ratio: 55%
New York Community Bancorp, Inc. (NYSE: NYCB), is a financial services company and also the holding company for New York Community Bank. The company ranks 9th on our list of high-yield dividend stocks with payout ratio less than 55%.
As of this May, Deutsche Bank has a raised price target on shares of New York Community Bancorp, Inc. (NYSE: NYCB) of $15, versus the previous price target of $11.50, alongside a Hold rating.
In the second quarter of 2021, New York Community Bancorp, Inc. (NYSE: NYCB) had an EPS of $0.33, beating estimates by $0.03. The company’s revenue was $347 million, up 23.38% year over year and beating estimates by $12.69 million. New York Community Bancorp, Inc. (NYSE: NYCB) has gained 15.05% year to date and 30.31% in the past year.
By the end of the second quarter of 2021, 30 hedge funds out of the 873 tracked by Insider Monkey held stakes in New York Community Bancorp, Inc. (NYSE: NYCB) worth roughly $393 million. This is compared to 25 hedge funds in the previous quarter with a total stake value of approximately $329 million.
Like Wells Fargo & Company (NYSE: WFC), Verizon Communications (NYSE: VZ), Medtronic plc (NYSE: MDT), and Moody’s Corporation (NYSE: MCO), New York Community Bancorp, Inc. (NYSE: NYCB) is a good stock to invest in.
8. MFA Financial, Inc. (NYSE: MFA)
Number of Hedge Fund Holders: 20
Dividend Yield: 8.85%
Payout Ratio: 43.8%
MFA Financial, Inc. (NYSE: MFA), a real estate investment trust operating in the US, ranks 8th on our list of high-yield dividend stocks with payout ratio less than 55%. The company focuses on residential mortgage assets, residential whole loans, and mortgage servicing rights alongside other related assets as its investments.
This April, Keefe Bruyette’s Bose George upgraded shares of MFA Financial, Inc. (NYSE: MFA) from Market Perform to Outperform. The analyst also placed a $4.75 price target on the shares.
In the second quarter of 2021, MFA Financial, Inc. (NYSE: MFA) had an FFO of $0.13, beating estimates by $0.03. The company’s revenue was $58.97 million, beating estimates by $30.20 million. MFA Financial, Inc. (NYSE: MFA) has gained 8.13% in the past 6 months and 20.21% year to date.
By the end of the second quarter of 2021, 20 hedge funds out of the 873 tracked by Insider Monkey held stakes in MFA Financial, Inc. (NYSE: MFA) worth roughly $151 million. This is compared to 16 hedge funds in the previous quarter with a total stake value of approximately $104 million.
Like Wells Fargo & Company (NYSE: WFC), Verizon Communications (NYSE: VZ), Medtronic plc (NYSE: MDT), and Moody’s Corporation (NYSE: MCO), MFA Financial, Inc. (NYSE: MFA) is a good stock to invest in.
7. Brandywine Realty Trust (NYSE: BDN)
Number of Hedge Fund Holders: 7
Dividend Yield: 5.3%
Payout Ratio: 42.9%
Brandywine Realty Trust (NYSE: BDN) is among the largest publicly traded and full-service integrated real estate companies operating in the US. The company’s operations are concentrated in Philadelphia, Austin, and Washington, D.C. It ranks 7th on our list of high-yield dividend stocks with payout ratio less than 55%.
This April, Mizuho’s Omotayo Okusanya raised the price target on shares of Brandywine Realty Trust (NYSE: BDN) from $12 to $13. The analyst also reiterated a Neutral rating on the stock at the same time.
In the second quarter of 2021, Brandywine Realty Trust (NYSE: BDN) had an FFO of $0.32, in line with estimates. The company’s revenue was $120.1 million, beating estimates by $2.04 million. Brandywine Realty Trust (NYSE: BDN) has gained 10.74% in the past 6 months and 16.62% year to date.
By the end of the second quarter of 2021, 7 hedge funds out of the 873 tracked by Insider Monkey held stakes in Brandywine Realty Trust (NYSE: BDN) worth roughly $32.1 million. This is compared to 12 hedge funds in the previous quarter with a total stake value of approximately $55.2 million.
Like Wells Fargo & Company (NYSE: WFC), Verizon Communications (NYSE: VZ), Medtronic plc (NYSE: MDT), and Moody’s Corporation (NYSE: MCO), Brandywine Realty Trust (NYSE: BDN) is a good stock to invest in.
6. Chimera Investment Corporation (NYSE: CIM)
Number of Hedge Fund Holders: 16
Dividend Yield: 8.89%
Payout Ratio: 39.9%
Chimera Investment Corporation (NYSE: CIM) is yet another US-based real estate investment trust on our list of high-yield dividend stocks with payout ratio less than 55%. The company invests in a portfolio of mortgage assets and other real estate-related securities. It ranks 6th on our list.
In November, Chimera Investment Corporation (NYSE: CIM) shares received a Neutral rating at BTIG, where analyst Eric Hagen initiated coverage on the stock.
In the second quarter of 2021, Chimera Investment Corporation (NYSE: CIM) had an FFO of $0.54, beating estimates by $0.20. The company’s revenue was $172.07 million, up 47.49% year over year and beating estimates by $44.89 million. Chimera Investment Corporation (NYSE: CIM) has gained 28.68% in the past 6 months and 50.91% year to date.
By the end of the second quarter of 2021, 16 hedge funds out of the 873 tracked by Insider Monkey held stakes in Chimera Investment Corporation (NYSE: CIM) worth roughly $105 million. This is compared to 15 hedge funds in the previous quarter with a total stake value of approximately $78.5 million.
Like Wells Fargo & Company (NYSE: WFC), Verizon Communications (NYSE: VZ), Medtronic plc (NYSE: MDT), and Moody’s Corporation (NYSE: MCO), Chimera Investment Corporation (NYSE: CIM) is a good stock to invest in.
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Disclosure: None. 10 High-Yield Dividend Stocks with Payout Ratio Less than 55% is originally published on Insider Monkey.
