The prevailing ultra low interest rate environment has left investors with little option to enhance their regular income. As a result of the Fed’s stimulus, fixed income security yields have dropped to their lowest. Therefore, stocks paying elevated dividends are the best alternatives these days.
You will find three such stocks from the U.S. financial sector that pay dividends in excess of 4.50% and are insiders’ favorites. I am bullish on the three stocks as they pay elevated and stable dividends during such challenging times when the 10-year Treasuries are offering 1.83%.
Additionally, the recent insider buying makes me more bullish on the three stocks under consideration. Therefore, I recommend you buy Inland Real Estate Corporation (NYSE:IRC), American Capital Agency Corp. (NASDAQ:AGNC) , and Invesco Mortgage Capital Inc (NYSE:IVR) . The remaining of the investment thesis aims to touch the individual stocks briefly.
Inland Real Estate Corporation (NYSE:IRC) operates as an equity REIT. The company focuses on developing, acquiring, and managing prime retail centers. The company has investments in over 146 properties. These properties are leased to generate rental income for Inland Real Estate Corporation (NYSE:IRC), which is then transferred as dividends to shareholders.
The company is currently yielding 4.88% on its monthly dividend of $0.05 per share, which was maintained for a very long time. Besides, since the company distributes dividends on a monthly basis, it is more attractive for regular income investors.
During the month of February, one of the company’s directors bought 1,000 shares at an average price of $9.41 per share. Among other recent purchases are over 110,000 shares of the company, which were bought during the month of November last year by its officers.Remember, these were not stock options which are granted to the top executives as part of their annual compensation. This insider buying signals the insiders’ bullishness on the company’s future.
American Capital Agency Corp. (NASDAQ:AGNC) operates as a mortgage REIT, and is exclusively invested in acquiring and managing fixed rate residential mortgage backed securities for which any of the government Agencies guarantees the principal and interest payments.
The company pays a quarterly dividend of $1.25 per share, yielding around 16.9%. The company has maintained its quarterly dividend for a long time now and I believe it will be able to do so in the future as its cash dividend coverage ratio comes out to 1.2 times.
During the month of February, the company’s CEO bought 15,500 shares of American Capital Agency Corp. (NASDAQ:AGNC) at an average price of $32.40 per share. Again, these are not part of the annual compensation. Besides, the company’s President doubled his stakes in American Capital Agency Corp. (NASDAQ:AGNC) after he exercised his options to buy 332,794 shares in May this year.
Invesco Mortgage Capital Inc (NYSE:IVR) is another mortgage REIT that has investments in both Agency and non-Agency residential mortgage backed securities. This is why it’s called a hybrid mortgage REIT.
The company is currently yielding 12.7% in dividends on its quarterly dividend rate of $0.65 per share. The company has been paying this dividend since December 2011, while its most recent quarter’s cash dividend coverage ratio comes out to 1.5 times. Therefore, it’s fair to say that you can expect the dividends to continue in the coming future.
The U.S. mortgage REITs are facing a challenging environment due to the prevailing interest rate environment and the Fed’s bond buying programs. Still, there are some mREITs which have re-positioned their investment portfolio to outmaneuver the Fed. This is why insiders are bullish on the growth prospects of these companies. Invesco Mortgage Capital Inc (NYSE:IVR)’s CEO, King Richard, added a few more shares, after he purchased 5,000 shares at an average price of $19.92 per share.
Conclusion
Relatively stable, sustainable, and elevated dividend yields coupled with insider buying makes me bullish on the aforementioned stocks. Therefore, I recommend investors buy Inland Real Estate Corporation (NYSE:IRC), American Capital Agency Corp. (NASDAQ:AGNC) and, Invesco Mortgage Capital Inc (NYSE:IVR).
The article Insiders Love These High Yielding Financial Stocks originally appeared on Fool.com is written by Adnan Khan.
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