Many of these stocks had been beaten down in the months leading up to January and are starting to see a recovery. This list is published on the last day of January so there is still room for other stocks to make a move.

1. Skyline Corporation – SKY

January Gain: 46.67%
Skyline Corp is heavily owned by institutional investors (86%). They make and distribute small homes and RVs. Their dividend yield is 5.2% after they cut their dividend substantially in 2011.

2. Tsakos Energy Navigation, Ltd – TNP

January Gain: 38.49%
Tsakos provides international seaborne crude oil and petroleum transportation services. They control 47 crude oil carriers and petroleum tankers that provide services around the world. 21 of their vessels meet ice-class requirements. TNP is a lightly traded company with 22% institutional ownership and a dividend yield of 9%.

3. Mesabi Trust – MSB

January Gain: 29.92%
The Mesabi Trust is a royalty trust that receives income from an iron mine in Minnesota. The mine is run by Northshore mining company. The Mesabi Trust has a dividend yield of 7.9%. They have been paying dividends since 1990 and have raised their dividend for each of the last 3 years.

4. SouFun Holdings Ltd. – SFUN

January Gain: 29.79%
This is an interesting company. SouFun operates a Internet portal and home improvement websites in China. They have 63 offices that provide marketing and listing services. Their dividend yield is 9.8% but they pay dividends only once per year. Their ex-dividend date is usually near the end of the year.

5. E-House China Holdings – EJ

January Gain: 29.51%
E-House provides real estate services in China. They offer consulting, online services and investment fund management. 60% of their stock is owned by institutional investors. Their dividend yield is 4.5%. They pay dividends once per year but their ex-dividend date will probably be coming up in April of 2012.

6. Greenhill and Co. – GHL

January Gain: 28.76%
Greenhill is an investment bank that assists with mergers and acquisitions. They also assist with raising capital and financial restructurings. This stock is heavily owned by institutions and has a modest 3.8% dividend yield.

7. Capital Product Partners – CPLP

January Gain: 27.41%
Capital Product Partners is a tanker company that provides services around the world. They own 21 vessels that transport oil, gasoline and other fuels. CPLP has a dividend yield of 12%. They cut their dividend in 2010 but were able to maintain it in 2011.

8. Macro Bank – BMA

January Gain: 27.24%
Macro Bank is a Argentinean Bank that provides banking services to individuals and businesses in Argentina. They have a dividend yield of 12% and pay dividends once per year. Their next ex-dividend date will most likely be in May of 2012.

9. Siliconware Precision – SPIL

January Gain: 26.15%
Siliconware provides semiconductor packaging and testing services. Only 15% of their stock is owned by institutional investors. They also pay dividends annually and have been paying dividends since 2004. Their 2012 ex-dividend date will be sometime in July.

10. Transocean – RIG

January Gain: 22.04%
Transocean is a stock we hear about a lot. They provide offshore drilling services for oil and gas wells. Transocean was providing drilling services to BP at the time of the oil spill in the Golf of Mexico. They have a dividend yield of 4.9%. They just started paying dividends in May of 2011.

In such cases, some investors decide to borrow in order to invest. While this can be a good strategy – especially in an environment where interest rates are low – it’s important to be aware of the risks.

Advantages of Borrowing to Invest

Recently, The Dividend Guy wrote a post about using leverage to fund your investment purchases. It’s an interesting post about how you can borrow money to be able to make a move right now on solid stocks. You can boost your income portfolio, plus get good deals that are likely to appreciate in the future, providing you with bigger capital gains down the road.

Borrowing means that you don’t have to have the capital sitting in your bank account right now in order to purchase stocks. Plus, with interest rates so low right now, you can borrow at a low rate. Hopefully, your income from dividends, plus the appreciation of the stock, will result in returns that more than make up for the low interest you are paying on the loan. When you use leverage, in many cases you can boost your returns since you aren’t using your own money to make money.

Risks of Borrowing to Invest

Of course, there are risks associated with borrowing to invest. The biggest risk is that your decision will backfire, leading you to magnify your losses. If the stock crashes, you still owe the money, plus interest.

Even if the stock doesn’t crash, it might not gain as much as you expected. As a result, your gains can be reduced by the combination of inflation, taxes, and the interest you pay on the loan. So, even if you don’t lose big time, you could still find yourself without as much as you had imagined. There is a chance that you might have been better off using dollar cost averaging to slowly build a portfolio without paying interest on a loan.

Bottom Line

Leverage can help you magnify your gains – but it also magnifies losses. Before you decide to borrow to invest, consider the investments you want to make, and whether or not you are likely to see returns that will make up for the interest you pay on your loan. If you choose carefully, and get a low-rate loan, you should be able to maximize your investments. Make sure, though, that you will be able to handle the payments, and that you can absorb any losses that do come along.

Dividend and stock information on this list is an estimate only. Ratings are based on historical numbers and performance and do not imply any future performance.

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In the case of the latter, it’s a little more straightforward. Reduce your tax liability by holding on to our positions for at least one year and for long term investors, attempt to minimize your dividend payouts in your taxable accounts. For those with taxable brokerage accounts meant for long term growth, contributing the maximum to a traditional IRA and using that account for dividend names is worth considering.

Reducing expenses is easy compared to maximizing the work load of your money. Think of this illustration. A farmer who has 1,000 acres of land buys a high dollar tractor which will allow him to decrease the amount of workers he has to hire. That’s sounds like a great use of capital but what if he only used his new tractor on 500 of his 1,000 acres? Sounds a bit absurd, doesn’t it? It is, but investors do it with their money every day.

Here’s one example. If you have 100 shares of stock in a high volume, relatively low volatility company, you should be selling covered calls from time to time. There are plenty of articles explaining how covered calls work so we won’t dive too deeply in to the mechanics but if you have a stock that is currently towards the top of its range, consider selling a covered call against your 100 shares.

Let’s say that the stock is currently at $45 and that’s the high end of where it has traded. Why not sell a covered call with a strike price of $47? The worst case scenario is that by expiration the stock is above $47 and you are forced to sell the stock at $47. You made $200 plus the premium you collected when you sold the call. You could always buy the stock back or purchase another 100 shares if the stock goes significantly above the strike price.

Covered call options are a more complicated than simple stock buying but it pays to take the time to learn how they work. You won’t make extra money every month but even after paying short term capital gains taxes on the premium you collected, it’s still more money than what you had.

Another way to maximize gains, besides dividends, is to ask your broker if they have a program where they use your shares for lending to short sellers. Often, you will receive 20% to 50% of the lending fee and in most cases you’re not impacted in any way as long as you plan to hold the stock long term.

Bottom Line

Income investors shouldn’t use dividends as their sole source of revenue. There are other strategies that can be used to produce income with various degrees of risk. Of course it’s always advisable to have a paper account where you can practice these strategies before putting real money to work.

We didn’t use any of those models to identify these three stocks.  Instead we first found stocks trading at a price to book value ratio of less than 1.  We further filtered that list down by removing any stock with a P/E and PEG ratio above their specific industry average.  It’s important to compare P/E ratios to industry averages instead of index averages because not all industry trading at the same level.

After drilling down into value we then sorted stocks by dividend yield to only include those with a yield of 3% or more.  We ended up with over 20 stocks many of which are REITs.  Each of these stocks has a story and it’s important to do your homework to determine if these fundamentals are predicting a big upside or a possible problem at the company.

A good example would be two stocks you’ve probably heard of before – Whirlpool and Computer Science Corp.  Both had disappointing earnings results recently and have analysts concerned about future growth.  Other stocks such as Transocean have solid fundamentals, a high yield and the backing of many analysts making it one of the best dividend stocks on the list.

On our REIT dividend list ranks these stocks based on historical performance.  Below is a list of real estate investment trusts that have a dividend yield over 4% and a dividend growth rate over 10%.

Digital Realty Trust – DLR

Digital realty trust buys, develops and manages technology related real estate properties. DLR owns 96 properties which are mostly in the US. 14 of those properties are in Europe. Most of their US property investment is focused in Dallas, Chicago and Boston.

DLR has a dividend yield of 4% and a 5 year dividend growth rate of 20%. They have increased their dividend for 5 consecutive years. DLR is tied for 9^th position on our best dividend stock list. They have a 3 year net income growth rate of 36%.

Annaly Capital Management – NLY

Annaly is one of the most popular REITs because it has a high dividend yield and a history of increasing it’s dividend. NLY is a very diversified REIT. They invest in multiple forms of mortgage securities and also manage an number of different properties.

NLY has a dividend yield of 15.4% and a 5 year dividend growth rate over 40%. Their 3 year net income growth rate is 45%.

Two Harbors Investment Corp – TWO

Two Harbors investment trust was incorporated in 2009 so we don’t have a lot of history on them. They mostly invest in mortgage backed securities and related investments.

TWO had a dividend yield of 17.1%. They have just completed their second year of paying dividends and have a year over year increase of 16.25% in 2011.

Anworth Mortgage Asset Corp – ANH

Anworth invests in United States mortgage backed securities. The companies mortgage derivative security investments cannot exceed 10% of their portfolio.

Anworth has a dividend yield of 14.8% and a 5 year dividend growth rate of 107%.

Hatteras Financial Corporation – HTS

Hatteras Financial Corporation is managed by Atlantic Capital Advisors. They primarily invests in mortgage securities that are guaranteed or issued by government agencies.

HTS has a dividend yield of 15.3 and a 3 year dividend growth rate of 44%. They have increased their dividend for each of the last two years.

All Three of the Major Indices Were Up

Finally, after what felt like forever, October was a winning month for the stock market. The Dow Jones Industrial Average rose from a disappointing September number of 10,913 to a more respectable 11,955 for October. To put this in perspective, the Dow is up 378 points, or 3.3 percent, for the year. The NASDAQ had a similar increase with a finish of 2,684 for October compared to September’s final figure of 2,415 while the S&P rose from 1,131 to 1,253.

A Resolution to the European Debt Crisis

To resolve the debt crisis across the pond, the powers-that-be formed a plan to trim the Greek debt by half, increase the European Rescue Fund to a million Euros, and recapitalize the European banks. This happened fairly late in the month making it hard to tell if they will be able to complete the plan or if it will have a long-term effect on the US market. It is clear that this announcement was responsible for a major surge in prices along with a few minor corrections before the month ended.

Wall Street and the Occupy Movement

With the 2012 elections looming, it’s hard to tell what is real and what’s a campaign promise. With Wall Street practically overrun with Occupy protesters, it’s more than evident that many in the nation aren’t happy with the current state of the economy. So far, Occupy has been more of a media event than anything else. No major impacts have been seen on stock prices, and none are really expected. However, this protest has brought more attention to new bank fees. Some customers are staging their own private protest by moving their business to less expensive credit unions. If your portfolio has a high percentage of financial-based investments, you may want to speak to your financial advisor about any potential risk.

October 2011 Dividend Report

October was a good month for the Standard and Poor’s Dividend Aristocrats. After several months of losses, the total returns ended at 965.29, a respectable 8.84 percent for the month and quarter. For the year, the increase was 4.4 percent. Price returns also performed much better than September. The monthly result was reported at 521.11 for an 8.72 percent monthly and quarterly increase. The year-to-date increase was reported at 2.15 percent.

The long-term figures look even better. Total returns were 9.76 percent for the past 12 months, 14.92 percent for the past three years, and 4.2 percent for the past five years. Price returns in the same categories were 6.66 percent, 11.29 percent, and 1.1 percent.

Top Performers for October

The top three dividend-paying stocks for October 2011 reported price increases of more than 50 percent each. Here is a closer look at these winners:
• Seagate Technology PLC trading as STX – With a 57.18 percent increase, investors were more than pleased with the performance of this stock in October. The price per share increased from $10.28 on September 30 to $16.15 on October 31. Dividends were $0.72 with a 4.30 percent yield.
• RAIT Financial Trust trading as RAS – From September 30 to October 31, this stock’s price rose from $3.39 to $5.20 for a 53.39 percent increase. Dividends were $0.24 with a 4.50 percent yield.
• Harmon International Industries trading as HAR – Over the same time period, this stock saw a 51.01 percent increase from $28.58 to $43.16. Dividends were $0.30 with a .70 percent yield.

If you’re a Stocktwits subscriber you’ve noticed that there are very few times when you don’t see something mentioned about Apple. The stream is filled with everything Apple. Not only is that true of Stocktwits but also of the all financial media. Apple is normally the “apple” of everybody’s eye but recently, following a good but not great quarter, they’ve become the subject of not so great press.

The Cash

The bad press comes from the fact that many think Apple has too much cash sitting around. With $81.5 billion in cash reserves, not only does Apple have more in reserve than the United States Treasury but also it could easily purchase many of the companies that we consider untouchable. Normally a company with a lot of cash is considered healthy and there’s no doubt that Apple is financially sound but shareholders have a problem with this.

First, $81.5 in cash is a lot of money to be sitting in a bank account. This claim by some uninformed investors isn’t quite true because in Apple’s 10-K filing it says that the $81.5 billion is in “cash, cash equivalents and marketable securities.” At least investors can feel good about the fact that Apple has invested a significant portion of their cash. Still, that’s not the main problem that has investors upset.

What To Do

Why does Apple need all of this cash? Apple is a public company and if they have all of this extra money, how about return it to shareholders or make a few acquisitions? First, let’s look at the acquisitions. It’s difficult to game Apple on this since their pipeline of products tends to stay secretive but there are plenty of small cap tech companies who are making some pretty slick products. Siri, the flagship feature of the new IPhone 4S, was an acquisition. Apple is clearly not opposed to using the cash to acquire technology.

Return To Shareholders

Now, how about return the money to shareholders? That could happen in two ways: A share buyback or a dividend. A share buyback would be difficult because $54 billion or nearly 2/3rds of that cash is overseas. Apple would have to bring that money back to the United States, pay the 35% corporate tax and then use it to buy back shares. There’s no good reason for this to happen.

An Apple Dividend

A dividend would seem like a better way to return some excess money. A dividend would be a much lower payout giving Apple the flexibility to pay it with funds in America. The problem with a dividend is that Apple enjoys the distinction of being the growth stock to have. When you think of growth you think of Apple. Paying a dividend would put them in the ranks of a Microsoft who has seen anemic growth for years. Surely, Apple still wants to be viewed as a growth company because that’s what they are.

If I were a betting man, I would say that Apple will most likely hold on to the cash for quite a while but when they do decide to put it to work, it will probably be in the form of a dividend but don’t expect that any time soon.

Doesn’t sound very fair, does it? If you’re a football fan, you want one of those choices to be the Packers (6-0) and if you’re buying a car, you want one of those choices to be a new car with a warranty. This is common sense, right? If you have to pick a winner in anything, you don’t want to choose from a list of proven losers.
If you have a company sponsored 401(k) plan as your main retirement vehicle, you probably remember choosing from a list of funds and since you’re not in the business of picking mutual funds, the only thing you knew was that you should get a mix of funds.

You can know a winning football team by looking at their record and you know a winning mutual fund by looking at their past returns relative to an index like the S&P 500 but either of those tell the whole story. Mutual funds are complicated and the bottom line is this: You aren’t always offered the best investments. Your company is giving you a very limited choice of funds to choose from and the choice you’re making isn’t much different than the football teams or the cars above.

You Can Fix That!

Here’s what you do. First, you ask your company if they allow for a self-directed plan. A self-directed plan is one where they set up a retirement account at a brokerage of their choosing. In order to meet Federal and state reporting requirements they have to have access to your account so you are stuck using the brokerage they choose.

Second, they probably won’t allow all of your funds to be self-directed. Maybe 50% give or take a little bit. Last, they may charge you a yearly fee of $50 to as much as $300. This seems like a hefty amount in order to do your own work but compared to the big time fees you’re paying in those sub-par mutual funds, you may still come out ahead without looking at performance by choosing products with a low maintenance fee.

Once you do that, find a wealth management advisor to help you. You can do one of two things: You can pay them a flat fee for an annual or semi-annual look at your account or you can pay them for ongoing management of the funds. They will typically charge 2% of your portfolio balance if you prefer ongoing management.
In the end, a self-directed plan managed by somebody with the flexibility to control the fees associated with the products will not only save you money, they will be able to lock in much better rates of return because of the large, diverse range of products available to them.

Bottom Line

You don’t have to keep all of your funds stuck in those losing 401(k) funds. A portion of your money can be self-managed allowing you the flexibility to make a lot more money and retire comfortably.

Dividend and stock information on this list is an estimate only. Ratings are based on historical numbers and performance and do not imply any future performance.

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