Top Performing Dividend Stocks – January 2012

As the first month of 2012 closes we decided to put together a list of the top performing dividend stocks for January. Each of these stocks has risen 20% or more in the month of January alone and has a dividend yield over 3%. We ruled out any stocks that have daily average trading volumes of less than 100k shares or are trading under $5 per share.

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.

Earning Dividends in Real Estate: REITs

One of the ways that you can diversify your dividend portfolio, while also providing you with reasonable returns and dividends, is to investing in real estate investment trusts (REITs). A REIT can provide you with the addition of real estate to your investment portfolio without requiring you to come up with a large amount of capital. Plus, REITs pay out dividends.

Brief Overview of REITs

Real estate investment trusts are basically collections of real estate investments. They can be public or private in nature, and the publicly held REITs are traded on stock exchanges much like stocks. This makes them easy to purchase. REITs can include commercial or residential real estate investments, as well as investments in real estate related assets such as storage companies and mortgage providers.

REITs are desirable because of their tax structure; corporations formed them originally with the intent to create a tax benefit. Because of the tax treatment REITs enjoy, they are required to pay 90% of their taxable income out to investors. This means that, in some cases, the dividend yield can be quite generous.

Investing in REITs

Whenever you choose dividend investments, you need to be careful about your efforts, and do your research. This is especially important as you consider REITs. The climate following the relatively recent mortgage market meltdown and the financial crisis of 2008 means that many REITs have been hit pretty hard. They have lost value, and some of them have cut their dividend payouts.

This state of affairs means that there are some great deals to be had, allowing you to find REITs at very reasonable prices. However, you do need to be careful. As you would with any dividend stock, investigate the merits of the REITs you are considering before you decide to invest:

  • Consistent dividend performance: Look at the dividend performance of the company. Look at the pattern of dividend payouts and increases. Consider that solid companies have regular performance, and regular increases. During times of trouble, the prudent REIT doesn’t need to cut dividends as much. Look back: There are some REITs that have been less affected by global real estate market setbacks than others. While future performance can’t be guaranteed by the past, the past can, nevertheless, provide some insight.
  • Reasonable expectation for growth: Look at the holdings of the REITs in question. Is there reasonable expectation for growth? Consider whether or not the REITs you are researching offer the potential for earnings growth as the current economic situation improves. A REIT heavily invested in subprime mortgages might not be your best option, but a REIT that has a reasonable expectation of earnings because of more prudent assets might not be a bad choice.

Now might be a good time to consider REITs. With the US economy, and the global economy, showing some symptoms of recovery, it is possible that real estate could also see some amendment. If this is the case, the REITs in your dividend portfolio could allow you to see regular income – and an increase in that income – as the situation improves.

Extra Low Rates Until 2014 and AAPL Dividend

It’s been a busy week in the world of investing and finance. One of the biggest pieces of news was, of course, the Federal Reserve decision to keep rates near zero for quite some time. Ben Bernanke doesn’t expect that there will be an increase for the Fed Funds Rate until 2014. The news initially helped equities, but there is enough bad news to temper the enthusiasm.

Indeed, economic news for the United States has been disappointing. The latest GDP news, for the fourth quarter of 2011, is that growth was 2.8%. This was less than the expected 3%, and that prompted some selling off in the markets. On top of that the latest jobless claims data shows an increase, so the labor market situation remains in doubt.

Even earnings news is becoming disappointing. Earlier coups have been forgotten in the latest round of disappointing news. However, the main bright spot, carrying over from Apple’s earnings report earlier this week, is that dividends are once again under discussion.

Cash Rich Apple

Apple (AAPL) is quite cash rich right now. It has surpassed Exxon as the most valuable publicly traded company, and there is $100 billion sitting in Apple’s coffers. As a result, AAPL executives are trying to figure out what to do with all that cash. Many people are pushing for a dividend. AAPL is one of the most solid companies out there — at least in the minds of many — and yet it doesn’t pay dividends to shareholders.

The possibility of a dividend has been raised, but it has yet to be decided upon. The situation is hotly contested, though. Some think that a dividend would be a good thing for Apple, while others think that Apple should hoard its cash and wait for bigger opportunities down the road. No matter what happens, though, it will be interesting, and AAPL will likely be a hot stock.

Reading the Balance Sheet: Liabilities and Shareholder Equity

When choosing a dividend stock for your portfolio, it is important to consider your options, including the health of the company and what its balance sheet looks like. Recently, we considered the side of the balance sheet containing a company’s assets. Now it’s time to look at the other side of the balance sheet – the side containing liabilities.

Company Liabilities

Assets are those items that contribute value to a company. Assets provide value that can provide funding to the business. Liabilities, though, are obligations to others. This is usually money owed to other companies, or to suppliers, or for some other purpose. There are two main types of liabilities:

  1. Current: Current liabilities are those that are paid within the time period of one year. Accounts payable is one example of a current liability. A business normally has to discharge those obligations within a year. Additionally, long-term obligations that are paid within a year are also considered current. So the amount of the interest that is paid on a 20-year loan during the course of the year is considered a current liability.
  2. Long term: A long-term liability is one that does not need to be paid until after a year. This can include non-debt financial obligations, such as an agreement to pay a certain amount of money for a shipment of goods at a later date, as well as debt obligations.

Company liabilities offset the assets, since they represent a drain on the resources of a company.

Shareholder Equity

Interestingly enough, shareholder equity actually goes on the same side of the balance sheet as liabilities. Shareholder equity represents the amount of money invested in the business at the outset. Shareholder equity can increase if the company decides to take some of its earnings and invest them back into the company.

When reading a balance sheet, you will find it divided into two sides. On side the assets will be listed, and on the other side the liabilities and shareholder equity will be listed. As the name “balance” sheet implies, the two sides are supposed to even out. The assets a company has should equal the liabilities plus shareholder equity, and you should see how that comes about. If a balance sheet doesn’t balance, it’s important to look into the numbers to find out why.

As you look at the balance sheet, compare the two sides. You will have an idea of what the company owns, and what its obligations are. If a company appears to be highly leveraged, with lots of debt in comparison to assets, you know that the company is risky. A balance sheet can provide clues about how a company uses money, and that, in turn, can help you decide whether or not to include the investment in your dividend portfolio.

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Reading the Balance Sheet: Assets

When researching dividend stocks, and determining which are solid picks for your investment portfolio, it can help to understand the balance sheet. Take a look at a company’s balance sheet to get an idea of the financial stability of the company before investing. A company that is financially stable is more likely to be able to raise dividends over time, helping you improve your portfolio over all.

You will look at different items on a balance sheet, including assets, liabilities and shareholder equity. Right now, we will look at assets; next week we will tackle liabilities and shareholder equity. Assets, when considering companies, are used to operate the business.

Current Assets

These are assets that can be converted quickly and easily into cash. For the most part, current assets have a life span of a year or less. Cash is, unsurprisingly, the most popular of current assets. Additionally, there are “cash equivalents,” like U.S. Treasuries, that are considered pretty much as good as cash, and that can be liquidated quickly.

Other types of current assets, though, might be accounts receivable – when clients owe money – as well as inventory. Inventory can include ready-made products that company plans to sell, as well as raw materials that will be used to create products and different items in various stages of manufacture.

Non-Current Assets

Those assets that cannot be turned into cash quickly and easily, and which have a longer lifespan, are called “non-current.” These assets are usually considered long-term and tangible. Machinery the company uses, real estate (warehouse, store or land), and other equipment, such as office equipment like computers, phones and chairs, are considered non-current assets.

However, while many non-current assets are tangible, there are those that are not. Patents and copyrights are considered non-current assets. The value of such intellectual property can be incalculable, and should be considered as you estimate the value of a company.

Depreciation

Another consideration is the depreciation of assets over time. During the useful life of an asset, it slowly loses some of its value. It is important to factor in the economic cost of the declining value of assets as you consider company. On the balance sheet, depreciation is deducted from the assets as part of the process of figuring value.

In the end, you need to understand what the company has that is of value. You want to choose dividend stocks that will remain solid over time, and possible show a tendency to grow. A number of assets can prove that the company has sufficient items of value to remain in business – and possibly even grow.

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Bank Dividends Remain in Doubt: ING, JPM, BAC

As the European debt crisis once again takes center stage, it is little surprise that the financial sector is in retreat today. In Europe, the Italian bond auction didn’t go as well as expected, and banks continue to borrow from the European Central Bank. European banks are trying desperately to meet the capital reserve requirements from Basel III, and that means that many banks are unsure what happens next.

Banks in Europe are having trouble repaying state aid, and they are having trouble meeting the requirements of Basel III. Many European banks have cut dividends as a result, including ING. In fact, ING won’t be reinstating dividends until it has repaid the state aid it has received, and met Basel III requirements. The Dutch bank is also trying to separate its different operations so that the banking portion has greater separation from the insurance portion.

Even here in the U.S. there are concerns. JPMorgan 4th quarter earnings didn’t “wow” anyone, and that has led the financial sector lower on the stock market today. The earnings report, though, hasn’t stopped JPM from announcing a dividend on preferred shares. Indeed, even though the report showed a 23% decline in 4th quarter earnings, JPM is overall in line with expectations. However, the issues surrounding the entire U.S. financial sector means that it is unlikely that we will see substantial bank dividend increases anytime soon.

Another point of interest today is that Bank of America announced that it will cut back some of its U.S. banking operations. BAC continues to struggle with its finances, especially since it was loaded with bad assets around the time of the financial crisis. Recent consumer outrage fiascos have done nothing to help BAC’s image, and help it get back on track. As a result, it is likely going to be a rather long time before BAC pays dividends on any shares but preferred.

Planning Qualified Dividend Purchases

One of the current benefits dividend investors can receive right now is the ability to receive favorable tax treatment on qualified dividends. Until the end of 2012 (unless Congress makes changes), it is possible to have certain dividends taxed at the long-term capital gains rate.

The current long term capital gains rate (again, extended through 2012) caps at 15%. For those in the lowest tax brackets, there is no tax at all on long term capital gains. Short term capital gains, though, are taxed at your regular income rate. Non-qualified dividends are also taxed at this rate. This means that, if you are in the 28% tax bracket, your non-qualified dividends will be taxed as ordinary income. With the proper planning, though, you can ensure that most of your dividends are qualified – paying no more than 15% on your dividend income, no matter your income bracket.

Making Sure Your Purchases are Qualified

If you want to be able to claim your dividends as qualified, you need to own the stock or mutual fund in question for more than 60 days in the 121 days preceding the 60 days before the ex-dividend date. This means that you need to think carefully about when you buy shares if you want the tax favored status that comes with qualified dividends.

Before you purchase a share of a company or a mutual fund, find out when the dividend will be paid out. With a company, you can use the ex-dividend date as your guide, or you can simply make your purchase after the dividend has been distributed.

The same is true of buying mutual fund shares. Look at the fund’s distribution schedule and find out when dividends and capitals gains are normally distributed. Make your purchase just after a distribution takes place. This way, you will be able to ensure that you meet the definition of “qualified,” and receive the long term capital gains rate as you pay taxes on your income.

Paying Taxes on Reinvested Dividends

It’s important to realize, too, that you will pay taxes on reinvested dividends. Even though you don’t receive the cash in hand, it is still considered income by the IRS. So take this into account when purchasing shares in a new company or mutual fund. Just because you plan to have the dividends automatically reinvested doesn’t mean you are protected from paying taxes. The only way to avoid it right now is if your dividend investments are held in a tax advantaged retirement account.

Here Come the High Yield Funds: HDIV, DIVS, IDIV

As continued uncertainty related to Europe weighs on markets and has investors focusing on the bad, rather than looking at signs of a recovering U.S. economy, there is a renewed interest in dividend stocks — and dividend funds.

Indeed, as 2011 drew to a close, more dividend ETFs were announced. Russell is especially interested in providing dividend ETF offerings. The fund giant plans to offer three new high yield funds for the new year:

  • HDIV: The High Dividend Yield ETF is going to focus on large caps in the U.S.
  • DIVS: Small Cap High Dividend Yield ETF is aimed at small caps, especially those on the Russell 2000 Index.
  • IDIV: For those looking to diversify with foreign investments, the International High Dividend Yield ETF might be just the thing.

Dividends stocks are becoming more popular as investor look for ways to maintain some income and some stability in these uncertain economic times.

Other Dividend News

Of course, it’s not just about the high yield dividend ETFs this week. Macy’s (M) just announced that it is going to double its dividend, boosting the payout. Macy’s reports that it had a great holiday season, and that its cash holding as about to improve.

Telecoms are also offering some promises for the new year — especially if they are focusing on wireless and broadband. Winstream (WIN) is still offering a good dividend, as is Alaska Communications (ALSK). Revenues are expected to grow in the next couple of years for many telecom companies.

Additionally, Evolving Systems (EVOL) plans to resume its regular quarterly dividend starting in the second quarter of 2012. However, before that, the company will pay a special dividend of $2.00 per share. There are hopes that this will help the company raise some capital from new investors.

Robbins & Myers (RBN) also raised its quarterly dividend by 11.1%, although this brings the company’s yield up to a paltry 0.4%.