High Yielding StocksSo what is the deal with the following high yielding assets?
What are they?
How can they produce such dividends?
What don’t I know about them?
Should I consider them?
What is the risk?
Symbol Company [down]
Div/Yld
WHX Whiting USA Trust I Whiting USA 39.40%
BSMX Grupo Financiero Santander Mexi 34.90%
CET Central Securities Corporation 32.30%
OZM Och-Ziff Capital Management Gro 32.00%
BCOM B Communications Ltd. 27.80%
SDR SandRidge Mississippian Trust I 24.90%
SDT SandRidge Mississippian Trust I 23.30%
CHKR Chesapeake Granite Wash Trust C 22.80%
HMG HMG/Courtland Properties, Inc. 21.90%
PER SandRidge Permian Trust Common 20.40%
WMC Western Asset Mortgage Capital 20.30%
WHZ Whiting USA Trust II Units of B 20.20%
MFBP M&F BANCORP INC 19.60%
EBR Centrais Elc Braz Pfb B Elbras 17.60%
SPPR Supertel Hospitality, Inc. 16.50%
ECT ECA Marcellus Trust I Common Un 16.30%
CG The Carlyle Group L.P. 16.00%
VOC VOC Energy Trust Units of Benef 15.40%
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I don’t know all of them, but generally the higher yields are indicative of either a one-time payout or a yield that investors think is unsustainable, or of a depleting asset that will not continue to yield at this level ad infinitum.
WHX is going to disappear in a year or two (I forget the date) and will stop paying distributions, so that’s probably still well overpriced even now. A couple of these are private equity firms (CG and OZM), so their investment performance is key. And some I’ve never heard of, but many of these are oil or gas trusts or mortgage REITs. The high-yielding energy trusts are generally those that have an expected production decline and a relatively short lifespan before the trust dissolves, and the mortgage REITs are very dependent on cheap financing and on a relatively steep yield curve (they borrow short-term and lend long-term.)
That’s not advice about any of these in particular, I haven’t looked at most of them at all, but generally with exceptionally high trailing dividend yields like that there’s an expectation of either high risk or of highly variable and possibly declining future payouts.
WHX has under $2 in payments left, will cease to exist early next year.
Thanks for your input
I’ve been caught more that once buying “bargain trusts” including WHX above. I’ve made a bit and lost a bit but if you see a trust with a fantastic yield check the price action. If the stock shows a downward trend it probably indicates that the trust will expire if not in one year, not many years in the future