Plummeting prices last year brought many stocks down 50% or more, so that their yields now look extraordinarily high. My database now shows 63 stocks with annual yields of 20% or more.
Allied Irish Banks is yielding 88.7%.
Ashford Hospitality (a REIT) is yielding 54.9%.
Atlas Pipeline is yielding 68.9%.
And those are just a few of the A’s.
But there’s something wrong with these stocks–business at every one of these high-yielding firms is faltering. The stocks’ plunges tell us that. And while the yields may look high today, they’re based on the past 12 months. If business shrinks, the dividend will shrink more. And if the business shrinks, the stock price may fall further, too. All in all, chasing these super-high yields is a dangerous game, suited only for professionals who can determine when the selling has been overdone and when the dividend is secure.
Flash Player 9 or higher is required to view the chart Click here to download Flash Player nowOne professional I respect, who was quoted in the latest issue of Income Digest, suggests Ituran Location and Control (ITRN), writing this:
“Ituran has a guaranteed growth market. This Israeli vehicle tracking company has $57 million in cash and little debt. It’s a pure play on a new Brazilian law that says all newly registered cars must have some sort of GPS vehicle tracking technology by the summer of 2009. This technology was created to save downed Israeli pilots, but it is now aimed at stopping carjackers in Brazil. In difficult times, crime goes up, and this company protects drivers from criminals. Earnings came out strong, but ITRN is a buy on dividend alone [16.2% annually].”
It appears many are threatening not to take risk if they don’t get the same breaks people with less income get, that appears to me symptomatic of the widespread rationalizations going on in the interest of self-interest. Using your method, I’ll follow by saying that I have nothing against risk-taking entrepreneurs, or others with high incomes who want to go higher.
Just once in a while let the government help those not in the mainstream economy who are still wanting to be proud to be an American. Once in a while let the government invest in areas of social interest not driven by money.
Thank you for your newsletter, from which I take good advice.