2 High Yield Dividend Stocks Investors Can Buy In September
September 07 2022 - 10:02AM
Finscreener.org
The ongoing year has been brutal
for both experienced and novice investors. Stock market indices
such as the S&P 500 and Nasdaq Composite are currently trading 17.6% and 27.7%
below all-time highs, respectively. In fact, the
S&P 500 briefly
entered bear market territory in July before it wiped out a part of
these losses.
Yes, a bear market can be
extremely scary due to the near-term unpredictability and
volatility associated with these events. But it also provides
investors an opportunity to go bottom fishing and buy stocks at a
bargain. Each double-digit percentage decline in the U.S. has been
followed by a bull market rally.
Dividend stocks can help you create wealth in a bear
market
Investors can also look to buy
quality dividend stocks in a bear market. Companies that pay
dividends are consistently profitable and derive cash flows in good
times and bad. A J.P. Morgan (NYSE:
JPM) report stated that publicly traded companies
that began paying dividends between 1972 and 2012 returned an
average of 9.5% annually. Comparatively, stocks with a dividend
yield generated returns of just 1.6% in the 40-year
period.
While dividends can help
investors create an alternate income stream, not all dividend
stocks are a good bet. In fact, studies have shown that dividend
yields of over 4% may carry higher risk-reward profiles. But the
current bear market has also driven prices significantly lower,
which has increased forward yields in 2022.
Here, I have identified two
high-yield dividend stocks investors can consider buying right
now.
Annaly Capital Management
A mortgage REIT (real estate
investment trust), Annaly Capital
Management (NYSE:
NLY) is a passive-income powerhouse given a forward
dividend yield of 13.8%. In the last two decades, it has managed to
sustain a dividend yield of more than 10%.
The REIT borrows capital at a low
short-term rate and uses the money to purchase high-yield assets
such as mortgage-based securities. So, the net interest margin,
which is the difference between the yield earned from the asset a
company owns and the borrowing rate, should be wide enough to
deliver consistent profits.
Shares of the REIT are down 20%
from all-time highs as the current environment is very challenging.
The yield curve has inverted, resulting in negative net interest
margins and lower book values for Annaly Capital. But almost $75
billion of its $82.3 billion assets are agency securities, which
are backed by the federal government in case of
defaults.
Antero Midstream
Another stock that has a juicy
dividend is Antero Midstream (NYSE:
AM) which yields a tasty
8.9% even though the company lowered its dividend payout by 27% in
2021.
Two years back, COVID-19-induced
lockdowns sent share prices of oil and gas stocks significantly
lower. In April 2020, WTI (West Texas Intermediate) oil
futures contracts traded at a negative $40/barrel.
But midstream operators such as
Antero are better poised to withstand downturns. Antero operates
natural gas gathering and processing assets while providing water
delivery and blending solutions for parent company Antero
Resources (NYSE: AR).
Additionally, 100% of its
contracts with Antero Resources are fixed fee allowing the company
to generate stable cash flows. Antero Midstream reduced its
dividends in 2021 due to rising natural gas prices. To take
advantage of an inflationary environment, Antero Resources wants to
boost drilling on Antero Midstream’s acreage.
A dividend cut will improve the
financial flexibility of Antero Midstream, allowing it to invest in
capital expenditures. The company’s cash flows will increase by
$400 million by 2025 following the cut.
Antero Resources (NYSE:AR)
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