Where Are the 'Safe' Dividend Yields?

Reasonable minds can differ on when that will be, of course. And if you do think the bottom is close at hand for this leper of a sector, go ahead and follow the insiders sooner rather than later. Buy into big 'ol Bank of America (BAC Quote), or pick up some Prospect Capital (PSEC Quote). Ditto for commercial mortgage REITs, like JER Investors Trust (JRT Quote).

Safely Midstream

For my money, energy related limited partnerships provide high and relatively safe dividend yields. This group may not have as high a yield on average as the finance and mortgage-related businesses on my screen, but neither do they have such squirrelly price charts. The relative stability is due to the bullish trend supporting this group.

And I'm not talking about skyrocketing energy prices. These mainly midstream plays don't rely on rising commodity prices for their distributable cash flow. But they have indirectly helped the group. With oil and gas prices so high, once unprofitable sources of these necessities -- like tar sands and shale formations -- are suddenly attractive. These new sources need links to end markets, which has led to a building boom in the midstream industry. And that should increase the volume of product these partnerships move for years to come. More product means more cash flow -- and more cash to distribute to unit holders.

So even though Enterprise Products Partners LP (EPD Quote) and Kinder Morgan Management LLC (KMR Quote) "only" have indicated yields of 6.7% and 6.9%, respectively, they are more appropriate for the needs of income investors who are looking for relatively safer yields. Expected 10% capital appreciation in these names over the coming year seals the deal for me.

These are pretty conservative choices, but that's what I usually look for in an income play. If you want a bit more excitement with your yield, go for it. But whatever risk level you are willing to shoulder for your yield, using insiders to make your short list of potential income investments is the way to go.

If you like this piece, Jonathan Moreland provides further insights and commentary through his "Insider Insights" newsletter.