NEW YORK ( TheStreet) -- Investors seeking long term gains should consider high-yield, low-beta companies with minimal debt such as AstraZeneca (AZN - Get Report), Fifth Street Finance (FSC), Potash Corp. of Saskatchewan (POT) and HollyFrontier (HFC) that have proven to be the most rewarding holdings for extended periods.
Every aspect of a publicly traded company is a tell for investors.
But a high dividend yield combined with low beta and minimal debt show much more to investors than the others. The payment of a dividend is a show of strength. It demonstrates in the most meaningful way possible for investors that the funds dedicated to the dividend are not necessary for the firm to maximize shareholder value. A dividend that is above the average of about 1.9% for a member of the S&P 500 is even more of a positive indicator.
This can be found with AstraZeneca, a British drug maker with a dividend yield of 4.97%. HollyFrontier is an independent oil and gas refiner with a dividend gushing at 4.36% for its shareholders. The world's largest fertilizer company, Potash of Saskatchewan, is off due to a commodity slump, but still pays a dividend of 4.55%. Each of those firms has the cash flow to finance future dividend payments.
Fifth Street Finance, a business development company, has a dividend of more than 12%. High dividends are the norm in that industry, as covered in a recent article on The Street. Fifth Street Finance, now around $9.10 per share, is down in recent market action. However, the stock was rated a buy on Nov. 27 by UBS, with a target price of $10.50.
As detailed in another article on TheStreet, a study by Russell investments found that low beta stocks, those that move up and down in price less than the market as a whole, have the highest long term returns. With these, investors can enjoy high returns from low-risk stocks. For investors, there is no reason to sell an equity that is performing well; that leads to a lower beta. Buying and holding stocks that few owners choose to sell has proven to be a profitable strategy for investors with a long term horizon.
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