Hedge Funds Are Buying These 8 Cash Rich High Yield Dividend Stocks

Looking for dividend stocks practically radiating with optimism? We created a list of high yield stocks that have the bullish backing of top investors.

To create the list below we started only with the names offering a dividend yield north of 3% and market caps above $100 million for stability.

These companies also have  plenty of cash. We take a look at the past five quarters of operating expenses, and then compare the average of those to the company’s short-term investments and most recent cash on hand. A ratio of 1 means that they can cover their average expenses for the quarter without earning any income, assuming they haven’t increased operations. If the ratio is below 1, then they won’t be able to cover their costs.

We analyzed their expenses and cash/investments for companies that have a cash/operating expense ratio over 4, just to have some extra cushion.

This is especially important in uncertain times.  If sales hit the fan in a bad way, it’s important to know that these firms are liquid enough to withstand a couple rough patches. It is also a healthy sign that they could then be headed towards expansion or even increase their dividend yield.

We then looked for names with significant net purchases from institutional buyers in the current quarter.

This means institutions, such as hedge funds and pension funds, have bought a significant amount of shares. Because these firms use a lot of money to establish these positions, and often have much more sophisticated market research on hand than Main Street investors, we can assume they have done their due diligence and have good cause to feel bullish about these stocks.

Business Section: Investing Ideas

These are the results of the screen listed below – these dividend stocks have strong cash holdings. They also have the confidence of institutional buyers.

1. Two Harbors Investment Corp. ( TWO): Operates as a real estate investment trust (REIT) that focuses on investing in, financing, and managing residential mortgage-backed securities (RMBS) and related investments. Market cap at $3.42B, most recent closing price at $11.59. Dividend yield at 19.78%. Average quarterly operating expense over the last five quarters at $55.76M, vs. most recent cash and short term investments at $833.61M, implies a Cash / Avg. Operating Expense ratio at 14.95. Net institutional purchases in the current quarter at 59.6M shares, which represents about 20.28% of the company’s float of 293.85M shares.

 

2. Arlington Asset Investment Corp. ( AI): An investment firm, acquires mortgage-related and other assets. Market cap at $203.86M, most recent closing price at $21.06. Dividend yield at 16.99%. Average quarterly operating expense over the last five quarters at $4.99M, vs. most recent cash and short term investments at $85.74M, implies a Cash / Avg. Operating Expense ratio at 17.17. Net institutional purchases in the current quarter at 1.3M shares, which represents about 10.64% of the company’s float of 12.22M shares.

 

3. Resource Capital Corp. ( RSO): Operates as a specialty finance company that focuses primarily on commercial real estate and commercial finance in the United States. Market cap at $592.89M, most recent closing price at $5.89. Dividend yield at 14.26%. Average quarterly operating expense over the last five quarters at $16.96M, vs. most recent cash and short term investments at $112.73M, implies a Cash / Avg. Operating Expense ratio at 6.65. Net institutional purchases in the current quarter at 6.2M shares, which represents about 6.5% of the company’s float of 95.34M shares.

 

4. Ellington Financial LLC ( EFC): Market cap at $456.59M, most recent closing price at $22.24. Dividend yield at 12.49%. Average quarterly operating expense over the last five quarters at $7.14M, vs. most recent cash and short term investments at $69.22M, implies a Cash / Avg. Operating Expense ratio at 9.69. Net institutional purchases in the current quarter at 2.2M shares, which represents about 14.22% of the company’s float of 15.47M shares.

 

5. Newcastle Investment Corp. ( NCT): Operates as a real estate investment and finance company that invests in and manages a portfolio consisting primarily of real estate securities. Market cap at $1.52B, most recent closing price at $8.79. Dividend yield at 10.34%. Average quarterly operating expense over the last five quarters at $43.56M, vs. most recent cash and short term investments at $229.04M, implies a Cash / Avg. Operating Expense ratio at 5.26. Net institutional purchases in the current quarter at 11.9M shares, which represents about 6.9% of the company’s float of 172.50M shares.

 

6. NGP Capital Resources Company ( NGPC): A business development company specializing in investments in small and mid size and middle market companies. Market cap at $153.94M, most recent closing price at $7.20. Dividend yield at 9.12%. Average quarterly operating expense over the last five quarters at $2.8M, vs. most recent cash and short term investments at $31.86M, implies a Cash / Avg. Operating Expense ratio at 11.38. Net institutional purchases in the current quarter at 1.1M shares, which represents about 5.37% of the company’s float of 20.48M shares.

 

7. THL Credit, Inc. ( TCRD): A private equity and mezzanine firm. Market cap at $391.12M. Dividend yield at 9.08%. Average quarterly operating expense over the last five quarters at $4.98M, vs. most recent cash and short term investments at $25.95M, implies a Cash / Avg. Operating Expense ratio at 5.21. Net institutional purchases in the current quarter at 5.0M shares, which represents about 22.81% of the company’s float of 21.92M shares.

 

8. Kohlberg Kravis Roberts & Co. ( KKR): A private equity and venture capital firm specializing in acquisitions, leveraged buyouts, management buyouts, and mezzanine investments in large cap companies. Market cap at $3.55B. Dividend yield at 5.74%. Average quarterly operating expense over the last five quarters at $339.9M, vs. most recent cash and short term investments at $1603.44M, implies a Cash / Avg. Operating Expense ratio at 4.72. Net institutional purchases in the current quarter at 21.5M shares, which represents about 9.89% of the company’s float of 217.44M shares.

 

Written by KAPITALL’s Rebecca Lipman.

Analyze These Ideas: Getting Started: Access a performance overview for all stocks in the list

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