Investors have an opportunity to invest in stocks that not only offer upside potential through capital appreciation, but also above average dividends. Whether you are a young or old investor, the thought of a consistent and sizable dividend payment is attractive.
Here are three investments that I believe will outperform the market along with a high dividend yield.
- SPDR High Yield Bond ETF (JNK) - Invests in corporate high yield (junk) bonds and pays out a monthly dividend that equates to an annual yield of 13%. Junk bonds and other risky assets remain undervalued and as the economy comes out of the recession pricing will move back to normal. JNK should move higher in value and continue to pay its monthly dividend. (I own shares of JNK.)
- iShares S&P US Preferred Stock ETF (PFF) - Invests in preferred shares of companies that are mainly in the financial sector. The annual dividend yield is 11% and the ETF has more than doubled off the low of March after money came back into the financial stocks. PFF is a great way to participate in the financial sector without taking the risk of an individual stock and collect a regular dividend.
- Capstead Mortgage (CMO) - A mortgage REIT that invests in residential mortgage backed securities (MBS) that are basically guaranteed by the government. The spreads have been in their favor and the stock has been a big winner for us. On top of price action there is the quarterly dividend that results in an 18% annual yield. This is also a play on the rebound of the housing market. (I own shares of CMO.)
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