Dividends to Sink Your Teeth Into

 | Feb 12, 2014 | 5:00 PM EST  | Comments
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Ben Bernanke is out as Federal Reserve chairman, but his low-interest-rate policy appears here to stay for quite some time. Those historically low interest rates, along with a copious dose of monetary stimulus, are what have kept stocks on non-stop ride to the moon. Even this year's so-called market pullback hasn't really been a true correction. I hope it becomes one so I can get greedy again.

In the meantime, there are some interesting dividend yields out there that could get some attention. Obviously, an abnormally high payout is often a flag that Mr. Market doesn't see it as a sustainable figure. Six years ago, many dry bulk shippers were yielding north of 10% -- but shortly thereafter the industry tanked, the dividends were eliminated (in most cases) and the share prices plunged.

On the other hand, energy master limited partnerships were caught in the turmoil back in 2007 and 2008, and many of them could have been purchased yielding 15% -- two examples I gave back then were Linn Energy (LINE) and BreitBurn Energy (BBEP). Those dividends were not only paid, but the stock price also went up. In case you were interested, both of these names still yield above 9%, but the share prices are elevated at current levels.

I like high-yielding restaurant stocks, as well, since food is such a stable business. With Ark Restaurants (ARKR) you get a great yield of 5%, along with a small-cap stock that could do well over the years. In addition to its payout, this company owns a collection of unique restaurants in top dining locations, so it looks like an intriguing opportunity.

Amerigas Partners (APU) is a $4 billion limited partnership that distributes natural gas, and shares yield 8%. (This company is 44%-owned by UGI (UGI), an energy-distribution company.) Amerigas, whose shares have fallen back near a 52 week low, generates very healthy levels of cash flow that service the debt and support the dividend.

Speaking of natural gas, Rentech Nitrogen (RNF) is a fertilizer LP that has seen shares fall from a high of $44 in the last year to $17 today. Shares now yield 6.2%. The key raw ingredient in the production of nitrogen is natural gas. While nat gas has moved up a bit due to winter weather, prices remain historically low, and that should bode well for nitrogen products.

The value of dividends favors the patient investor. It's a known fact that nearly half of the historical 9% annual return of the S&P 500 comes from dividends. Against the right investment, made at the right price, dividends are a very underrated capital-appreciation tool.

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