|May 22, 2015
2 High Yielders My Readers
Love -- And So Do I
By Amy Calistri
In 2009, StreetAuthority tasked me with creating a unique strategy that produces safe, long-term income by compounding dividends. We call it The Daily Paycheck.
Since its inception, I've grown the initial portfolio value from $200,000 to more than $320,000. As I continually reinvest my dividends, that number will benefit from the power of compounding growth.
On the surface, The Daily Paycheck might look like just a newsletter. But from the countless subscriber emails I receive each and every day, I know it's more than that.
Over time, my readers and I have become a community of like-minded investors. Together, we place a premium on exchanging ideas and finding ways to help each other achieve our income goals.
Today's essay is just one example of The Daily Paycheck's community at work.
Think Small And Collect Big Dividends
I now have a portfolio with more than 50 income-paying securities, which I discuss with my readers twice a month.
But today, I want to talk about a group of securities that I don't often get a chance to cover.
When I feature individual firms in my newsletter, I tend to look for large companies with long dividend track records. Because small companies can sometimes go through periods of growth pains, their stocks are generally more volatile than their larger peers. What's more, these younger firms haven't had the sustainability of their dividends tested during periods of stress or economic downturns. And since I look for securities I can reinvest my dividends into over the long haul, size and longevity are vital attributes.
But big companies with a strong dividend track record had to start somewhere. And today's dividend-paying small fry may just be tomorrow's Daily Paycheck powerhouse.
My readers are great at ferreting out small gems -- income securities that might normally fly below my radar screen because of their size or longevity. Here are two they recently suggested that I now have on my watch list:
City Office REIT, Inc. (NYSE: CIO): This real estate investment trust (REIT) is a true fledgling. CIO went public a little more than a year ago and has a market capitalization of just $156 million. That said, it already owns 22 high-end office buildings located in Colorado, Texas, Florida, Idaho, Oregon and Pennsylvania. It is also looking to acquire more properties, especially in Phoenix, Salt Lake City and Seattle.
Part of CIO's growth strategy will require it to raise additional funds. That means investors can expect the firm to offer more shares in secondary offerings, as it did in December 2014. In general, this can pressure a security's price.
CIO pays a quarterly dividend of $0.235 per share. At current prices, CIO yields a tempting 7.3%.
Gladstone Land Corp. (Nasdaq: LAND): This is a REIT that specializes in farmland. It has a market cap of just less than $100 million and owns 33 farms (8,370 acres) in Arizona, California, Florida, Oregon and Michigan. LAND rents its farms out to independent farmers as well as corporations under long-term triple-net leases. Today, all its farmland is leased and all its farmers are current on their rental payments.
That being said, farming is a risky business. Although LAND leases primarily to vegetable and berry farmers -- which have traditionally enjoyed more stable prices than grain farmers -- prices still vary. Also, farm water access and regulations are changing quickly, driven by drought conditions in the southwest and western regions of the United States.
But Gladstone has a better dividend record than first meets the eye. It wasn't a REIT when first going public in January 2013. Instead, it went through a time-consuming process of converting to a REIT.
During that time period, it had to retroactively pay out 90% of its previously earned income, which artificially raised its monthly dividend to $0.12 per month for much of 2013. When it reverted back to its regular dividend of $0.035, investors were taken aback and many sold their shares too soon.
LAND recently announced that it would increase its monthly distribution by 14.3% to $0.04 per share. It also stated that more dividend increases are planned -- possibly before year's end. At current prices, LAND's new dividend equates to a 4% yield.
Don't Let These Small-Fries Pass You By
While CIO and LAND are not quite ready for my Daily Paycheck portfolio, I think both of them are worth keeping an eye on. But some of my more aggressive readers might feel comfortable jumping in now. For the rest of you, I have plenty of income opportunities in the wings.
In the May issue of The Daily Paycheck, for example, I profiled two larger REITS, both with solid dividend growth track records.
One of them is among the top 20 largest REITs in the United States and holds leases for powerhouse businesses like Morgan Stanley, Facebook and AT&T. At current prices, its yield is 5.3% and growing.
My other pick was recently added to the S&P 500 High Yield Dividend Aristocrat Index, which means it has increased its dividends for at least 20 years straight. Better yet, it's a monthly dividend payer, which has made 539 consecutive monthly payouts.
If you're looking for income opportunities, I encourage you to keep an eye on young dividend-paying firms like the ones I described today.
Whether you are an aggressive dividend hunter or just seeking a portfolio of reliable dividend payers, these small companies could soon be our go-to dividend investments at the foundation of The Daily Paycheck.
Chief Investment Strategist
The Daily Paycheck
Editor's Note: Want to learn more about the power of dividend payers, but unsure of where to begin? Just a few months ago, Amy's colleague Matt Michaels was in the same position. And with just $300 to invest for his young daughters' future, he wasn't sure he had enough.
But after working closely with Amy, Matt has put together a plan for his daughters' financial future. He recorded a short, free video to show how easy using The Daily Paycheck strategy can be... no matter how much money you begin with.
So if you're curious to learn exactly how to start a successful low-risk investment plan, we invite you to watch as Matt walks you through his first high-yield trade by clicking the video below.