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How To Achieve 9% Yield With Lower Volatility: Managing Risk In High-Yield

Published Sun, 22 Sep 2019 09:35:00 -0400 on Seeking Alpha

Co-produced with Beyond Saving and PendragonY
Our Service, High Dividend Opportunities ('HDO'), focuses on finding opportunities that provide a high level of current income- investments that provide a larger than average dividend.
We often target investments with yields over 7%, frequently these investments are immediately labeled as "high-risk", "sucker yields" or are said to be "just returning capital". Often with little more evidence than just pointing at the yield.
There is misunderstanding and a lot that is read into a high-yield. While many high-yield investments are in fact high risk, many low-yield (or zero yielding) investments are also high risk. Dividend yield alone is not a measure of risk.
Yields are high for a number of reasons-
"Pass-through" entities like REITs, BDCs or MLPs are designed to pass the majority of their profits directly to investors. This results in a much higher than average yield. Capital allocation strategy- when companies have excess capital they have a variety of choices of where to allocate it. Many will buy back shares on the market, increasing share-price, others decide to increase the dividend. The company is trading at a low price- yield is the annual dividend divided by the current price, so as price declines the yield goes up. So when a yield is high, it is because the company is cheap. On the other hand, when the yield is low, it is indicative of a company that is expensive. The first step of buy low/sell... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
WP GLIMCHER 4.18   24.6 0.17 1.00 24.10
VERMILION ENERGY 15.98   9.3 1.72 2.09 13.10
MACERICH 33.33   43.9 0.76 3.00 8.91
APPLE 223.08   19.0 11.73 3.08 1.42
AMAZON.COM 1843.55   76.5 24.10 0.00 0.00
GOOGLE 1234.25   24.9 49.54 0.00 0.00
NETFLIX 288.86   113.3 2.55 0.00 0.00


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Now Is Not The Time To Be A High-Yield REIT Investor
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Our 2020 High Yield REIT Portfolio
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