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Buy This Stock with a 7% Dividend Yield for Monthly Dividends

Home Loan Servicing Solutions (HLSS) is an internally-managed owner of non-agency mortgage servicing assets with historically stable valuations and cash flows.  HLSS’ assets are predominately mortgage servicing advances that, along with the related servicing rights, are over-collateralized 30 times by residential real estate. HLSS’ objective is to generate stable, recurring fee-based earnings and dividends throughout the economic cycle.  HLSS is a small cap stock with a market cap of $529 million.

HLSS reported net income of $6.6 million, or $0.37 per ordinary share, for the third quarter of 2012 which was 12% higher than Q2 2012 of $4.7 million, or $0.33 per ordinary share, its first full quarter of operations.  HLLs reported net income of $1.3 million, or $0.31 per share based on 4.2 million weighted average shares outstanding, for the first quarter of 2012.

On October 1, 2012, the Company’s Board of Directors declared a monthly dividend of$0.11 per ordinary share with respect to each of October, November and December 2012.  HLSS has an annual dividend yield of 7.10%.

Home Loan Servicing received gross proceeds of $249.9 million in connection with the follow-on offering of 16,387,500 shares at $15.25 per ordinary share on September 12, 2012. Proceeds from the offering were used to acquire mortgage servicing assets related to non-agency mortgage loans.

On October 19, 2012 Barclays Capital upgraded HOME LOAN SERVICING SOLUTIONS from EQUAL WEIGHT to OVERWEIGHT.

On October 16, 2012 Zacks Investment Research, Inc. upgraded HOME LOAN SERVICING SOLUTIONS from HOLD to BUY.

On October 16, 2012 Merrill Lynch initiated coverage for HOME LOAN SERVICING SOLUTIONS with a BUY recommendation.

First Call analysts have a BUY recommendation with a 2.0 stock rating.

This New Monthly Dividend Payer is an Undervalued Growth and Income Play

Vanguard Natural Resources, LLC (NYSE: VNR) is a publicly traded limited liability company focused on the acquisition, production and development of oil and natural gas properties. Vanguard has significant growth and income potential while also being undervalued at its current stock price.

Vanguard trades at a PE of 7.4 compared to an industry PE average of 14. The Company increased earnings 88% and revenues 35% last quarter compared to the same quarter one year earlier.  Vanguard is projected to grow EPS by 36% next year.  Vanguard has increased cash flow 33% in the last 5 years compared to 12% for the industry.

Vanguard reported consolidated earnings and operations results for the second quarter and six months ended June 30, 2012.  For the quarter, the company reported total revenues of $151,915,000 against $112,509,000 a year ago. Income from operations was $102,301,000 against $61,088,000 a year ago. Net income attributable to the company unit holders was $103,447,000 against $31,799,000 a year ago.

Vanguard announced a public offering of an additional $200 million aggregate principal amount of their 7.875% senior unsecured notes due 2020 at a public offering price of 7.875%. The Company intends to use the net proceeds from this offering to repay a portion of the outstanding borrowings under its senior secured reserve-based credit facility.

Vanguard converted its quarterly dividend to a monthly dividend in July 2012.  The Company is paying 40.20 per month for an annual dividend of $2.40.  This is a current dividend yield of 8.04%.  The Company increased its quarterly dividend 7 straight quarters before converting to a monthly payout.  Vanguard has a 57% dividend payout ratio.

Richard Robert, EVP & CFO, commented, “We have listened to investors and we believe that we are giving them what they want. A monthly distribution should allow investors to better manage their finances by matching their monthly cash outflows with monthly cash inflows. In addition, a monthly distribution will allow us to reward our investors in a timelier manner as we make accretive acquisitions in the future. We believe the decision to pay distributions monthly rather than quarterly will be welcomed by both our current Vanguard unit holders as well as other potential investors looking to invest in high yielding energy securities.”

First Call analysts have a BUY recommendation with a 1.8 stock rating.  The stock has an equity summary score of 7.2 out of 10 for a Bullish outlook.  Vanguard has a 12 month price target of 33.

2 High Yield Dividend Stocks with a Bullish Outlook

While high yield is difficult to come by these days, here are 2 quality stocks with high dividend yields, reasonable valuations and projected growth next year.  Both of these stocks produced significant EPS growth last quarter and have equity summary scores indicating a Bullish outlook.

PennyMac Mortgage Investment Trust (NYSE: PMT) invests primarily in residential mortgage loans and mortgage-related assets.  PennyMac trades at a PE of 8 with a beta of 0.83.

PennyMac increased EPS by 33% last quarter compared to the same quarter a year ago.   The Company is projecting an increase in EPS of 7% next year.

PennyMac has a current dividend yield of 9.43% which has been increased 10% in the last year.

PennyMac is up 40% year to date and 9.3% in the last 4 weeks.  Shares pulled back in August after pricing an upsized underwritten public offering of 15 million shares at $20.93 each. The deal originally intended to sell 12 million shares. Underwriters received a 30-day option to purchase up to 2.25 million additional shares from the company.

PennyMac plans to spend the net proceeds to purchase residential whole mortgage loan portfolios as well as funding continued growth of its correspondent lending business and acquiring additional mortgage loans or other investments, including existing forward purchase agreements.

PennyMac has an equity summary score of 9.1 out of 10 for a VERY Bullish outlook.  PennyMac has a 12-month price target of $25.30.

Vanguard Natural Resources (NYSE: VNR) engages in the acquisition and development of oil and natural gas properties in the United States.

Vanguard increased EPS by 88% last quarter compared to the same quarter a year ago.   The Company is projecting an increase in EPS of 39% next year.  Vanguard has a PEG ratio of 0.41.  Vanguard trades at a PE of 7.2 with a beta of 1.02.

Vanguard dividends are paid on a monthly basis.  Vanguard has a current dividend yield of 8.31% which has been increased 4.35% in the last year.

Vanguard just announced the closing of its previously announced public offering of 6,900,000 common units representing limited liability company interests in the Company at a price of$27.51 per unit.  The 6,900,000 common units include 900,000 common units purchased pursuant to the underwriters’ full exercise of their option to purchase additional common units.

Vanguard intends to use the net proceeds from the offering of approximately $182.3 million, after deducting underwriting discounts and estimated offering expenses, to repay a portion of its indebtedness outstanding under its senior secured revolving credit facility.

Vanguard has an equity summary score of 7.4 out of 10 for a Bullish outlook.  Vanguard has a 12-month price target of $31.50.

Get Monthly Dividends From This Back To School Stock

Founded in 1997, Student Transportation Inc. (NASDAQ: STB) is North America’s third-largest and fastest-growing provider of school bus transportation services, operating more than 8,500 vehicles. STI’s family of local companies delivers safe, reliable and cost-effective transportation solutions to school districts throughout the U.S. and Canada.

Standard Transportation usually purchases a new fleet and then splits the fuel costs with the customer. With the uncertainty of market diesel prices it is more cost-efficient to operate an LPG or CNG vehicle than a diesel engine vehicle.  Standard has additional LPG vehicles scheduled to be deployed for the upcoming school year and we look forward to further fuel savings for our customers. Standard Transportation is committed to helping schools everywhere have safe, economical, and environmentally responsible transportation for their students.  Their success with alternative fuel fleets in Minnesota and California has prompted more customers to make the switch to outsourcing student transportation.

Student Transportation has won six new bid contracts, two in Ontario, two inConnecticut and two in New Hampshire, for 2013 as announced towards the end of March, and secured another eight contracts in Texas and Washington that National Express was required to divest by the U.S. Department of Justice in connection with its purchase of Petermann Partners.

The additional revenues and cash flows from the six acquisitions closed and integrated in the first half of the fiscal year and the nine new bid contracts won for fiscal 2012, along with the recovery of approximately $1.2 million in continued revenue deferrals at the end of the third quarter should continue the positive momentum through the end of the fourth quarter of fiscal 2012,

Third quarter revenue increased $22.3 million to $113.3 million, from $91.0 million and EBITDA improved $6.1 million to $25.5 million, from $19.4 million for the comparable period last year. Net income for the third quarter of fiscal year 2012 increased to $3.0 million or $0.05 per common share compared to net income of $1.6 million or $0.03 per common share for the third quarter of fiscal year 2011.

Student Transportation has continued its practice of approving the announcement of dividends quarterly. Dividends will continue to be paid on a monthly basis to shareholders of record.  Today, investors are looking at an investment in Student Transportation that pays $0.55 annually in monthly distributions. This produces an 8.3% yield at the market price.  Student Transportation will pay a regular monthly cash dividend on October 15, 2012, November 15 and December 17 to shareholders of record at the close of business on September 28, 2012, October 31 and November 30.

Student Transportation’s CEO Denis Gallagher has stated that he’s satisfied with the dividend payment and wants to focus on driving investor value.  His goal is to see the yield drop in the 5%-range through share-price appreciation.  This calculates to a target price of $11.00 which is 66% higher than the current price of $6.63.

New Special Dividend Paying a 24% Yield!

Evolving Systems, Inc. (EVOL), a leading provider of software solutions and services to the wireless, wireline and IP carrier market, announced it will distribute approximately $19.3 million in cash to stockholders in the form of a $1.70 per share, one-time special dividend. The special dividend will be payable on May 29, 2012. If a stockholder sells their shares before May 30, 2012, the stockholder will have to relinquish the dividend to the buyer.  EVOL is trading at $7.10 making the special dividend a 24% dividend yield.

“This will be our second special dividend paid in 2012, underscoring the Board of Directors’ commitment to return value to stockholders,” said Thad Dupper, Chairman and CEO. “Our two special dividends, combined with regular quarterly dividends we began paying in 2010, bring the total cash returned to stockholders to $4.05 per share, or over $45.0 million. At the same time we continue to invest in product development and other growth initiatives and maintain a strong, debt-free balance sheet.”

As of the first quarter ended March 31, 2012, Evolving Systems had cash and cash equivalents combined with long-term investments in marketable debt securities that totaled $31.0 million.

Anixter International Inc. (AXE), a leading global distributor of communication and security products, electrical and electronic wire & cable, fasteners and other small parts, announced that it’s Board of Directors declared the payment of a special dividend to shareholders of $4.50 per common share, or a total cash outlay of approximately $150 million. The special dividend is payable on May 31, 2012 to shareholders of record on May 16, 2012.  AXE is trading at $61.71 for a special dividend yield of 7.29%.

SMTP (STMP) is a leading provider of cloud-based services to facilitate email deliverability, including bulk and transactional sending, reputation management, compliance auditing, abuse processing and issue resolution. Our services provide customers with the ability to increase the deliverability of email with less time, cost and complexity than handling it themselves.  SMTP trades OTC at $1.24 per share for a total dividend yield of 11.5%.

Special Dividend.  We have a cash surplus that has been earned over the last several years in excess of $1.4 million, and we intend to distribute $1.4 million in cash to our shareholders in the form of a Special Dividend, which will be paid on 5/31/12 to shareholders of record as of 5/21/12 (the “Record Date”).  In the event that an outstanding warrant to purchase up to 800,000 shares of common stock at a $0.625 strike price is exercised before the Record Date, the special dividend will be increased to up to approximately $1.9 million.

Quarterly Dividend.  Additionally, we intend to commence the payment of a regular quarterly dividend to our common stockholders, initially in the amount of $200,000 per quarter, which will be included with the special dividend payment and will be paid on 5/31/12 to the same special dividend Record Date shareholders. The initial quarterly dividend represents approximately 90% of one fiscal quarter of our 2011 net after tax earnings. Going forward, we intend to continue regular dividend payments each quarter (approximately 45 days after quarter end), with a general guideline of paying out 80%-90% of each fiscal quarter’s net earnings. We believe that our quarterly dividend payments will generally increase each quarter, as we focus on maintaining strong profitability, with consistent top-line growth.

The Best Dividend Stocks for 2012 – Industrial Sector

S&P recommends marketweighting the S&P 500 Industrials sector. Year to date through November 18, the S&P Industrials Index, which represented 10.6% of the S&P 500 Index, was down 6.3%, compared to a 3.3% decline for the S&P 500. In 2010, this sector index advanced 23.9%, versus a 12.8% increase for the 500. There are 18 sub-industry indices in this sector, with Aerospace & Defense being the largest at 24.9% of the sector’s market value.

S&P analysts have a positive fundamental outlook on the Industrials sector due to expected sales benefits from rising emerging market exposure, although Europe’s debt crisis has increased uncertainty, in our view. In addition, operating leverage is rising with revenues thanks to aggressive cost-cutting initiatives put in place by most companies during the extreme business downturn of 2008 and 2009. According to Capital IQ, from a valuation standpoint, the sector trades at 11.8X consensus estimated 2012 EPS, above the market’s 11.3X, due to above-average EPS visibility, in our view. Its P/E to projected five-year EPS growth rate of 0.9X is lower than the broader market’s 1.1X. The sector’s marketweighted S&P STARS average of 3.7 (out of 5.0) is slightly below the 3.8 average for the S&P 500.

The S&P Industrials Index have broken out from a fairly large, bullish base, turning the intermediate-term trend to bullish, in our view. In addition, prices have retaken a bearish trend-line off the highs since July, confirming to us the change in trend. The sector has also jumped back above its 17-week exponential moving average for the first time since July. The next area of overhead supply sits up near the 300 level, which was the major breakdown region. The rising 17-week exponential remains below the 43-week exponential, but the gap between the two is narrowing, a potentially bullish sign. Relative strength versus the S&P 500 has reversed to the upside, another positive sign. We have raised our technical opinion on Industrials to neutral with a bullish bias, from neutral.

We recommend marketweighting this cyclical sector due to increased risks we see to the global economic recovery, which we believe are offset by an improving technical outlook.

As the world’s largest defense contractor, Lockheed Martin (LMT) has amassed an enviable product portfolio.  Lockheed turns 8% of revenue into operating cash flow, which it uses to fund dividends and stock repurchases. Still, budgetary pressures that require the Department of Defense (DoD) to reduce spending by $350 billion over 10 years could be expanded to more than $950 billion should Congress be unable to come to a consensus on the upcoming debt reduction discussions.  However, LMT is on the technology side of DOD so they have not been hurt by budget cuts.  Aeronautics houses key fighter aircraft programs such as the fourth generation F-16 and the fifth generation F-22 and F-35.  The difference between fourth and fifth generation aircraft is related to stealth, computer systems, and the ability to process and integrate data to rapidly make informed decisions.  LMT has a dividend yield of 4.9%.

We believe that Eaton’s expansion into developing markets will pay nice dividends, even while developed economies in the U.S. and Europe face challenges. Over the long run, we think the firm’s advanced technologies and high switching costs should lead to solid economic profit generation.  Eaton is a diversified manufacturer of electrical components and systems across a broad number of end markets, but is importantly focused on the common theme of providing power solutions. Thus the firm has been successful at expanding its business well beyond its central focus of supplying to car and truck manufacturers, but hasn’t drifted too far outside of its core competencies.  Eaton also has a long history of dividend growth, based on a target of growing EPS by 15% per year and dividends in a like amount.  The dividend was maintained throughout the recession, and may grow once again as earnings recover.

The list of industrial stocks with bullish equity summary scores are shown in the table below: best dividend stocks of 2012 for industrials.

Best Dividend Stocks for 2012

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Monthly Dividend Stocks Beating the S&P 500

Comparison of monthly dividend stocks and ETFs to the S&P 500

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While dividend income is the hot item these days as the yield on fixed income investments is lower than income investors are seeking.  However, you do not want to give up some total return just to lock in a dividend.  The yield on the S&P 500 is only 2% and the price return has been 1% over the last year.  This creates a total return of 3% on the S&P 500. You should use this as the baseline for your income investments.  You can easily find monthly dividend stocks and ETFs that can beat the S&P 500 to make you even more money than just the monthly dividend.

Here are three monthly dividend stocks that have beaten the S&P 500 over the past year: (1) CRT, (2) MAIN and (3) UTG. The chart above shows the stock price returns compared to the S&P 500 over the past year.

Cross Timber Royalty Trust (CRT) is currently trading at $46.50. It has a 1-year price return of 24.05% compared to 1% for the S&P 500. CRT has a current dividend yield of 6.43% paid as a monthly dividend. CRT has a total return (1-year price return and dividend yield) of 30.48%. This is 8 times more profitable than the S&P 500. This is clear evidence that monthly dividend stocks can provide significant income investment returns beating the S&P 500.

CRT Company Profile: Cross Timbers Royalty Trust (Trust) is an express trust. The Trust is a widely held fixed investment trust (WHFIT). The Company entered into Cross Timbers Royalty Trust Indenture between predecessors of XTO Energy Inc. (XTO Energy), as grantors, and NCNB Texas National Bank, as trustee. As of December 31, 2010, Bank of America, N.A. is the trustee of the trust. Approximately 20 of the underlying royalty interests in the San Juan Basin burden working interests in properties operated by XTO Energy. XTO Energy also operates the Penwell Unit, which is the properties underlying the Texas 75% net profits interests and ExxonMobil operates the Hewitt Unit, which is the properties underlying the Oklahoma 75% net profits interests. Other than these properties, XTO Energy and ExxonMobil do not operate or control any of the underlying properties or related working interests.

Main Street Capital (MAIN) is currently trading at $17.50. MAIN has a 1-year price return of 13.77% compared to 1% for the S&P 500. MAIN has a current dividend yield of 8.64% paid as a monthly dividend. MAIN has a total return (1-year price return and dividend yield) of 22.41%. This is 7.5 times more profitable than the S&P 500. Again, this is another monthly dividend stock significantly beating the S&P 500.

MAIN Company Profile: Main Street Capital Corporation (MSCC) is a principal investment firm focused on providing customized financing solutions to lower middle-market companies with annual revenues between $10 million and $100 million. The Company was formed for the purpose of acquiring 100% of the equity interests of Main Street Mezzanine Fund, LP (MSMF) and its general partner, Main Street Mezzanine Management, LLC (MSMF GP); acquiring 100% of the equity interests of Main Street Capital Partners, LLC (the Investment Manager); raising capital in an initial public offering (IPO), which was completed in October 2007, and thereafter operating as an internally managed business development company (BDC). MSMF is licensed as a Small Business Investment Company (SBIC) by the United States Small Business Administration (SBA) and the Investment Manager acts as MSMF’s manager and investment adviser. The Company invests primarily in secured debt instruments, equity investments, warrants and other securities.

Reaves Utility Income Fund (UTG) is currently trading at $25.08. UTG has a 1-year price return of 14.09% compared to 1% for the S&P 500. UTG has a current dividend yield of 6.0% paid as a monthly dividend. UTG has a total return (1-year price return and dividend yield) of 20.09%. This is 6.7 times more profitable than the S&P 500. Again, this is another monthly dividend stock significantly beating the S&P 500.

UTG Company Profile: Reaves Utility Income Fund (the Fund) is a non-diversified closed-end investment Company. The Find’s investment objective is to provide a high level of after-tax income and total return consisting primarily of tax-advantaged dividend income and capital appreciation. The Fund may invest a portion of its assets in foreign securities. In the event that the Fund executes a foreign security transaction, the Fund will enter into a forward foreign currency contract to settle the foreign security transaction. It focuses to invest at least 80% of its total assets in dividend-paying common and preferred stocks and debt instruments of companies within the utility industry. The remaining 20% of its assets may be invested in other securities, including stocks, money market instruments and debt instruments, as well as certain derivative instruments in the utility industry or other industries.

List of High Quality, High Yield Dividend Stocks

We have a new list of high yield dividend stocks that are also filtered by being high quailty stocks.  The filters are shown in the table below.  These stock criteria include a buy or hold rating from Zacks Research, a projected EPS of 10% or greater, cashflow growth rate of 0.06% or greater, etc.

 Zachs
Research
Is Rated Buy or Hold
Dividend Yield Greater than or Equal to 5.00%
EPS Growth (Proj this Yr vs. Last Yr) Greater than or Equal to 10.00%
P/E (This Year’s Estimate) Less than or Equal to 20.0
Cash Flow Growth Rate (TTM vs. Prior TTM) Greater than or Equal to 0.06%
Interest Coverage (Most Recent Qtr) Greater than or Equal to 3.0x
Security Price Greater than or Equal to $5.00
Volume (90 day Average) Greater than or Equal to 50.0K

 

The list of stocks passing this hurdle are shown in the graph below.  The most impressive stock is Two Harbors (TWO) which sports an 18% yield due to a recent price decline.  TWO has NO long-term debt which is great for a REIT and is rated a strong buy by many analyst,  Here is a detailed company description:

Two Harbors Investment Corp. (TWO) is an real estate investment trust (REIT), which focuses on investing in, financing and managing residential
mortgage-backed securities (RMBS). The Company focuses on investing in the asset classes, which includes agency RMBS, non-agency RMBS and financial assets other than RMBS, consisting of approximately 5% to 10% of the portfolio. Two Harbors is externally managed and advised by PRCM Advisers LLC. Capitol Acquisition Corp. (Capitol) is a wholly owned indirect subsidiary of Two Harbors. On October 28, 2009, Two Harbors Merger Corp., a wholly owned subsidiary of the Company merged with Capitol.

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List of Monthly Income Stocks

Below is an updated list of CEFs with monthly dividend income as of August 29, 2011.  there are 12 monthly income stocks shown in the table.  However, many are still trading at a premium price to their net asset value.  The VIX is still at 40 as the market opens today.

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