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Even investors who normally shy away from the financial sector, may find themselves curious about financial dividend stocks that provide high yields. After all, investing in dividend stocks is a reliable way to add supplemental income and build wealth. Today we have a list of high-yielders that have two other characteristics that further their attractiveness: minimal debt and endorsement from industry analysts in terms of a "Buy" or better rating. These companies have maintained a solid infrastructure by not over utilizing debt to fund growth. Below you will find the short list of financial dividend stocks that we pulled together for your review.
The long term debt/equity ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
We first looked for financial stocks with a very high yield (more than 5%). Then we screened for businesses that analysts rate as "Buy" or "Strong Buy" (1 < mean recommendation < 3). We then looked for companies that operate with little to no long term debt (Long Term D/E Ratio<.1). We did not screen out any market caps.
Do you think these stocks are undervalued? Use our list to help with your own analysis.
1) KKR Financial Holdings LLC (KFN)
| Sector | Financial |
| Industry | Mortgage Investment |
| Market Cap | $1.61B |
| Beta | 2.52 |
Key Metrics
| Dividend Yield | 9.30% |
| Payout Ratio | 51.80% |
| Analysts' Rating | 1.80 |
| Long Term Debt/Equity Ratio | 0.00 |
| Short Interest | 3.74% |
KKR Financial Holdings LLC, together with its subsidiaries, operates as a specialty finance company with expertise in a range of asset classes. It primarily invests in financial assets, such as below investment grade corporate debt comprising senior secured and unsecured loans, mezzanine loans, high yield bonds, and distressed and stressed debt securities; marketable equity securities; and private equity. The company also invests in other asset classes, such as natural resources and real estate. Its corporate debt investments are held in collateralized loan obligation (CLO) transactions that the company uses as long-term financing for these investments. The senior secured notes issued by the CLO transactions are owned by unaffiliated third party investors and the company owns the majority of the mezzanine and subordinated notes in the CLO transactions. KKR Financial Advisors LLC serves as the manager of the company. KKR Financial Holdings LLC was founded in 2004 and is based in San Francisco, California.
2) Ares Capital Corporation (ARCC)
| Sector | Financial |
| Industry | Diversified Investments |
| Market Cap | $3.84B |
| Beta | 1.77 |
Key Metrics
| Dividend Yield | 8.80% |
| Payout Ratio | 87.18% |
| Analysts' Rating | 1.70 |
| Long Term Debt/Equity Ratio | 0.00 |
| Short Interest | 2.38% |
Ares Capital Corporation is a private equity firm specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. It prefers to make investments in companies engaged in the basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors.
The firm will also consider investments in industries such as restaurants, retail, oil and gas, and technology sectors. It focuses on investments in Northeast, Mid-Atlantic, Southeast and Southwest regions from its New York office, the Midwest region, from the Chicago office, and the Western region from the Los Angeles office. The firm typically invests between $20 million and $200 million and a maximum of $400 million in companies with an EBITDA between $10 million and $250 million. It makes debt investments between $10 million and $100 million The firm invests through revolvers, first lien loans, warrants, unitranche structures, second lien loans, mezzanine debt, private high yield, junior capital, subordinated debt, and non-control preferred and common equity.
The firm also selectively considers third-party-led senior and subordinated debt financings and opportunistically considers the purchase of stressed and discounted debt positions. The firm prefers to be an agent and/or lead the transactions in which it invests. The firm also seeks board representation in its portfolio companies. Ares Capital Corporation was founded in 2004 and is based in New York, New York with additional offices in Los Angeles, California; Chicago, Illinois; Washington, District Of Columbia; and Atlanta, Georgia. The firm operates as a subsidiary of ARES Private Debt Group.
3) Hatteras Financial Corp (HTS)
| Sector | Financial |
| Industry | REIT - Residential |
| Market Cap | $2.84B |
| Beta | 0.26 |
Key Metrics
| Dividend Yield | 12.42% |
| Payout Ratio | 98.63% |
| Analysts' Rating | 2.20 |
| Long Term Debt/Equity Ratio | 0.00 |
| Short Interest | 2.36% |
Hatteras Financial Corp. operates as an externally-managed mortgage real estate investment trust (REIT). It invests in fixed-rate and adjustable-rate single-family residential mortgage pass-through securities guaranteed or issued by the United States Government agency or by the United States Government-sponsored entity, and the Federal Home Loan Mortgage Corporation. Atlantic Capital Advisors, LLC serves as the manager of Hatteras Financial Corp. The company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, and would not be subject to Federal income tax to the extent that it distributes 100% of its taxable income. Hatteras Financial Corp. was founded in 2007 and is based in Winston Salem, North Carolina.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on September 1, 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.
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