With interest rates continuing to hover around historic lows, it
is not surprising that most investors' think of three percent as
decent and a four percent yield as a real treat. And in a volatile
market environment, it has not been surprising to see investors
favor steady blue-chip dividend stocks such as AT&T (NYSE:
), Coca-Cola (NYSE:
) and Wal-Mart (NYSE:
Those names do have storied histories of consistent dividend
increases and they do fit the bill as low beta, but only AT&T
has a remotely impressive dividend yield of 4.8 percent. The
decision to moderately ratchet up the risk profile by embracing
high-yielding small-caps can pay off handsomely for investors.
a few more basis points in yield over time
means invested principle multiplies that much faster.
Take a look at these four small-caps with big-time dividend
Crosstex Energy (NASDAQ:
There is some risk with Crosstex and that much was evident on
Thursday. When the broader market was surging, Crosstex closed down
on the day. Texas-based Crosstex is a midstream energy firm engaged
in processing and transmitting natural gas and natural gas liquids,
so there will be some correlation to this stock and natural gas
Currently yielding nine percent, Crosstex has paid a dividend
since 2003. The bad news is there was a dividend cut during the
financial crisis. The good news is Crosstex has increased the
distribution by nearly 33 percent from the first quarter of 2009.
In addition to the dividend, value investors may want to taken note
of Crosstex because it currently trades below book value.
Sandridge Mississippian Trust II (NYSE:
There has been
shortage of controversy surrounding royalty trusts
, but it should be noted there are still some solid opportunities
in this asset class.
Sandridge Mississippian Trust II went public earlier this year.
At the time of the offering, the present value combination of
proved and probable reserves is $900 million, assuming oil is at
$91 and natural gas is at $4 per thousand cubic feet
with reserves split 47 percent in oil and 53
percent in natural gas
It is worth noting that assuming a unit price of $20, the
trust's expected payouts are forecast to surge in the 2014-2016
time frame. The units currently yield 9.6 percent.
Rentech Nitrogen Partners (NYSE:
Rentech Nitrogen Partners is another example of small-cap name
with a big-time dividend that could be impacted by natural gas
prices. In the case of Rentech, higher gas prices could hurt the
shares because the California-based company produces natural
gas-based nitrogen fertilizer and industrial production.
The stock has more than doubled year-to-date even though natural
gas futures have shown some faint signs of improvement.
Importantly, Rentech said in August it expects "cash available for
distribution to be in excess of $126 million or $3.30 per unit, and
EBITDA to be in excess of $130 million. This compares to the
previous guidance of EBITDA in the range of $120 million and cash
available for distribution in the range of $109 million, or $2.86
In other words, the drought that has driven up the prices of
corn, soybeans and wheat has also increased demand for
nitrogen-based fertilizer. The drought is bad news, but it is good
news for Rentech, which yields 13.5 percent.
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
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