A favorite tactic of many income investors is to confine their
searches for dividends to the largest, most familiar blue-chip
names. To be sure, there is a level of comfort in sticking with
large- and mega-caps such as Coca-Cola (NYSE:
), Johnson & Johnson (NYSE:
) and Procter & Gamble (NYSE:
). These companies and others raise their payouts like clockwork
every year while offering low-beta alternatives in a topsy-turvy
There is something to be said venturing away from the familiar
when it comes to dividends. By moving down the market
capitalization spectrum to the mid-cap universe, investors can
avail themselves of high-yielders with better growth potential
than what is offered by most mega-caps.
Fortunately, the following mid-caps do not represent
infinitely higher levels of risk when compared to more familiar
fare. These stocks do, however, offer robust yields and superior
potential for capital appreciation.
Companhia Energetica de Minas Gerais (NYSE:
For those not fluent in Portuguese, the simple way of describing
this company is as a Brazilian utility. That does imply some
degree of risk because
normally stodgy U.S. utilities
have recently had a rough go of things.
Companhia Energetica de Minas Gerais has followed suit as the
shares are down nearly 10 percent in the past month. In the
company's favor are several factors. First, third-quarter results
were strong. Second, a forward price-to-earnings ratio of just
4.53 implies a much more favorable valuation than what can be had
with U.S. utilities. Third, the company has almost
$1.3 billion in cash
. The current yield is 5.7 percent.
Oaktree Capital Group (NYSE:
California-based Oaktree Capital Group focuses on alternative
markets such as high-yield debt, convertible bonds and real
estate. Assets under management rose to $81 billion from $78.7
billion at the end of the second quarter on market gains and new
according to Bloomberg
After capitalizing on Europe's sovereign debt crisis, Oaktree
is now raising money to launch a fund focused entirely on
emerging markets junk bonds. That could prove to be a "right
place right time" move for Oaktree due to the soaring issuance of
investment-grade and high-yield corporates
in developing nations.
The stock has lagged the broader financial services universe
this year, but in the past month Oaktree is off just 1.7 percent
compared to a 6.4 percent decline for the Financial Services
Select Sector SPDR (NYSE:
Old Republic International (NYSE:
The case of Old Republic International is a curious one. Old
Republic International is an insurance company and does engage in
some of the more benign aspects of that universe such as general
liability, home warranty, commercial and automobile. Perhaps it
is Old Republic's exposure to mortgage insurance that leads some
investors to think there is a higher degree of risk than is
actually the case here.
As has been noted, Old Republic
is bigger than some members of the S&P
though it is not a member of that prestigious index. More
importantly, Old Republic's dividend has nearly doubled in the
past decade. With a yield of 7.1 percent, the shares currently
trade for less than 0.7 times book value.
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