The 25 Highest-Yielding Stocks

Dan Dzombak, The Motley Fool

Dividend investing is popular again. Investors have taken to heart Jeremy Siegel's studies, which show that higher-yielding stocks tend to offer greater returns over time than low- or no-yield stocks.

The highest dividend yields can be very tantalizing. As long as a stock yielding 15% doesn't see its share price drop, you'll make 15% in one year! In more cases than not, however, an astronomical yield is a bad sign for a stock. Since dividend yields and stock prices move in opposite directions, a high yield usually means that investors have begun to worry about the business and driven down its stock price.

However, certain types of companies, such as REITs, have to pay out most of their income as dividends, so their yields will be higher than "normal." Dividends are not guaranteed; you need to make sure that a business is generating enough cash to pay its dividend, or your investment could be disastrous.

Three months ago, I ran a screen for the highest-yielding stocks, and it got such a good reception that I'm doing it again this quarter. The only limitation I've set this time is that the dividend stocks must have a market cap greater than $500 million.

Here are the top 25 highest-yielding stocks the screen produced:

Company

Market Cap (millions)

Yield

1

Invesco Mortgage Capital (NYS: IVR)

$1,824

24.9%

2

Chimera Investment (NYS: CIM)

$2,733

19.8%

3

American Capital Agency (NAS: AGNC)

$6,435

19.7%

4

ARMOUR Residential REIT (NYS: ARR)

$604

18.6%

5

Two Harbors Investment (NYS: TWO)

$1,333

17.2%

6

CYS Investments (NYS: CYS)

$1,101

16.7%

7

Hatteras Financial (NYS: HTS)

$2,053

15.0%

8

Ship Finance International (NYS: SFL)

$912

15.0%

9

Annaly Capital Management (NYS: NLY)

$15,783

14.8%

10

MFA Financial (NYS: MFA)

$2,433

14.7%

11

Anworth Mortgage Asset (NYS: ANH)

$861

14.6%

12

Niska Gas Storage Partners (NYS: NKA)

$674

14.3%

13

Capstead Mortgage (NYS: CMO)

$1,073

14.1%

14

National Beverage (NAS: FIZZ)

$785

13.5%

15

Frontier Communications (NYS: FTR)

$5,742

13.5%

16

Prospect Capital (NAS: PSEC)

$1,027

13.2%

17

Cellcom Israel (NYS: CEL)

$1,695

12.3%

18

OneBeacon Insurance Group (NYS: OB)

$1,446

12.2%

19

Crexus Investment (NYS: CXS)

$760

12.1%

20

BlackRock Kelso Capital (NAS: BKCC)

$648

12.1%

21

CommonWealth REIT (NYS: CWH)

$1,395

12.0%

22

Inergy (NYS: NRGY)

$2,863

11.7%

23

Compass Diversified (NYS: CODI)

$612

11.5%

24

Navios Maritime Partners L.P. (NYS: NMM)

$834

11.4%

25

BGC Partners (NAS: BGCP)

$807

10.9%

Source: S&P Capital IQ as of Dec. 5.

These stocks are a good place to start your research, but they're not formal recommendations. Remember, their seemingly irresistible yields could be ticking time bombs, so do your own due diligence. Also, make sure you diversify your picks across various sectors. As investors relearn every decade or so, you never want to put all your eggs in one basket -- no matter how tempting the dividends are.

For more dividend stock ideas, click here to get The Motley Fool's free report: "11 Rock-Solid Dividend Stocks."

At the time thisarticle was published Fool contributorDan Dzombakowns shares of Frontier Communications and Annaly Capital Management, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Chimera Investment and Annaly Capital Management.Motley Fool newsletter serviceshave recommended buying shares of Cellcom Israel. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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