Many investors like big yield, but don’t want to pay a big price. If you’re one of them, I’ve got three low-priced, high-yield investments for you.
Investors are psychologically drawn to round numbers. If you were to place a limit order for a stock trading around $20, I’d surmise you’d likely put an order in at $20, or $20.50, as opposed to $19.98, or $20.48.
Many of us also prefer to buy in round lots (I include myself) – in increments of 100 shares. But this is an issue if your investing budget is limited. A hundred shares of Google (NASDAQ: GOOG) will set you back $59,000; 100 shares of Apple (NASDAQ: AAPL), though more affordable, will still set you back $10,000.
If you’re an income investor on a limited budget (and even if you’re not), I recommend three solid income-paying stocks that allow you to comfortably buy in 100-share increments. More important, these three stocks are not only affordable, they have a history of consistent, high-yield payouts.
Affordable Income Stock #1: BGC Partners (NASDAQ: BGCP) 6.3% Yield, $7.60 Share Price
BGC Partners is an affiliate of Cantor Fitzgerald, the large privately held investment brokerage located in New York City. Cantor Fitzgerald made news on Sept. 11, 2001 when two-thirds of its employees were killed in the World Trade Center attack. Fortunately, Cantor Fitzgerald roared back, and so did BGC Partners.
As for BGC, it focuses on financial trading platforms for institutional investors. In recent years, it has branched into commercial real estate brokerage, buying out of bankruptcy the assets of Grubb & Ellis and Newmark Knight Frank. BGC is now one of the largest commercial real estate brokers in the country
Through acquisitions and organic growth, BGC has morphed into a solid growth company. In the past five years, annual revenue has grown $1.7 billion from $1.2 billion — this despite selling its electronic trading platform to NASDAQ OMX Group (NASDAQ: NDAQ) for $1.2 billion.
The sale has left BGC flush with cash, $2.81 per share, or nearly 40% of share value. In other words, BGC has plenty of cash to support its $0.48 per share annual dividend and to fund further growth.
Affordable Income Stock #2: Nuveen Quality Pref. Fund II (NYSE: JPS) 7.3% Yield, $9.00 Share Price
If you like monthly income, you’ll like the Nuveen Quality Pref. Fund. Nuveen pays $0.055 per share each month, or $0.66 per share annually. Nuveen has been paying income at this rate for nearly five years.
Nuveen generates big income and high yield by investing in a portfolio of quality preferred stocks. Preferred stocks are hybrid securities: They are similar to debt investments, in that the dividend payments are contractual. They are similar to common stocks in that they pay dividends and have a lower claim on business assets than debt.
Nuveen’s income is further enhanced by leverage. The fund uses low-cost debt – 28% of the portfolio – to pay income that keeps the yield above 7%.
Nuveen is also on sale. Its shares trade a 9.2% discount to net asset value.
Affordable Income Stock #3: PDL BioPharma (NASDAQ: PDLI) 6.2% Yield, $9.65 Share Price
PDL BioPharma owns and manages a portfolio of human antibody patents. The company receives royalties based on sales of humanized antibody products marketed by biotech and pharmaceutical companies that use PDL’s patents.
PDL’s royalty-based business model is lean and high margin: Operating margins average above 91%; net margins average above 55%. By buying patents, as opposed to producing them, PDL forgoes large investments in fixed assets and R&D. Being lean means PDL generates a lot of cash, which enables it to continually pump out high-yield dividends to its investors.
BGC, Nuveen, and PDL prove you don’t have to fork over a lot of money to buy a round lot of a quality dividend stock.
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