Ironically, given that it specializes in handling money, the finance sector is not a hotbed of high-yielding dividend stocks. Even after a clutch of increases from the nation's banks, many companies in that segment still pay out well shy of 2%.
It isn't all that easy to find finance stocks that yield above that level, much less twice as high. But for the intrepid investor, they're out there if you know where to look. Here is a pair of solid high-yielders you can add to your portfolio right now.
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Giant alternative asset manager Blackstone Group (NYSE: BX) is a master at its game, and has been winning a lot lately.
In the second of two excellent quarters this fiscal year, total assets under management grew to $371 billion -- a new all-time high -- from just over $356 billion the year before. Even better, the company posted year-over-year revenue growth of 30%, to just over $1.5 billion, and its attributable net income leaped more than 60% higher to nearly $745 million.
The company did particularly well during the quarter in its real estate investments, the critical asset category that has grown to comprise nearly 30% of its business. In one characteristically splashy deal, it signed an agreement worth almost $14 billion to divest its European Logicor warehouse subsidiary. This was the largest private-equity real estate transaction in the continent's history, by the way.
The company has much more in its pipeline. Among other deals, it just announced it will effectively acquire a 51% stake in the 30 billion euro ($35 billion) real estate portfolio of rescued Spanish bank Banco Popular Espanol. And in the financial sphere, it's teaming up with CVC Capital Partners in a nearly $4 billion arrangement to buy Paysafe, a UK company that specializes in the hot segment of online payment processing.
With a humming stock market and a world full of investors chasing higher yield, restless and busy dealmaker Blackstone is well placed to continue its successful wheeling and dealing.
Blackstone, which likes to distribute much of its take in the form of dividends, currently pays out $0.54 per share for a yield of 6.4%. Although that makes the company's payout ratio on its Q2 net income figure 106%, if we take distributable earnings -- a more accurate metric of its funds available for payouts and the like -- that number is a more reasonable 86%.
Although numerous pundits have been predicting the demise of bricks-and-mortar retail, the more clever players in the sector are still managing to thrive. Exhibit A: STORE Capital (NYSE: STOR) a real estate investment trust that specializes in such properties.
STORE Capital is bucking the trend largely because its tenants commit to long-term leases of its real estate. That's an understatement -- in the REIT's most recently reported quarter, the weighted average remaining lease contract term was an impressive 14 years.
That's not the only figure to admire. Across its 1,770 properties, STORE Capital had a near-perfect 99.5% occupancy rate, and this in a sector where big operators are cutting down on store count. And the REIT's clients collectively shelled out more in rental income, which grew a very healthy 24% on a year-over-year basis to $108 million in Q2.
Meanwhile, on the back of that performance and an ambitious acquisition strategy, the company increased its funds from operations -- the most important profitability metric for REITs -- a robust 30% to over $72 million. In its brief life as a publicly traded company (it listed in late 2014), quarterly FFO has risen by nearly 80%.
Heavy hitters have noticed this.
It was revealed in June that Warren Buffett's Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) snapped up nearly 10% of the outstanding shares of the company. The Berkshire Hathaway mastermind's vote of confidence goosed the share price, yet it's still a high yielder at just under 4.9% on its $0.29 per share quarterly dividend. If it's good enough for Berkshire Hathaway, it's good enough for many of us income investors.
As a REIT, STORE Capital is basically required to disburse nearly all of its net profit in dividends, which is why its payout ratio was 83% for Q2. But like Blackstone, it's got a more appropriate measure of profitability -- FFO -- and on that basis it paid out only 69%.
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