High Yields for Shaky Markets: Three Sectors Paying Top Dividends

• By the tickerspy.com Staff
• On 11:50 am EDT, Tuesday October 13, 2009

It is a tough market for stock-pickers, but long-term investors can collect big dividends while the economy fights to get back on its feet.

In this market, economic data can swing the stocks in either direction and government intervention impedes some traditional value-oriented fundamental strategies. Fortunately for long-term investors, there are still plenty of stocks paying big dividends, and with signs pointing to an eventual economic rebound, reinvesting those quarterly payments could lead to big gains down the road.

Some companies, called master limited partnerships (MLPs) pay out a majority of cash flows directly to shareholders in lieu of tax expenses. To qualify as an MLP, a company must earn 90% of its income from activities related to the production or transportation of natural resources or commodities, although in some cases a significant real estate interest is sufficient.

Given their structure, and involvement in the rebounding commodity sector, MLPs are a top pick for big dividends and equity appreciation. Components of the MLPs Index have an average dividend yield of 7.9%.

Over the last three months, Kinder Morgan Energy Partners (NYSE: KMP - News) and Enterprise Products Partners (NYSE: EPD - News) have both added more than 10% while paying annualized 7.6% dividends, and they are among the sector's laggards. Crosstex Energy (NASDAQ: XTEX - News) has more than doubled for the period and Breitburn Energy Partners (NASDAQ: BBEP - News) has shot up by 76%, but the company temporarily suspended cash distributions in April.

The Canadian Energy Trusts Index is another high-dividend commodity play. Popular picks Penn West Energy (NYSE: PWE - News) and Harvest Energy Trust (NYSE: HTE - News) have both trimmed distributions but not suspended them. Both have also seen their stock prices appreciated by about 40% in the last three months.

Provident Energy Trust (NYSE: PVX - News) and Pengrowth Energy Trust (NYSE: PGH - News) are also still paying monthly distributions.

A third virtual sure-shot sector for high yields is real estate investment trusts (REITs). Investors can find seven different REIT Indexes at tickerspy, six of which are ranked among the top-25 Indexes by dividend yield.

Healthcare REIT Medical Properties Trust (NYSE: MPW - News) and retail play NorthStar Realty Finance (NYSE: NRF - News) pay 9.7% and 11.4% dividends respectively, though the latter trimmed its payout this year. However, Nasdaq-listed residential REIT American Capital Agency (NASDAQ: AGNC - News) tops both of them paying out an incredible $4.95 this year alone, which based on a current share value of about $26.60, yields close to 20%.

Investors can learn more about these sectors and find more solid dividend plays at tickerspy.com.

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