Stocks that pay high dividends have always been darlings of investors. Given the uncertain conditions of the stock market, you will naturally want a good cover for yourself in the form of good returns. However, you cannot conclude that all high dividend stocks are good choices for investing. You must exercise discretion here and invest wisely so that you don’t complicate your financial position any further. A stock that has more than 7% dividend yield sounds interesting definitely; however, how will you know if that stock is worthy enough to be invested in or has good growth potential? You can be sure on these aspects, if you choose from the following.
Leasing out aircrafts
Fly Leasing Limited (FLY, Financial), as the name indicates, is a company that deals in leasing out aircrafts to airline companies. Purchasing airplanes involves a lot of investment; therefore, most of the companies do not wish to invest in them. This is why they resort to Fly Leasing, the company that holds a fleet of 121 flights with a remarkable utilisation rate of 100%. The year 2014 proved very successful for Fly Leasing as this was the year when revenues grew by 33%.
In the event of low fuel prices, the number of air passengers has increased and airline operators all over the globe are reporting busier operations. The demand of flights has increased and this has impacted the business of Fly Leasing in a great way. The flights that the company leases out have an average lifespan of 8 years. The 2-year lease agreements between Fly Leasing and airline companies were increased to 5 years, which speaks volumes about the confidence of these companies in the services of Fly Leasing. The management of FLY is confident about increased revenues for 2015 as well as the aircraft industry is going through a good phase now. At a forward P/E of 6 and a dividend yield of 7.2%, the company is all set to exceed expectations during this year as well. The price movement of the company for the last few months is seen below:
A stock from the shipping sector
The next company on the list is Seaspan Corporation (SSW, Financial). With a fleet of 83 ships, dividend yield of 7.6%, and 26 new container ships expected to be added by the end of 2016, Seaspan presents a wonderful opportunity for investors. If you invest in this stock right now, you are sure to reap rewards in the future. The company was founded in 2005 and started posting impressive revenue growths right from 2008 onwards. From 2008 till now, revenues have grown by a phenomenal 200%.
The ships held by Seaspan have an average lifespan of 6.2 years and their utilisation rate is close to 99%. One of the main features in favour of Seaspan is that it has held strongly to its operations, in the light of most of its peers losing businesses totally. If there is one point that you have to think twice before investing in Seaspan, it is the company’s bulging debt levels. Nevertheless, the top management and Wall Street experts believe that with the rate of growth expected for the company (6.7%) and with its potential to generate large amounts of cash within a quick span of time, it should be easily able to pay off its debts. The stock movement of Seaspan can be seen below:
Conclusion
Among stocks that have more than 7% dividend yield, these two are safe bets because they have the capacity to continue yielding good returns to shareholders. Consistency is the key for these two stocks. With lots of growth-generating initiatives lined up for this year, both these companies are sure to exceed expectations of analysts and investors.
