Income investors continue to struggle under current market conditions. Many thought inflation fears would push some yields higher, but it simply has not happened.
The yield on the 10-year Treasury Bond is back under 1.5%. It shows no signs of leaping higher anytime soon.
For higher cash yields, income-focused investors will have to think outside the box. That’s where our best dividend stocks to buy now come in.
Traditional income havens like corporate bonds and real estate investment trusts (REITs) have rallied substantially over the past few years. They now offer paltry payouts as well.
Unfortunately, junk bonds today pay less than 5%. There seems to be no potential relief from that market.
So, we might have to dig deeper to find the best dividend stocks today. Nonetheless, we found a few cash-heavy, steady dividend payers you might be interested in this week…
The 9% Dividend Investment Manager
Templeton Emerging Markets Income Fund Inc. (NYSE: TEI) invests in debt issued by governments and large corporations in emerging economies worldwide. Templeton is a leader in emerging market investments and has been managing income and equity portfolios worldwide for decades with solid results.
Emerging economies will be significant beneficiaries if we any see any sort of continued inflation in the United States. It would cause commodity prices to rise around the world. Weakness in the dollar from inflation would also be good for emerging market debt held by the fund.
While the pace so far has been very slow, the continued spread of the COVID-19 vaccine should also be good news for emerging market economies and sovereign debt returns.
The fund also maintains a decent cash position of over 15% to take advantage of developing opportunities.
Templeton Emerging Market Income Fund shares trade at about an 8.5% discount to the underlying value of the bonds and cash owned by the fund.
Dividends come in monthly, and the yield right now is a little over 9%.
But this next dividend yield is even higher.
The Energy Stock with an 11% Yield
The InfraCap MLP ETF (NYSE Arca: AMZA) has pulled back recently and offers a fantastic way to collect the massive cashflows and appreciation potential of energy infrastructure assets.
No matter what the Green New Deal folks may think, oil and gas are not going away. Both, but mainly natural gas, will be part of the U.S. and global energy markets for decades.
The top 10 holdings of this ETF make up 98% of the fund. They represent the largest owners of pipelines, storage, and transportation facilities in the United States. All of them pay huge dividends, which pass straight through to us as shareholders of the fund.
The yield on the InfraCap MLP ETF is about 11% right now. There is also substantial appreciation potential because the share price has to double to be back at the pre-pandemic levels.
In today’s world, existing energy infrastructure will get more valuable with each passing year. No one wants pipelines or oil and gas storage facilities in their backyard. The permitting process at the federal and state levels is just short of insane.
Now, let’s get to one of the best dividend stocks to buy today.
The Highest Dividend Yield This Week
FS KKR Capital Corp. (NYSE: FSK) is a business development company (BDC) managed by affiliates of KKR, the large private equity and alternative investment firm.
The BDC makes loans to private middle-market companies and prefers to focus on senior secured debt. In addition, FS KKR Capital can draw on the expertise of more than 140 dedicated KKR credit investment professionals.
KKR has been using credit to do deals since 1976 and investing in leverage credit for a very long time as well. As a result, it knows more about middle-market private companies than just about anyone else on the planet.
Its in-depth knowledge is evident when you look at its incredibly low 0.73% loan loss rate.
The team at FS KKR Capital is picky about which loans they will make. In 2020, they looked at more than 1,500 deals. Three hundred of them made it to an investment committee meeting for discussion.
Only 41 of them were funded.
They recently completed a merger with KKR Capital II to create a $16 billion business development company. That makes KKR the second largest publicly traded business development company in the United States.
In addition to the 11.2% dividend yield that the BDC is paying, the firm announced a $100 million stock buyback as soon as the merger closed this month.
As a bonus, there is no need to worry about inflation with this BDC. Eighty percent of its loans are floating rate and will adjust higher if interest rates rise.
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Source: Money Morning