Mid-Cap Dividend Dynamos
A favorite tactic of many income investors is to confine their searches for dividends to the largest, most familiar blue-chip names. To be sure, there is a level of comfort in sticking with large- and mega-caps such as Coca-Cola (NYSE: KO), Johnson & Johnson (NYSE: JNJ) and Procter & Gamble (NYSE: PG). These companies and others raise their payouts like clockwork every year while offering low-beta alternatives in a topsy-turvy market environment.
There is something to be said venturing away from the familiar when it comes to dividends. By moving down the market capitalization spectrum to the mid-cap universe, investors can avail themselves of high-yielders with better growth potential than what is offered by most mega-caps.
Fortunately, the following mid-caps do not represent infinitely higher levels of risk when compared to more familiar fare. These stocks do, however, offer robust yields and superior potential for capital appreciation.
Companhia Energetica de Minas Gerais (NYSE: CIG) For those not fluent in Portuguese, the simple way of describing this company is as a Brazilian utility. That does imply some degree of risk because normally stodgy U.S. utilities have recently had a rough go of things.
Companhia Energetica de Minas Gerais has followed suit as the shares are down nearly 10 percent in the past month. In the company's favor are several factors. First, third-quarter results were strong. Second, a forward price-to-earnings ratio of just 4.53 implies a much more favorable valuation than what can be had with U.S. utilities. Third, the company has almost $1.3 billion in cash. The current yield is 5.7 percent.
Oaktree Capital Group (NYSE: OAK) California-based Oaktree Capital Group focuses on alternative markets such as high-yield debt, convertible bonds and real estate. Assets under management rose to $81 billion from $78.7 billion at the end of the second quarter on market gains and new commitments, according to Bloomberg.
After capitalizing on Europe's sovereign debt crisis, Oaktree is now raising money to launch a fund focused entirely on emerging markets junk bonds. That could prove to be a "right place right time" move for Oaktree due to the soaring issuance of both investment-grade and high-yield corporates in developing nations.
The stock has lagged the broader financial services universe this year, but in the past month Oaktree is off just 1.7 percent compared to a 6.4 percent decline for the Financial Services Select Sector SPDR (NYSE: XLF).
Old Republic International (NYSE: ORI) The case of Old Republic International is a curious one. Old Republic International is an insurance company and does engage in some of the more benign aspects of that universe such as general liability, home warranty, commercial and automobile. Perhaps it is Old Republic's exposure to mortgage insurance that leads some investors to think there is a higher degree of risk than is actually the case here.
As has been noted, Old Republic is bigger than some members of the S&P 500 though it is not a member of that prestigious index. More importantly, Old Republic's dividend has nearly doubled in the past decade. With a yield of 7.1 percent, the shares currently trade for less than 0.7 times book value.
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