These High-Yield Stocks Are Hiding In Plain Sight

Nathan Slaughter's picture

Tuesday, November 12, 2019 - 2:30pm

by Nathan Slaughter

Have you ever driven yourself half-crazy looking for your car keys?

You spend so much time looking for them -- only to find them sitting in plain sight. They may not have been where you usually leave your keys, but there they are -- right in front of you. You must have walked by them a dozen times.

The same thing happens to securities that pay irregular -- or special -- dividends.

We like to call them "Wall Street Irregulars."   

These dividend payers offer above-average yields, yet most investors skip right over them.

That's because popular investment resources like Yahoo! Finance rarely reflect the total yield these companies offer.

Most brokerage and investment websites only take a stock's most recent dividend payment and multiply it times the payment frequency to get a stock's annual dividend. The websites then use the computed annual dividend to calculate the yield.

So while the "posted yield" -- the yield investors see listed -- may show something south of 2%, a stock's "trailing yield" -- the yield based on the company's actual dividend payments over the last 12 months -- may be much higher.

There are various types of Wall Street Irregulars.

There are quarterly irregulars, which pay a modest dividend in three out of four quarters. One quarterly payment, however, is quite significant. There are also semi-annual irregulars, which pay one large and one small dividend each year.

Take a company like The Buckle, Inc. (NYSE: BKE) for example. It's a quarterly dividend payer with a posted yield of 4.5% on websites like Yahoo! Finance.

That's actually pretty good. However, in the screenshot below you can see that earlier this year BKE actually paid a massive quarterly payment four times bigger than its regular quarterly dividend.

BKE special div
Source: Yahoo Finance

That gives BKE a trailing yield of over 10% -- more than twice as high as what many potential investors see by simply looking at the stock's stated yield on the website.

BKE is just one example. And the stock isn't without its risks. This apparel company specifically caters to teenagers, a notoriously fickle fashion group.

A more conservative choice might be RLI Corp. (NYSE: RLI), a Wall Street Irregular with a more dependable revenue stream.

RLI is a specialty insurance company with a track record of delivering underwriting profits for 23 years -- quite a feat in the insurance business. This has allowed the company to make more than 160 consecutive quarterly dividend payments and hike its dividend for each of the past 43 years.

On the surface, RLI appears to pay only $0.92 per share in dividends -- giving the stock a measly sub-1% yield. But when you dig a little deeper, then you'll find the company recently paid a quarterly dividend nearly 6 times bigger than its typical quarterly payout.

RLI special dividend
Source: Yahoo Finance

In reality, RLI pays more than meets the eye -- $1.90 on a traling basis. And while that's only about 2% -- it's nearly twice as large as what most financial websites report. And if you think that's not impressive, remember we're talking about one of the most well-run specialty insurance outfits in the country -- they typically don't hand out dividends like candy. That dividend yield would be much higher if the stock weren't already up by 43% year-to-date.

Action To Take

The point is, Wall Street Irregulars like the ones I've just mentioned can be a valuable contributor to any income investor's portfolio. There are more Irregulars out there, too. It takes a little digging to find them, but the results are often worth it.

That's where my premium newsletter, The Daily Paycheck, comes in. We started this retirement plan eight years ago as a low-risk investment strategy for investors looking to increase the size and frequency of their portfolio's payouts.

Since we began, the results have been nothing short of spectacular. So far we've turned an initial $200,000 investment into more than $411,000 today. And this total continues to grow with each passing day, thanks to the power of dividend reinvestment.

That just shows you the power of my Daily Paycheck strategy. And it's something I want you to experience, too.

That's why I'll give you complete access to my entire portfolio, including a full slate of special reports to help get you started. All you have to do is access my latest report here.

Nathan Slaughter does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.