A high dividend is anything over 5%, especially in companies that in 20 years could be paying out much more of the earnings to shareholders. Interestingly enough, three of the vehicles are attached to private equity firms, an industry historically inaccessible to the average (even noninstitutional) investor. Here are five stocks that provide both income and long-term growth potential.
Carlyle Group (CG, Financial)
Price: $19.10
Yield: 8.63%
Carlyle is one of the world's largest private equity firms and it’s only getting bigger with a new $100 billion fundraising target over the next few years. Carlyle has a moat because of its historical performance, which has been stellar. It runs more than 275 funds and fund-of-fund partnerships. Last year it did $2.9 billion in revenue and pays out a 7.2% dividend. Long term, the dividend should be steady, and the stock still has room to run higher.
Blackstone Group (BX, Financial)
Price: $33.21
Yield: 7.20%
Blackstone’s assets under management (AUM) reached a record $368 billion as of March 31. Blackstone is unique among publicly traded alternative asset firms with scale across key asset classes from real estate, private equity, credit and hedge funds. Once new assets are in house, the partnership earns fees for a decade. The company’s 6.4% dividend could spin up to 10.5% this year, and the stock could see a nice pop with estimates for $3 per share in 2018 and $4 per share by 2020. Notable guru investor Julian Robertson (Trades, Portfolio) owns 656,000 shares.
Apollo Global (APO, Financial)
Price: $27.23
Yield: 6.10%
Another alternative asset manager trading at low multiples paying a great yield, 6% to 7% this years, with a solid economic moat. The company’s private equity business is typical with lockup periods in the 10- to 11-year range, but its acquisition of Athene, a fixed-annuity provider, puts Apollo in a different niche. While private equity funds tend to return capital before new money raised, Athene’s AUM sets a perpetually recurring revenue stream.
Verizon (VZ, Financial)
Price: $45.51
Yield: 5.08%
The leader in wireless communication and getting stronger in high speed internet delivery. Plenty of competition to keep the company on its toes from AT&T and soon the T-Mobile (TMUS, Financial)/Sprint (S, Financial) merger will create a big three in this industry. Verizon has continued to grow and acquire bolt-on media services. Would like to see it buying back shares instead of issuing them, but overall, the company should increase earnings and book value from here. With Verizon, you have the potential for multiple expansion and dividend growth. Trading near its 52-week low, the stock will likely not produce 15% per year long term for buyers but will pay out a nice dividend for years to come. Legendary guru investor Joel Greenblatt (Trades, Portfolio) owns 788,297 shares of the stock.
NOTE: If you want to add AT&T (T, Financial) with Verizon, the yield is about the same with AT&T having a little tighter trading range.
DineEquity (DIN, Financial)
Price: $42.99
Yield: 9.03%
Paying out a whopping 9% and trading near a 52-week low with a 6x multiple puts this squarely in value territory. Here’s a company that has had a tough go of it in the last few years. The company has two well-known brands in Applebee’s and International House of Pancakes, and it currently generates a little over $627 million in sales per year with an EPS of $4.75. Since December the stock price has been cut in half, accelerated by its March numbers of 79 cents per share on $156.2 million in sales. Here’s the bottom line: It’s still very profitable. It’s still a low-cost leader in dining and will continue to increase earnings and dividend payments. Now’s the time to own it. Once again, both Robertson and Greenblatt own small stakes in DineEquity.
Disclosure: I do not own any of the stocks mentioned in this article but may take a position in DineEquity over the next 72 hours.
