We recently compiled a list of the 7 Dividend Stocks with 10%+ Yield. In this article, we are going to take a look at where Barings BDC, Inc. (NYSE:BBDC) stands against the other dividend stocks with 10%+ yield.
Dividend stocks have kept their appeal among investors due to the steady yields and income they provide. However, in the past year or so, all eyes have been on anything related to artificial intelligence. These stocks have not only surged but have also lifted the overall market much higher compared to dividend-paying stocks. Nevertheless, tech stocks have also joined the dividend game, unable to resist the trend as several major companies began distributing dividends starting in 2024. This highlights the financial strength of these companies, as they generate more cash than they currently need to reinvest.
Despite the lower yields on these tech stocks, their dividend payouts are punching above their weight contributing to the overall payments made by companies in the broader market. According to a report by S&P Dow Jones Indices, in the second quarter of 2024, companies listed in the index collectively paid out $153.4 billion in dividends, marking an increase from $151.6 billion in the previous quarter and up from $143.2 billion in the same period last year. The report highlighted that Alphabet’s dividend initiation contributed $9.3 billion to the Q2 2024 increase, while initiations from Brookings, Meta Platforms, and Salesforce in Q1 2024 accounted for $7.2 billion, collectively making up 53% of the S&P 500’s year-to-date dividend gain. Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said that although the gains without the new initiations are expected to achieve a record dividend payment for 2024, their ongoing commitment to dividend payouts will notably boost the total payout, prompting investors and boards that do not currently pay dividends to reassess their strategies.
Dividend investors often debate between dividend yields and dividend growth, not fully realizing that dividend yield is crucial for sustained dividend growth. For instance, in the case of the Dividend Aristocrats Index, which has raised dividends for 25 consecutive years, maintaining a high yield hasn’t been at the expense of growth. Over the past 26 years ending in 2023, the index consistently outperformed its benchmark with higher yields, typically ranging between 2% and 2.9%. On average, the index boasted a yield of 2.5%, significantly higher than the market average of 1.8%, according to a report by S&P Dow Jones Indices. To learn more about high-yield stocks, read Very High Yield Dividend Stocks With Upside Potential.
However, it’s worth noting that high dividend yields aren’t always the most practical choice. Analysts generally suggest targeting dividend yields in the range of 3% to 6%, as this range typically offers potential for both dividend growth and appreciation in stock value. In one of its reports, an Illinois-based financial planning company, Nuveen, highlighted that global companies with moderate dividend yields (between 0% and 3%) tend to demonstrate stronger earnings growth, profitability, and profit margins compared to those with higher yields or those that don’t pay dividends at all. These factors also contribute to reducing risk, particularly during periods of market volatility.
The debate between these two strategies appears endless. We believe that combining growth and yields can present better results for investors. How investors navigate yield traps ultimately depends on their caution and strategy. With that, let’s take a look at some of the best dividend stocks with over 10% yield.
Our Methodology:
For this list, we used a stock screener and selected dividend stocks with yields above 10%, as of July 16. Among those stocks, we chose companies that have relatively stable dividend histories, however, a lot of the companies on the list don’t have a consistent record of paying dividends due to their exceptionally high yields. They either stopped or reduced their dividend payments in 2020 due to the pandemic or because they were facing financial difficulties. We’ve also mentioned the hedge fund sentiment for each stock using Insider Monkey’s Q1 2024 database. The stocks are ranked in ascending order of their dividend yields, as of July 16.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close up view of a bank of computers and wires, showing the complex technology powering the company’s financial services.
Barings BDC, Inc. (NYSE:BBDC)
Dividend Yield as of July 16: 10.28%
Barings BDC, Inc. (NYSE:BBDC) is a North Carolina-based business development company (BDC) that specializes in debt investments in middle-market companies. The BDC industry is growing rapidly, with assets under management reaching a record high of $315 billion as of March 2024. In addition, capital continued to pour into BDCs throughout 2022 and early 2023 as investors adjusted their portfolios.
Barings BDC, Inc. (NYSE:BBDC) stands out as one of the top business development companies in the industry, thanks to its ability to seize growth opportunities and deliver substantial value to shareholders. Over the past twelve months, it has outperformed many of its peers and a broader market index, achieving a remarkable total shareholder return of over 28%. This performance is particularly impressive given its low-risk profile. Typically, investors take on significant risk with high-beta stocks to achieve substantial returns. However, the company offers a lower risk due to its stable end markets, high dividends, and increasing net asset value. Its 5-year monthly beta of around 0.70 indicates its low volatility compared to the broader market.
As mentioned before, Barings BDC, Inc. (NYSE:BBDC) has been focusing on growth opportunities to enhance its portfolio value and boost net investment income. In the first quarter of 2024, the company allocated $143 million to both new and existing companies. Its net investment income for the quarter came in at roughly $30 million. The company generated nearly $70 million in revenues, up 4% from the same period last year.
On May 7, Barings BDC, Inc. (NYSE:BBDC) declared a quarterly dividend of $0.26 per share, which was in line with its previous dividend. The company has raised its payouts for five straight years, which makes BBDC one of the best dividend stocks with over 10% yield. The stock supports a dividend yield of 10.28%, as of July 16.
At the end of Q1 2024, 12 hedge funds tracked by Insider Monkey reported having stakes in Barings BDC, Inc. (NYSE:BBDC), the same as in the previous quarter. These stakes are collectively valued at over $35.5 million. With nearly 2 million shares, Callodine Capital Management was the company’s leading stakeholder in Q1.
Overall BBDC ranks 7th on our list of the best dividend stocks to buy with 10%+ yield. You can visit 7 Dividend Stocks with 10%+ Yield to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of BBDC as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than BBDC but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.