Investors looking for dividends are often drawn to the financial sector. That's because many firms that deal in lending or investment have a built-in mechanism to fuel distributions back to shareholders simply by passing on a piece of monthly interest payments or earnings. Of course, not all financial stocks are the same – and these payouts can differ wildly based on a stock's unique operations. Here are nine names in the sector that may not be prominent but should be on the radar of income investors thanks to yields north of 5% annually.
Founded in 1994, Artisan Partners (APAM) is
a publicly owned investment manager that
serves pension funds, trusts and charitable
foundations through equity and fixed-income
portfolios. While asset managers are in some
way a bet on the performance of their
underlying investment strategy, big funds like
APAM have a more important characteristic:
a built-in mechanism to fund dividends
through the management fees charged to
these clients. Thanks to a massive base of more than $120 billion in assets under management, a few percentage points in investment fees adds up in a hurry.
Current yield: 7.7%
Artisan Partners Asset Management
Ares Capital (ARCC) is a business
development company, meaning it doesn't
manage its money for clients but instead
deploys capital in the pursuit of turning a
profit for its own operations. This involves
acquisitions, restructurings and buyout
transactions of midsized companies. Ares
typically invests between $20 million and
$200 million in a single opportunity. Currently,
the ARCC portfolio is largely focused on
business services and health care opportunities. Based on the big dividends the stock is currently throwing off, those investments are offering very healthy returns.
Current yield: 8.4%
Ares Capital Corp.
Arch Capital (ACGL) is a Bermuda-based
property, casualty and mortgage insurance
provider to clients around the world. It also
dabbles in commercial automobile and
marine product insurance, along with smaller
energy and travel insurance businesses, too.
This $15 billion stock has deep relationships
with clients and deep knowledge of insurance
markets. Together, this adds up to a reliable
stream of monthly premiums from
policyholders that backstops a generous dividend.
Current yield: 5%
Arch Capital Group
You may recognize Janus (JHG), the London-
based asset management firm that offers
institutional and retail investing services that
include branded mutual funds. Admittedly,
Janus is no longer one of the biggest names
on Wall Street thanks to the rise of ETF and
index-fund providers like Vanguard. But the
roughly 90-year-old firm still boasts nearly
$400 billion under management, in part
thanks to a successful focus on private client
businesses that rely on high-net-worth individuals. After all, why wrangle up millions of passive 401(k) participants when you can instead bank on several thousand rich investors that demand a lot of attention? The fees from this business along with legacy operations help support a reliable cash flow and generous dividends.
Current yield: 5.6%
Janus Henderson Group
Main Street Capital (MAIN) is another publicly
traded stock that operates in many ways like a
private equity fund. MAIN provides long-term
debt and equity capital to small and midsized
companies, including turnarounds as well as
growth financing opportunities. Main Street
seeks to partner with entrepreneurs and
management teams to offer one-stop
financing alternatives so that it is not sharing
the upside with a wide swath of other
investors. That approach has paid off lately, as evidenced by its generous payout.
Current yield: 5.6%
Main Street Capital Corp.
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The biggest dividend payer on this list, New
York Mortgage Trust (NYMT) is a mortgage
REIT – meaning that it is a hybrid between a
real estate investment trust and a conventional
lending firm. While most investors are familiar
with REITs that manage mall properties or
hotels, this stock doesn't own acreage and
instead focuses on real estate loans,
investments and related assets. It's a unique
model that relies on regular interest and
investment returns instead of regular rent payments. Otherwise, NYMT is the same as a traditional REIT with a structure that demands big dividends passed on to shareholders.
Current yield: 12.6%
New York Mortgage Trust
Nomura (NMR) is one of the biggest financial
players in Japan, with roughly 100 years of
history in the region. NMR offers various
financial services to individuals, corporations
and governments. It has retail banking and
investment operations through a network of
more than 150 physical branches but also
investment products for pension funds and
other institutional investors. Like so many of
the other stocks on this list, the business
model is simple but effective in that Nomura offers much-needed financial services for a modest fee and then passes on a portion of that payday to shareholders via dividends.
Current yield: 5.4%
Nomura Holdings
PennyMac (PMT) is another specialty finance
company that is structured as a REIT but
invests primarily in residential mortgage loans
and mortgage-related assets instead of
physical property. The company qualifies as
a REIT for federal income tax purposes,
meaning it gets a break on federal corporate
income taxes so long as it distributes at least
90% of its taxable income to its stockholders.
As you can tell by the generous yield, that
means a big mandate for big dividends.
Current yield: 8%
PennyMac Mortgage Investment Trust
Ohio-based TFS (TFSL) is a retail consumer
banking stock that offers the traditional
finance offerings you'd expect – savings
accounts, retirement planning, mortgages
and small business loans. It's a modest affair
with just 37 full-service branches and a
market capitalization of about $6 billion. But
thanks to reliable operations from a small
but loyal customer base, this Midwestern
banking stock offers up one of the better
payouts in the sector.
Current yield: 5.3%
TFS Financial Corp.
Artisan Partners Asset Management
Founded in 1994,
Artisan Partners
(APAM) is a publicly
owned investment
manager that serves
pension funds, trusts and charitable foundations through equity and fixed-income
portfolios. While asset managers are in some
way a bet on the performance of their underlying investment strategy, big funds like
APAM have a more important characteristic:
a built-in mechanism to fund dividends
through the management fees charged to
these clients. Thanks to a massive base of more than $120 billion in assets under management, a few percentage points in investment fees adds up in a hurry.
Current yield: 7.7%
Ares Capital Corp.
Ares Capital (ARCC)
is a business
development
company, meaning it
doesn't manage its
money for clients but instead deploys capital in the pursuit of turning a profit for its own operations. This involves acquisitions, restructurings and buyout transactions of midsized companies. Ares typically invests between $20 million and $200 million in a single opportunity. Currently, the ARCC portfolio is largely focused on business services and health care opportunities. Based on the big dividends the stock is currently throwing off, those investments are offering very healthy returns.
Current yield: 8.4%
Arch Capital Group
Arch Capital (ACGL) is
a Bermuda-based
property, casualty and
mortgage insurance
provider to clients
around the world. It also dabbles in commercial automobile and marine product insurance, along with smaller energy and travel insurance businesses, too. This $15 billion stock has deep relationships with clients and deep knowledge of insurance markets. Together, this adds up to a reliable stream of monthly premiums from policyholders that backstops a generous dividend.
Current yield: 8.4%
Janus Henderson Group
You may recognize
Janus (JHG), the
London-based asset
management firm that
offers institutional
and retail investing services that include branded mutual funds. Admittedly, Janus is no longer one of the biggest names on Wall Street thanks to the rise of ETF and index-fund providers like Vanguard. But the roughly 90-year-old firm still boasts nearly $400 billion under management, in part thanks to a successful focus on private client businesses that rely on high-net-worth individuals. After all, why wrangle up millions of passive 401(k) participants when you can instead bank on several thousand rich investors that demand a lot of attention? The fees from this business along with legacy operations help support a reliable cash flow and generous dividends.
Current yield: 5.6%
Main Street Capital Corp.
Main Street Capital
(MAIN) is another
publicly traded stock
that operates in many
ways like a private
equity fund. MAIN provides long-term debt and equity capital to small and midsized companies, including turnarounds as well as growth financing opportunities. Main Street seeks to partner with entrepreneurs and management teams to offer one-stop financing alternatives so that it is not sharing the upside with a wide swath of other investors. That approach has paid off lately, as evidenced by its generous payout.
Current yield: 5.6%
Main Street Capital Corp.
Main Street Capital
(MAIN) is another
publicly traded stock
that operates in many
ways like a private
equity fund. MAIN provides long-term debt and equity capital to small and midsized companies, including turnarounds as well as growth financing opportunities. Main Street seeks to partner with entrepreneurs and management teams to offer one-stop financing alternatives so that it is not sharing the upside with a wide swath of other investors. That approach has paid off lately, as evidenced by its generous payout.
Current yield: 5.6%
Nomura Holdings
Nomura (NMR) is one
of the biggest financial
players in Japan, with
roughly 100 years of
history in the region.
NMR offers various financial services to individuals, corporations and governments. It has retail banking and investment operations through a network of more than 150 physical branches but also investment products for pension funds and other institutional investors. Like so many of the other stocks on this list, the business model is simple but effective in that Nomura offers much-needed financial services for a modest fee and then passes on a portion of that payday to shareholders via dividends.
Current yield: 5.4%
PennyMac Mortgage Investment Trust
PennyMac (PMT) is
another specialty
finance company that
is structured as a REIT
but invests primarily
in residential mortgage loans and mortgage-related assets instead of physical property. The company qualifies as a REIT for federal income tax purposes, meaning it gets a break on federal corporate income taxes so long as it distributes at least 90% of its taxable income to its stockholders. As you can tell by the generous yield, that means a big mandate for big dividends.
Current yield: 8%