Income Investors Should Consider This 10% Dividend Yield
Investing in the current market may be difficult because all the major indices are trading at or near all-time highs. To make things even more difficult, the current low-interest-rate environment makes alternative investments such bonds and certificates of deposit unappealing. So with that in mind, what options are there for an income investor?
During this difficult time, consider investing in a high-dividend-yielding stock with a cheap valuation. These preserve capital, with no need to chase a high-priced stock. Not to mention the higher income received compared to other investment opportunities.
One source of both value and a high dividend yield is Apollo Investment Corp. (NASDAQ:AINV) stock. The company invests in various forms of debt instruments, such as secured and unsecured debt, loan investments, credit-linked notes, collateralized loan obligations, and services in the private equity markets.
There are public investments held as well, which trade on the major exchanges: these include common shares, preferred stocks, warrants, and options. All investments generate an income and have the potential for capital appreciation over time. A related benefit of owning AINV stock is that it offers diversification since there are so many different assets in both the public and private markets.
Let’s take more depth look at why AINV stock warrants consideration.
Get Paid a Piece of the Profits
AINV pays a quarterly dividend for an annual payment of $0.60 per share. The dividend payments tend to occur every January, April, July, and October.
As mentioned earlier, AINV stock sports a high yield–10%, to be precise. This dividend yield is fives times more the average dividend yield offered by the S&P 500 Index and 3.9 times that of the industry average.
Just to get an understanding of how of how large the dividend yield is, let’s say a $100,000 investment was made into Apollo, resulting in receiving an annual income of $10,000. This would compare to annual income of $1,950 from the S&P 500 and $2,560 based on the industry average, which creates a shortfall of $8,050 or $7,440, respectively. Also consider that Apollo’s income would be received regardless of market performance.
To determine if a stock is cheap the price-to-earnings (P/E) ratio should be looked at and then compared to the industry average.
AINV stock has a current price-to-earnings (P/E) ratio of 15.0 times, or $15.00 per dollar of earnings. This is compared to 27.5 times, or $27.50, for the industry average; as you can see, the overall industry is nearly double. Also, the S&P 500 has a high P/E of 24.7, which is more than a 60% premium for an ownership stake in the index. In other words, Apollo offers a lot of value.
I believe investors are either ignoring or are unaware of AINV stock, based on its valuation and other metrics, as well as its margin and effectiveness ratios, which are in line with the industry average.
Final Thoughts About Apollo Investment Corp.
AINV is a very unique investment opportunity because it offers investors access to the private equity and debt markets, which is impossible to invest into for retail investors.
In the current market environment, AINV stock also features capital preservation with its low valuation and high yield. Now is a great time to consider AINV for your investment portfolio.
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