One of My Favorites!
Today, I’m going to introduce a stock that not only pays a nice dividend but has a bonus surprise attached to it as well. I’ll tell you all about it below!
I’ve talked a lot about ETFs. And there are some definite pluses to an ETF. The biggest plus concerning the ones I’m discussing is that these funds invest in high-quality, well-established stocks, plus they pay handsome dividends.
So, if you’ve always wanted to invest in Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), etc., but just don’t have the funds to buy those high-priced stocks, guess what an ETF does for you?
Makes you a millionaire! Oops. Just kidding. 😅
But it does allow you, in essence, to invest in all these stocks for a lot less.
QYLD, for example, which I discussed in previous articles, invests in stocks in the Nasdaq-100 and uses covered calls to generate additional income. It pays a dividend of nearly 10%.
But that doesn’t mean there are not good-quality individual stocks paying decent dividends. In fact, in my earlier articles I have presented some well-established stocks paying nice dividends. Verizon (VZ) is one such stock with over a 6% dividend.
Today I want to introduce you to a stock I have owned for years and one that I personally am very pleased with.
Again, as with most high-yield stocks and ETFs, we are not looking for a lot of appreciation in the stock price. Rather, we are looking for a relatively steady stock price with a great dividend.
In other words, income!
We are also looking for a history of steady dividends from a company and, even better, a company with dividends that have increased over the years.
Before I introduce you to the stock, I want to remind you again that I am not a broker and am not offering stock recommendations. I also do not run a stock or stock options strategy company. I’m simply a retiree like you who has gained knowledge that has been helpful to me, and I’d like to share those experiences with you.
Moving on. 🚶🏽➡️
The stock I want to discuss today is Hercules Capital, Inc. (HTGC).
Hercules Capital is a business development company, commonly called a BDC. It specializes in providing financing to venture capital-backed companies, particularly companies in technology, life sciences and other growth industries. In simple terms, Hercules lends money to growing companies that may not fit the traditional bank lending model.
This is a company that is considered one of the better-known BDCs by many income investors, and it is one that I have owned for years.
They just announced their latest earnings on July 30, and the results were good. In fact, they have beaten expectations in three of the last four earnings announcements. And the one they missed was only by 1 cent.
The company pays a base dividend of $1.60 per year. They pay quarterly, so that is 40 cents a share every three months. At the current stock price, that works out to a dividend yield of around 9%.
And here is the bonus surprise I mentioned above.
Because the company has been doing well financially, they have also been paying an additional 7 cents per share per quarter. That brings the total quarterly payment to 47 cents and puts the annualized dividend at more than 10%.
Now, the additional 7 cents is a bonus and is not guaranteed to be paid every quarter. But Hercules has been paying this additional amount regularly, and in some quarters they have even paid more.
Now for some reason, the stock, in my opinion, is trading a little under its fair value at $16.67 as of this writing. Using my own methods, I believe the stock is worth closer to $19. My calculations are backed by several analysts whose average price target is around $19.19.
Now there is no guarantee that the stock is going to climb up to that price, as there are a lot of factors that come into play. But for myself as an investor, I think this could be a good place to jump in, as the stock price does look discounted to me.
But even if the price stays where it is, that 10% plus dividend is something I am more than happy to receive.
In my next article, I’m going to do a quick recap of all the dividend stocks and ETFs I have been telling you about so you can easily review their benefits again.
A colleague and good friend of mine, Mike Celeste, asked me to give some examples of how call options can enhance a dividend investor’s income. So, I’ll go over that as well.
If you enjoyed this article, please click the Like button below and, if you haven’t already, Subscribe to the blog at the bottom of the page. It’s completely free, and you’ll receive an email whenever a new article is published.
I’d also love to hear your questions, suggestions or comments. And of course, I’d love to hear about the stocks or ETFs you have been successful with! You can leave them at the bottom of this page or email me at ponzot2004@yahoo.com.
Until next time,
Tony
Leave a Reply