Dividend Delights & Dodgy Deals

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Now, listen closely, because Wall Street is a peculiar place. A swirling, dizzying vortex of numbers and nonsense, where perfectly sensible people pretend they know what’s going to happen tomorrow. They don’t, of course. But they do have a remarkable knack for separating fools from their fortunes. The clever ones, though – the ones who understand the magic of a regular payout – they do alright. They really do.

Companies that cough up dividends, see, are usually the ones that aren’t entirely bonkers. They’re profitable, mostly. They’ve survived a few storms, and they’re not about to vanish in a puff of smoke. And, wouldn’t you know it, they tend to do rather better than the chaps who promise the moon and deliver a handful of dust.

Some analysts – perfectly respectable sorts at Hartford Funds, with a little help from Ned Davis Research – spent a good fifty years (1973 to 2024, no less!) comparing these dividend-paying businesses with the ones that hoard all the gold for themselves. The results? Well, the dividend payers doubled the return of the stingy ones – a whopping 9.2% versus a measly 4.31% – and did it with a lot less wobbling about. Remarkable, isn’t it?

But don’t go thinking you can simply fling a dart at a financial newspaper and land on a winner. Oh no. That would be far too easy. Some dividend stocks are trickier than a badger in a bramble patch. The really high-yield ones – the ones that promise you a fortune for doing practically nothing – often come with a bit of a wobble. A hidden danger, perhaps.

Still, with a bit of poking and prodding, a bit of sensible sniffing around, you can unearth a few gems. And right now, in this rather pricey market, there are three particularly juicy specimens that deserve a closer look. Three stocks that are practically begging to be bought.

Sirius XM Holdings: A Radio Racket (5.31% yield)

First up, we have Sirius XM Holdings (SIRI 1.20%). A satellite-radio operator, which sounds terribly complicated, but isn’t really. The share price has been looking a bit peaky lately, which means the yield has plumped up to a rather tasty 5.3%. Almost at its all-time high, you see.

The clever bit about Sirius XM is that they’ve got a monopoly. A legal one, mind you. They’re the only ones allowed to beam radio signals from space. It’s a bit like owning all the sweets in the village. You can charge what you like, really. They’ve still got to fight off the terrestrial radio chaps and the online streamers, of course, but they’ve got a good head start.

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But the real secret sauce isn’t the monopoly, it’s the way they make their money. Most radio stations rely on adverts. Ghastly things, adverts. Interrupting your music with shouts about washing powder and dodgy insurance. Sirius XM, though, gets most of its cash from subscriptions. People actually pay to listen to them. Clever, eh? When the economy goes wobbly, people still want their music. They’re less likely to cancel their subscriptions than they are to stop buying fizzy drinks.

And the best part? Once they’ve built the satellites and the transmitters, it doesn’t cost them much more to add another listener. It’s like having a magic money-making machine.

Right now, you can pick up shares in Sirius XM for just 6.6 times their earnings. A rather substantial discount, wouldn’t you say? A bargain, even.

The Campbell’s Company: Soup & Suspicion (5.58% yield)

Next, we have The Campbell’s Company (CPB 2.27%). Makers of soup, mostly. And other tinned goods. The share price has been looking a bit glum lately, which means the dividend yield has swelled to an all-time high. A rather tempting sight.

There are two reasons for this glumness. First, that dreadful Mr. Trump imposed tariffs on steel. Steel! Imagine. Campbell’s has to package its soup in tins, you see. So, they either have to swallow the cost or pass it on to the customers. A bit of a pickle, really. But these tariffs won’t last forever, thankfully.

The other problem is that people aren’t buying as many snacks. But that’s happening all over the food industry. It’s not just Campbell’s. A temporary wobble, nothing more.

Campbell’s isn’t just sitting around moping, though. They’re busy acquiring other companies. Specifically, snack companies. They recently bought Sovos Brands, bringing Rao’s pasta sauce and Michael Angelo’s frozen foods under their wing. A rather cunning move, wouldn’t you agree?

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They’re also busy modernizing their factories, making them more efficient. A bit of tidying up, really.

The company isn’t going to grow at a breakneck pace – maybe 2% or 3% a year. But at a price-to-earnings ratio of 10.8, it’s a bargain. A proper, old-fashioned bargain. And a company that makes soup? You can’t go wrong with soup.

PennantPark Floating Rate Capital: A Peculiar Payout (13.03% yield)

Finally, we have PennantPark Floating Rate Capital (PFLT 0.32%). A rather peculiar company, this one. A business development company, they call it. Which means they lend money to small, unproven businesses. And they pay their shareholders a dividend every month. A monthly payout! Can you imagine?

And the yield? A whopping 13%. Not a typo. Thirteen percent! It’s enough to make your eyes water.

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The beauty of lending money is that you get paid interest. These small businesses can’t get loans from the big banks, you see. So, they have to pay a higher rate. PennantPark has a weighted-average yield of 10.2% on its loans. Not bad, eh?

And almost all of its loans have variable interest rates. Which means that when the Federal Reserve raised interest rates, PennantPark’s income went up. Even though the Fed is now slowing down, PennantPark is still earning a handsome return.

The company is also very careful about who it lends money to. Only 0.4% of its loans are in trouble. And almost all of its loans are secured by assets. Which means that if a borrower defaults, PennantPark can seize their assets. A bit harsh, perhaps, but that’s business.

Right now, PennantPark is trading at a 13% discount to its book value. Which means that you can buy its assets for less than they’re worth. A rather extraordinary opportunity, wouldn’t you say? A proper, old-fashioned steal.

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2026-02-04 12:13