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Which High Yield Dividend Paying Stocks are Worth Investing

Updated on February 8, 2012

Searching for the best high yielding dividend stocks to invest in? There are some truly impressive ones out there.

The top five types of high yielding dividend stocks are:

1. REITs – Real Estate Investment Trusts

2. MLPs – Master Limited Partnerships

3. BCDs – Business Development Companies

4. Utilities – Gas, Electric, Oil etc.

5. Others- higher risk larger gain stocks

Each of these dividends stocks are terrific investments. Some carry much higher risk than others, but they all provide a unique passive income stream you can rely on. So, let’s take a look at each of these categories a little bit more in depth.

Dividends: REITS Real Estate Investment Trusts

The basic concept of REITS is similar to that of a mutual fund. The advantages of owning REITS in your investment portfolio are numerous including tax, diversity, and higher dividends. As an investor, there is a central management company to each REIT they pool together a bunch of money from investors. Then the fund manger divides up the amount of money going into a variety of different funds.

The best advantage of REITS is that they are pure dividend investment funds. IF they pay out at least 90% of the income they acquire from their investments to their REITS shareholders they are not liable for any corporate income tax. So, the REITS are made to make the investor money and acquire little return in the process.

You also can invest in something called a mortgage MREIT. These mortgage MREITS acquire their money by the spread of the borrowed money verse the actual value of the property. Along with the actual interest rate of the amount, they are charging clients. With the Federal Reserve keeping interest rates so low, the Mortgage REITS that have survived the market bubble will continue to only rise. These types of investments should only be viewed as temporary because they are highly volatile and require excellent timing. But, if you can get in at just the right time you can acquire a large return on your investment.

Dividends: MLPs Master Limited Partnerships

MLPS are a excellent way for the average investor to get into the investment of high capital intensive programs. These programs could include gold, oil, natural gas or other explorations around the country or the world. They were originally setup by the government as a place to have a tax advantage for many clients.

MLPS like REITS pay no corporate income tax, and disbursements of the funds are generally 80 to 90% of the total income received. These funds that are distributed are all taxed deferred investments. In the event, that you sell the MLPS investment that is the only time you will pay Federal income tax. If, you keep them for longer than one year they are considered a long term capital gains on each investment. So, these can be a terrific investment vehicle as well for longer term passive income growth.

Dividends: BDCs Business Development Companies

These too were created by the government to allow the basic investor to participate in the opportunities that go with a new business. These too just like the others have the same tax advantages as long as they pass along at least 90% of the income earned to its shareholders. During the recession, this was a safe location to store some cash. Most of the Business development companies, where low on the investors radar, and were able to withstand the ups and downs of the market. They carry risk of about a moderate level which means modest returns but the returns can keep coming. So, these are another excellent investment vehicle for passive income.

Dividends: Utilities

Utilities are some of the most reliable and stable dividend investments that you can make. There will always be a need for utilities whether we are in a recession or a depression they are the ones that will continue to rise. There are some utilities paying higher dividends than others, and of course, this can increase the risk of your investments. So, always check your fact sheets on the company prior to investing in any company. But, if you are searching for fast growth then the utility sector may not be right for you. But, if you are searching for stable gains and a continued source of passive dividends then this is one location you should consider.

Dividends: High Yield Foreign Stocks

Typically if, you want the highest paying dividend stocks they are going to be from foreign companies. This is one of the largest areas that you can place your money in terms of risk. Unlike the U.S, where we know how our system works, we do not know the inner workings of many foreign companies. This gives us a blind side that we just cannot control. On top of that there is the risk of currency fluctuation, economic cycles of foreign markets and security exchanges have different rules and regulations. So, investing gin the individual stocks is extremely risky so many turn to international mutual funds to help absorb the impact if there is a bigger problem. But, if you decided to invest in this type of AFT transaction then you should take as many precautions as necessary and research, research, research and then research some more. The more informed, you are about international endeavors the more educated risk you can take. The biggest is to make sure you know the company you are investing in for example Australia or Japan would be better than Iraq or South Africa.

No matter what type of investment you are looking for to complete your passive income portfolio always due your research. Take your time and invest wisely and your payouts will be that much greater. Make sure the investment criteria you set for your self is never faltered because that is when it will lead to risks. As always I’m not here to give investment advice, you must do your own research about any or all of these types of trading dividend options.


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