Goldilocks Dividend Stocks

Without counting reinvested dividends, the highest-yield group did the worst, with a ten-year average annual return of 9.9%. The safe-money 3%-to-5% group returned 11.8%. The winners of my ten-year backtest screen were the not-too-high, not-too-low group of 5%-to-9% yielders. They scored an impressive 15.4% average annual return since 2003. What kind of stocks fit my Goldilocks screen today?

Yield-rich picks can be found among business development companies (BDCs). These are essentially publicly traded private equity firms that target small and medium-size private companies, providing debt and sometimes equity. Watch out—these can be volatile. During the liquidity freeze of the financial crisis some of these stocks collapsed. Given their history it’s best to avoid the highest-yielding firms in this group. Ares Capital (ARCC, 17), Triangle Capital TCAP -2.31% (TCAP, 27), Hercules Technology Growth Capital HTGC -2.25% (HTGC, 12) and THL Credit (TCRD, 15) all pass my screen and have yields around 8%.

Source: Forbes

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