Dividend income is one of the best ways to build and secure portfolios for the long term. When reinvested, dividends can easily become a second income later on. Take Warren Buffet’s legendary $1.3 billion investment in Coca-Cola, for example.
That investment, made at the end of the 1980s, now earns him more than $700 million annually. It just goes to show that with time, the right investments can turn into goldmines. Today, I’m on the hunt for some overlooked income stocks, and to get the list, I used the following screen:
- Debt to Equity ratio of less than 75%,
- Current ratio (current assets/current liabilities) greater than 2 ,
- A strong buy rating from analysts.
Then, I sorted the list based on the company’s dividend yield from highest to lowest.
Alliance Resource Partners LP (ARLP)
A major player in the coal markets in the US, Alliance Resource Partners, L.P. (NASDAQ:ARLP) markets and produces coal for various industrial and international customers, as well as domestic utility companies. The company’s operations can be divided into four segments:
- Appalachia Coal Operations: operates the Mettiki, Tunnel Ridge, and MC mining complexes.
- Oil & Gas Royalties: holds various oil, gas, and related equity assets.
- Illinois Basin Coal Operations: responsible for operations in the Gibson County, Warrior Coal, River View, and LLC mining complexes.
- Coal Royalties: operates its leased and coal mineral reserves and other company-owned resources.
The company offers its investors an attractive 11% dividend yield based on a $2.80 forward annual rate.
In 2023, Alliance Resource Partners reported record revenue, reaching $2.6 billion from FY’22’s $2.4 billion. Its net income also grew 7.5% year over year. The company’s Oil & Gas Royalty business also reported record BOE (barrel of oil equivalent) volumes.
Chairman, CEO, and President Joseph W. Craft III said the results relied “upon the strength of our well-contracted coal order book and the resilience of the entire ARLP team who persevered through volatile market challenges and difficult mining conditions.”
The company’s current ratio stands at 2.08, while its debt-to-equity remains at 23.15%. With high dividends, great financial performance, and a strong buy rating from analysts, ARLP is one of the market’s most attractive and overlooked income stocks.
DHT Holdings (DHT)
An independent crude oil tanker company specializing in the VLCC (very large crude carriers) segment, DHT Holdings (NYSE:DHT) operates its fleet of tanks through its integrated management companies located in various countries globally.
The company has 24 operating vessels on the spot market or in time charters. DHT Holdings has also announced the construction of four new VLCCs, designed for improved fuel efficiency and reduced emissions and targeted for delivery around 2026.
DHT Holdings reported $556.1 million in shipping revenue for FY’23, a marked improvement from FY’22’s $450.4 million. Meanwhile, net income improved significantly from 37 cents to 99 cents per basic share YOY.
The company’s current ratio is 3.30, while its debt-to-equity ratio is at a comfortable 38.10%. Given these excellent metrics and an impressive 10.03% dividend yield, DHT stock has earned a strong buy rating and a spot among the best income stocks investors overlook.
Vinci Partners Investments (VINP)
Vinci Partners Investments Ltd (NASDAQ:VINP) is a Brazilian investment management company specializing in asset and wealth management. The company offers various products for investments in equities, credit, real estate, etc.
Vinci Partners recently acquired Mav Capital, which aims to expand the company’s agribusiness footprint. Additionally, the company announced its business partnership with Compass, an investment management firm. This partnership aims to provide customers with an alternative way of accessing alternative asset management services.
Vinci Partners Investments reported fee-related revenues is up 10% in FY’23, with total fee-earning AUM or assets under management growing 9% over the same period. Meanwhile, adjusted distributable earnings decreased by 1%.
Even with strong momentum, the company still holds a lot of value. Its current ratio is 11.29, while its debt-to-equity ratio is relatively low at 51.91%. With Wall Street’s strong buy rating and a forward dividend yield of 6.8%, we may have another strong contender portfolio candidate.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
— Rick Orford
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Source: Investor Place