Dividend investing is popular again. Investors have taken to heart Jeremy Siegel's studies, which show that higher-yielding stocks tend to offer greater returns over time than low- or no-yield stocks.

The highest dividend yields can be very tantalizing. As long as a stock yielding 15% doesn't lose value, you'll make 15% in one year! In more cases than not, however, an astronomical yield is a bad sign for a stock. Since dividend yields and stock prices move in opposite directions, a high yield usually means that investors have begun to worry about the business and driven down its stock price.

However, certain types of companies such as REITs have to pay out most of their income as dividends, so their yields will be higher than "normal." Dividends are not guaranteed; you need to make sure that a business is generating enough cash to pay its dividend, or your investment could be disastrous.

Three months ago, I ran a screen for the highest-yielding stocks, and it got such a good reception that I'm doing it again this quarter. The only limitation I've set this time is that the dividend stocks must have a market cap greater than $500 million.

Here are the top 25 highest-yielding stocks the screen produced:

 

Company

Market Cap (Millions)

Dividend Yield

1 Invesco Mortgage Capital (NYS: IVR) $2,035  22%
2 American Capital Agency (NAS: AGNC) $5,089  19.5%
3 ARMOUR Residential REIT (NYS: ARR) $574  19.3%
4 Cypress Sharpridge Investments (NYS: CYS) $1,103  17.9%
5 Chimera Investment (NYS: CIM) $3,112  16.8%
6 Two Harbors Investment (NYS: TWO) $1,345  16.7%
7 SandRidge Mississippian Trust I (NYS: SDT) $729  16.5%
8 Hatteras Financial (NYS: HTS) $2,076  14.5%
9 Capstead Mortgage (NYS: CMO) $1,123  14.5%
10 Annaly Capital Management (NYS: NLY) $17,569  14.4%
11 Prospect Capital (NAS: PSEC) $960  14%
12 National Beverage (NAS: FIZZ) $763  14%
13 Anworth Mortgage Asset (NYS: ANH) $950  13.8%
14 MFA Financial (NYS: MFA) $2,668  13.3%
15 Cellcom Israel (NYS: CEL) $2,240  11.8%
16 BlackRock Kelso Capital (NAS: BKCC) $642  11.7%
17 Niska Gas Storage Partners LLC (NYS: NKA) $866  11.1%
18 Crexus Investment (NYS: CXS) $716  10.6%
19 Compass Diversified (NYS: CODI) $641  10.5%
20 Solar Capital (NAS: SLRC) $844  10.4%
21 BGC Partners (NAS: BGCP) $819  10.2%
22 Getty Realty (NYS: GTY) $635  10.2%
23 Frontier Communications (NYS: FTR) $7,454  10%
24 PDL BioPharma (NAS: PDLI) $854  9.98%
25 CommonWealth REIT (NYS: CWH) $1,720  9.78%

Source: Capital IQ, a division of Standard & Poor's.

These stocks are a good place to start your research, but they're not formal recommendations. Remember, their seemingly irresistible yields could be ticking time bombs, so do your own due diligence. Also, make sure you diversify your picks across various sectors. As investors relearn every decade or so, you never want to put all your eggs in one basket -- no matter how tempting the dividends are.

For a basket of some high-yield some dividend opportunities, click here to get The Motley Fool's five-page free report: "13 High-Yielding Stocks to Buy Today."

At the time this article was published Dan Dzombak's musings and articles he finds interesting can be found on his Twitter account: @DanDzombak. He owns shares of Annaly Capital Management and Frontier Communications, but he holds no other position in any company mentioned.The Motley Fool owns shares of Chimera Investment and Annaly Capital Management. Motley Fool newsletter services have recommended buying shares of Cellcom Israel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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awgamut

How do I get a copy of my old Portfolios formay -- the last results to run before you replaced it with the new. You have screwed me up. Now I have to wait a month to get my brokers report to match the two. Even now looking for another servor to replave AOL would not give me back the talley's and format I used for years. What a blunder. I know you did it to increase income from advertising and your new relationship with this "Motley Fool" format but your unannounced change has made your customers and AOL the Motley Fools. Please respond.

September 17 2011 at 5:27 PM Report abuse rate up rate down Reply
JEANNIE'S VIEW

THIS PRINT SHOULD ONLY INCLUDE THE ARTICLE AND NOT ALL THE ADS.

September 07 2011 at 4:55 PM Report abuse rate up rate down Reply