24/7 Insights

• Investors love dividends, but selecting the right stocks can be a challenge.
• Ellington Financial Inc. (NYSE: EFC) could be the single best stock yielding over 12%.

Income-focused investors love dividends. Yet, picking the right dividend stocks can be a challenge. A big dividend may not be sustainable. Or companies in trouble may have to reduce or eliminate even modest dividends. In fact, Dividend Aristocrats, those companies that have not only paid but increased their payouts every year for at least 25 years, sometimes are forced to make the hard choice.

Why Invest in Dividend Stocks?

Solid dividend stocks provide investors with reliable streams of income and with total return. That is, appreciation of the stock price plus the regular distributions made by the company. Dividends also can be a sign of a company’s financial health and stability. A company must be doing well if it can afford a healthy and reliable payout.

With that in mind, let’s take a look at one stock that could be the single best stock yielding over 12%: Ellington Financial Inc. (NYSE: EFC).

Ellington Financial, the Company

This real estate investment trust (REIT) acquires and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States. The company acquires and manages residential mortgage-backed securities (RMBS) backed by prime jumbo, Alt-A, manufactured housing, and subprime mortgages; RMBS for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity; residential mortgage loans; commercial mortgage-backed securities; and commercial mortgage loans and other commercial real estate debt. It also provides collateralized loan obligations; mortgage-related and non-mortgage-related derivatives; corporate debt and equity securities; corporate loans; and other strategic investments; and consumer loans and asset-backed securities backed by consumer and commercial assets.

Ellington Financial is based in Old Greenwich, Connecticut. It was incorporated in 2007 and went public in October 2010. Competing mortgage REITs include AGNC Investment Corp. (NYSE: AGNC), Annaly Capital Management Inc. (NYSE: NLY), Starwood Property Trust Inc. (NYSE: STWD), and Two Harbors Investment Corp. (NYSE: TWO).

Ellington Financial posted strong first-quarter results, including a monthly dividend declaration. Recently, it completed non-QM securitization and proprietary reverse mortgage loan securitization. Analysts anticipate that per-share earnings will grow more than 4% in the next five years. Note that the monthly dividend was $0.15 a share from May 2021 to November 2023, but since then has been variable. The most recent payouts have been $0.13 per share, and the yield is about 12.9%.

Six Ultra-High-Yield Dividend Stocks That Pay Investors 10% and More Monthly

Ellington Financial, the Stock

The share price is more than 5% lower year to date, but the S&P 500 has gained almost 15% in that time. The stock is down 12% or so in the past year. Analysts have a mean price target of $13.50, which suggests they see shares turning around and gaining over 12% in the next 52 weeks. The high target is up at $14.50 per share. The consensus recommendation is to buy shares.

Ellington Financial is a top dividend pick of billionaire Leon Cooperman. About 60% of shares are held by institutional investors, including sizable stakes at Blackrock and Vanguard. Note that an executive sold 16,600 shares in June.

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