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Wednesday Wealth Recap

Note from Managing Editor Allison Brickell: Today, Chief Income Strategist Marc Lichtenfeld reveals the three highest-yielding dividend payers whose executives have dived in and bought up their companies' shares recently.

This is an incredibly bullish signal for these stocks - and it's one that Chief Investment Strategist Alexander Green tracks closely.

In fact, Alex just went live with a top stock pick for 2021, which has seen some heavy insider buying.

Click here to learn more about his #1 Tech IPO for 2021.

THE SHORTEST WAY TO A RICH LIFE

The Highest-Yielding Stocks With Insider Buying

Marc Lichtenfeld | Chief Income Strategist | The Oxford Club

Marc Lichtenfeld

There are lots of reasons company insiders sell their own companies' stock. They may need to diversify or pay for a new mansion in the Hamptons, or they may know that earnings are going to be lousy in a few months.

But there is only one reason they buy: to make money.

And that is especially true of insiders at companies that pay dividends.

For a highly paid executive, dividend income is taxed at a significantly lower rate than ordinary income.

So buying more shares of their own company's stock not only sends a message to investors that they are confident in the company but also generates more income for the executive with less of a tax burden.

So I took a look at the highest-yielding companies with more insider buying than selling.

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Icahn Enterprises (Nasdaq: IEP) is a master limited partnership that invests in a variety of companies. Some of its investments include Herbalife (NYSE: HLF) and Caesars Entertainment (Nasdaq: CZR).

The company pays a quarterly distribution of $2 per share, which is 12.2% on an annual basis.

In December, there were two big purchases of stock from insiders. Director Alvin Krongard bought 36,000 shares, and the man himself, Carl Icahn, purchased another 8.3 million shares, which will provide him with an additional $66 million a year in income.

BlackRock TCP Capital Corp. (Nasdaq: TCPC) is a business development company that lends money to midsize and small businesses.

It currently pays a $0.30 per share quarterly dividend, which comes out to a 9.3% annual yield.

In the past three months, there have been no insider sales, but two insiders have added a total of 23,200 shares. One of these insiders was CEO Howard Levkowitz, who bought 20,000 shares. That increased his stake to 186,318 shares.

Owl Rock Capital (NYSE: ORCC), which has a business model similar to BlackRock TCP Capital's, sports a generous 8.8% yield. In November, Director Alexis Maged bought 15,000 shares for $200,000.

Honorable Mention

The Kraft Heinz Company (Nasdaq: KHC) isn't the highest-yielding stock, though its 4.3% yield is respectable. But it is worthy of mention because one of its directors, Elio Leoni Sceti, purchased 90,000 shares in the open market for just under $3 million.

That's not nothing.

But in November, Director Alexandre Van Damme bought a whopping 13.8 million shares for an astonishing $420 million. He's already up $82 million on his purchase and will receive $22 million a year in dividends.

The billionaire is one of the wealthiest people in Belgium. Based on Kraft's recent performance, his holdings in Kraft should keep him there.

Tracking insider buying is a good way to get a feel for what those in the know think about the companies they serve. Combine that with a strong dividend yield, and you have a recipe for outperformance.

Good investing,

Marc

P.S. Alexander Green tracks just this kind of bullish activity for readers of his Insider Alert. To learn more about what he's most excited about right now and how you can join him in The Insider Alert, check out his presentation here.

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