dividend stocks beat the market research proves it time and again but which dividend-paying stocks are going to give you the highest yield and return on your money in this video I’ll not only rank the top 5 dividend stocks I’ll reveal 4 dividend investing risks that will destroy your portfolio we’re talking high dividend stocks today on let’s talk money BJ come on make your money work free in the financial future you deserve talk money Joseph old with the let’s talk money channel here on YouTube I want to send a special shout out to everyone in the community thank you for taking a part of your time to be here if you’re not part of that community yet just click that little red subscribe button it’s free and you’ll never miss an episode now you know I love dividend stocks and it’s a big theme here on the channel I get a lot of comments and questions about some of the highest-paying stocks the ones with those double-digit dividends so I wanted to make a video ranking some of my favorite dividend investments now those of you in the community know I’m not about just laying out a list of stocks to invest it I will reveal those 5 high dividend stocks but I also want to give you the tools to find your own and make those better investing decisions now that means knowing the four risks to watch out for in these high-yield investments four dangers to dividend investing that you absolutely cannot neglect first of these is going to be also to look at that payout ratio for a stock now this is the percentage of the profits a company pays out to cover that dividend payout too little and it’s probably not much of a dividend stock payout too much and it will seriously limit any future growth and may actually cause the company to fall behind the competition finding the payout ratio is actually pretty easy you just divide the annual dividend amount by the earnings per share now a safe ratio is gonna be different for each sector so safety sectors like utilities and telecom gonna have higher payout ratios while growth sectors like tech tend to pay out less so just make it a point to compare that payout ratio for a stock with some of the others in the same sector our next risk and this one is especially bad for investors reaching for those really high dividend yields like we’ll talk about and that’s exposure risk to just a few business structures you see there are a few types of businesses specifically business development corporations or BDCs which lend out money to small and medium-sized businesses master limited partnerships or MLPs which hold energy assets like pipelines and storage and real estate investment trusts or REITs which hold commercial real estate now these three types of businesses tend to payout almost all their profits as dividends in fact they get tax breaks for doing so and these tend to be the highest dividend yields you’ll find the risk is that if you’re only searching for stocks with very high dividend yields then you’re probably only an investing across these three business structures these three sectors of the economy now all three of these are highly sensitive to interest rates so when rates increase it tends to hit these stocks harder than the rest of the market you’ve also got risks within each of these like a steep drop in oil prices for MLP zaroor credit risks in those BDCs the point is you need to hold more types of dividend stocks than just these in these three business types our third big risk to watch for is just focusing on that dividend yield alone understand that a high dividend yield is still no guarantee of a positive return you see a lot of these really great dividend payers with yielding the 12 or 15 percent but the stock price goes nowhere and sometimes even Falls as much as that yield this is something that we’ll see in that ranked list of high dividend yield stocks now all five that I’ve selected have beat in the stock market over the last three years but you’ll see that that highest yield isn’t necessarily the highest total return so before you invest in a dividend stock look into the fundamentals of the company and make sure that that company is just a good investment on its own our last dividend risk before we get to that list is to watch out for the high yield myth now I call this one the high yield myth because you find a stock with a high dividend yield you invest in the shares and then you see that the stock price has plunged over the last year the problem here is that you take any stock paying a 2% dividend yield cut its stock price by 50% and suddenly it’s a 4% dividend yield stock it’s like a magic right well something is definitely wrong with that company and when the Board of Directors goes to declare that next dividend they might cut it back down to 2% or maybe even cut it out completely so always look at what a stock price has done over the last year or two and make sure it’s not just a high dividend stock because that dividend has stayed the same well the stock prices tanked now let’s get into those five high-yield stocks that I found and how I started as I screamed Morningstar for stocks with a yield above 6% and a market cap above 1 billion dollars now what I didn’t do was just go and pick the highest dividend stocks available that would have left us right smack in friend of the risks that we just talked about so I went through each stock looking through the fundamentals and the prospects for growth picks had to produce positive total returns for the last few years and have some upside potential besides just that attractive yield I’ll first reveal each individual stock that made the list and then a table rank and then my total returns first if you like in the video though and the information do me a favor and tap that thumbs up button below so our first high you’ll pick here is Crestwood equity partners ticker CEQ P now this is an energy master limited partnership paying a six and a half percent yield Crestwood is the perfect example of why I say look for the total return rather than just that dividend this is actually our lowest dividend yield in the group but has produced the highest return with an annualized 31 percent return over the last three years now Crestwood is a traditional midstream MLP which means it owns oil and gas pipelines processing stations and then those storage facilities it then charges energy explorers a fee to transport through the pipeline’s or store in its tankers and you can see it has assets in all the major production zones the company has long-term contracts with some of the biggest oil companies including Exxon Mobil Shell and con Edison now most of these contracts 84% are on fixed fees so so not subject to that volatility in energy prices Crestwood is some of the some great fundamentals with 30% growth expected and distributable cash flow and an industry-leading one and a half times coverage on that DCF ratio now this is a really important metric for MLPs that we’ve talked about on the channel it means a company is covering its dividend by one and a half times so the cash flow is there and it might even be able to increase that payout a little our next high dividend stock is a mortgage real estate investment trust chimera investment with a solid ten point four percent dividend yield now this is one of the oldest and most dependable mortgage REITs out there sending investors over four and a half billion in dividends since its founding in 2007 now what I really like about chimera is that it survived through that 2008 crisis so management knows the risks and it’s put together a solid portfolio of mortgage assets to keep that dividend stable even if the economy takes a hit so the company invests in a great mix of residential mortgages agency and non agency mortgage-backed securities and there’s some commercial loans and now this chart showing the breakdown probably doesn’t mean a whole lot to you but it just shows diversification in that company’s assets total number of loans over 136,000 and spread across these different loan models that’s what gives chimera its stability now one of the drawbacks to of these high-yield business structures so your BD C’s your REITs and your MLPs is that they have to raise money frequently they pay out almost all their profits as dividends so raising money through preferred shares or stocks can sometimes dilute that investor ownership chimera has actually authorized an 85 million share buyback program so it’s actually doing something to counteract that dilution just a little bit now one thing to remember about mortgage REITs is that the group is extremely sensitive to rising interest rates first real estate is just highly leveraged industry so anytime those borrowing rates increase you’re bound to see a little weakness in the sector also though and this has been a big weakness over the last few years for mortgage REITs specifically is that the Federal Reserve increases short-term rates but it really can’t do a whole lot about controlling those longer-term interest rates the problem here is that when the market is looking at a potential recession or at least an economic weakness those longer-term rates don’t rise as fast as the short-term rates when the Fed is hiking now mortgage REITs borrow in those short-term rates to buy those loans with longer terms so what you get is higher borrowing costs in those shorter terms without much of an increase in the interest that they’re collecting on those longer term assets this might not be a problem for a few quarters because the Fed has already come out and said that’s pretty much done hiking rates for at least a year but just to understand then be ready for a little bit of pain in mortgage rates every once in a while when that when those interest rates are increasing now our third high-yield pick is one of the few stocks outside MLPs rates and business development companies Alliance Bernstein Holdings say there’s an asset management with more than half a trillion in assets under management he’s a strong six point six percent dividend now what I really like about Alliance Bernstein here is that it gives us some diversification in that high-yield list a B manages stocks and bonds with 51 percent of assets and fixed income funds another 38% in equity funds and then the rest in alternative assets I like that position of fixed income funds because I think it’s less prone to the trend in passive management that we’ve seen in stock investing over those last few years it’s got a strong international reach with 45% of through that global investment services the dividend payout hasn’t been quite as consistent on this one so the payment is bounced around though the yield is fairly stable as the company reported a strong pipeline and institutional assets last quarter of eleven point four billion so this is money committed to new funds that the company is going to be rolling out and a big opportunity for fee growth so with Alliance Bernstein not only do you get a solid dividend yield and good investment but you get to diversify your portfolio a little bit from those roots in the MLP so that usually find dominating a high yield list New York mortgage Trust is another em read and pays the highest yield of the group with a 12 point 7 percent annual yield so this one is gonna be similar to chimera investment and that the company invests in different types of mortgage debt now you New York mortgage focuses a little bit more on multifamily properties and has a larger portion of its portfolio and distressed property debt so maybe a little bit riskier but it also has that a little bit higher yield given the choice between the two though I probably have to say to go with chimera but I think you can spread your investment between the two it’s going to give you a little bit more diversification in these Emirates and then take some of that company specific risk out of your portfolio our next pick here is Sonico with a ten point seven percent yield and a different business model compared to a lot of those high-yield MLP as you’ll see now most master limited partnerships specialize in that midstream components so pipelines and energy storage Sonico operates in a downstream segment operating in the retail and wholesale fuel stations so not only is suntico a great dividend pick on its own adding it to a portfolio of midstream MLPs is going to give you some of that diversification as well sonica books three different sources for income fuel income through its wholesale operations selling fuel to 7-elevens and other buyers it books rental income on over nine hundred and forty locations and also books some income like payment processing franchise revenue and terminal operations now let’s look at these five high dividend stocks ranked by three-year total return again I want you to notice here that the highest yields didn’t necessarily translate to the highest returns in fact the two lowest yielding stocks produced strong annualized returns that outperforms some of the others I noticed that industry concentration we talked about in ml peas and REITs as well so I’ve ranked the five here but understand that these are the five best among 60 plus high dividend stocks as I looked at for the video so-so any of these would probably make good additions to your portfolio now if you want to see how I picked dividend stocks for our 2019 stock market challenge click on the video you see to the right the portfolio is beating the market with almost a 20% return just this year with five stocks over 30 percent don’t miss it and don’t forget to subscribe for more videos like this one