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One of the things I like about owning high-yielding stocks is that I can receive passive income from them, in the form of dividends.
Here are a couple of stocks that I think offer good value at their current price. In fact, I like them so much that I hold them myself.
Henderson Far East Income
With a dividend yield of 10.4% and a recent history of annual dividend increases, Henderson Far East Income (LSE: HFEL) does what it says.
By investing in companies doing business in Asian countries, the fund aims to capture some of the economic gains to be made in that region.
One concern I have had in the past is owning investment trusts that promote “high income” is that to achieve this, they invest in high-yield but also high-risk stocks.
All stocks carry risk, but overall I think this fund's portfolio avoids this trap. Its portfolio includes fast-growing companies such as Semiconductor manufacturing in Taiwan (its largest holding), as well as high-paying stocks such as those with a 7.3% yield. Wire Properties.
An uncertain economic outlook in some Asian markets is a risk to the fund's performance. But now that the Japanese stock market is finally overcoming a decades-long crisis and emerging markets are moving forward, I'm happy to keep this stock in my portfolio.
M&G
Closer to home is the asset manager M&G (LSE: MNG).
The city's well-known name has a retail customer base of millions spanning more than two dozen markets. On top of that, it serves hundreds of institutional clients.
Asset management is big business. The sums involved can be large, meaning commissions and fees add up. I expect demand to remain strong in the long term.
Thanks to its well-known brand, established customer base and long experience in the field, I believe M&G is well placed to capitalize on this.
Like Henderson Far East Income, it has increased its dividend per share annually over the past few years and earns a yield of 9.8%. I am hopeful that the high-yield stock delivers on its strategy of maintaining or increasing its dividend each year.
However, dividends are never guaranteed and there are risks here. Loss of business is key, for example, if a fund's poor performance leads clients to move their money elsewhere. This could also be due to weakness in financial markets.
But business performance has been resilient of late and the company has shown it is capable of generating significant excess cash. This is good news when it comes to financing dividends.
Weighing risk and reward
Other investors can see what I do, and yet these two high-yield stocks still offer attractive dividends.
That could be a sign of high risk, which helps explain why I consider risks carefully before investing.
However, in both cases I see reasons to be optimistic about the long-term prospects, while hoping to earn significant passive income streams along the way!
