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From the popular Camry to the best-selling F-150. From rollin’ in style in an Escalade to running hot in a Lamborghini Gallardo, I’ll reveal seven dividend stocks that will pay for these cars!
Too often we just talk numbers, the dividend yield and dividends you collect on a stock, and it can seem just that…just talk. Today, we’re making this real and turning dividend income into something you can use.
I’m going to show you seven cars, a car for any budget from the affordable Camry to the Lamborghini dreams we all have at one point. With each car, we’ll look at one of the best high yield dividend stocks and how much you need to invest to have that stock make your monthly car payment!
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With each of these, we’ll be assuming a six-year car loan at the average rate of 3.86% and a $3,500 down payment. I’ll be counting up to the highest yielding dividend stock in the list and the most expensive car so make sure you stick around!
First up, the sensible Toyota Camry, one of the most popular and the only car in the top 10 that has competed in NASCAR! The new Camry comes with a base price of $25,400 which means your payment would be $341 a month.
In fact, after moving to Tampa earlier this month, this was the first car we bought…a used 2019 Camry. The wife wants an Audi SUV but me, I work from home and roll cheap!
To make that payment, look to Cross Timbers Royalty Trust, ticker CRT, with its 9% dividend yield and monthly payment.
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Now not all of the stocks here will be monthly dividend stocks, in fact most are going to put that cash in your pocket quarterly or every three months. I’ll show you how much to invest next but whether you’re getting the dividend monthly or quarterly, it’s going to be enough to cover the total car payments.
CRT owns a royalty interest for 75% of net profits on oil-producing properties in Texas, Oklahoma and New Mexico…so despite the name, this is an energy stock and has done really well on the rise in oil prices this year. The way these royalty trusts work is really interesting. The properties are owned and operated by XTO Energy, a subsidiary of Exxon in the Permian Basin, but CRT has bought the royalty investment so gets the percentage share of profits each year and passes those on to investors. Since it’s just a simple pass through, there are very little expenses to run CRT and investors get a great dividend yield.
Now as a royalty trust, the dividends are taxed a little differently than with other stocks we’ll talk about. The dividends you receive from a trust are counted as income instead of dividend interest.
At an annual dividend yield of 9%, investing $45,466 will create the $341 monthly to pay for your car!
Hold up…if I had forty-five grand to invest, I’d just buy the damn car!
Yeah, but then in five or ten years, when you want a new car…you’d be assed out. Invest that money instead and you’ll always have that monthly income no matter what you want to do with it!
OK, but c’mon…I thought you were going to show me how to invest $1000 and get a free car.
OK, let’s be real here folks. I can show you how to do some amazing things with your investments…but I can’t miracle your ass into a new car for nothing… but hold up, before you click out to some YouTuber that promises you the moon or head to the comments to vent, even if you can’t invest the entire amount we’re talking about for example that $45,000 to pay for the Camry…if you invest as much as you can, it’s going to make that monthly payment a hell of a lot easier and then you build up to the full amount that’s paying for your car!
For example, invest $10,000 and that 9% dividend produces $75 a month towards the car…invest $25,000 and you’re over half way there with $188 a month in cash flow!
Later I’ll show you how to build your high yield dividend portfolio to grow faster and some stocks with payouts as higher as fifteen- and 18% a year!
Next, the Honda CR-V, the best-selling non-truck on the market with a base price of $26,400 for this year’s model! That puts your monthly payment at $357 after the $3,500 down.
Making that payment is business development corporation Horizon Technology Finance, ticker HRZN, with its 9% dividend yield and great total return over the last five years.
Horizon makes secured loans to venture and private-equity backed companies in the life sciences and technology industries The portfolio of loans is well diversified by sector, geography and company stage. All these are going to be those fast-growing startups backed by venture capital and again, a great niche in healthcare and technology.
So besides that high yield you get from the typical business development corporation, here you get a little bit of growth stock as well.
The average yield on portfolio debt is 16.3%, well above the 7% dividend yield, in fact I think the biggest yield spread I’ve seen in a BDC stock. That keeps the dividend safe and will mean the stock price should continue to rise.
That average yield on the portfolio is important and is something we’ve talked about before. You find this on the company’s financial reports and for any BDC, it’s critical that this number is above the dividend yield. That average yield on the portfolio of loans is what the company is collecting so it needs to collect more than it pays out in dividends or that dividend is in danger of being cut, something that happens too often in a lot of high yield stocks.
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Horizon is another monthly dividend payer, making it easy to plan those car payments. And while that 9% yield is more than 5-times the stock market average, it still means you’ll need to invest $47,441 to earn enough to cover the $357 monthly payment but stick around because the dividend yields are going higher from here!
The Ford F-150 truck has been the best-selling vehicle for more than 40 years and I’m excited to see the EV model Ford has coming out. At a base price of $31,500 your payment is going to be $436 per month.
The F-150 is American made but to pay for it, we’re going with the only foreign stock on the list, shares of Vale SA, ticker VALE, and its 11% dividend.
Vale is one of the largest mining companies in the world with production in Canada, Brazil and Indonesia in iron ore, nickel and copper. Most of its mines have decades of operational life left and because it operates heavily in emerging markets, the cost of production is considerably lower. Average cost of copper production is just $1,500 per ton and half that from its major Salobo field.
That’s allowed Vale to commit to shareholder cash return with over $19 billion paid out last year through the share buyback, dividend and a special dividend in September.
On the 11% dividend yield, you’ll be able to pay the truck payment of $436 a month or anything else you want to use it for with $47,560 invested.
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We’ve still got four more dividend stocks and cars to highlight including one stock that pays an 18% yield but I want to give you two tips on building a dividend portfolio to do this.
We’re having fun matching each car up with a different stock but please do not think I’m suggesting putting all your money in one of these stocks. Instead, invest across a portfolio of dividend stocks, maybe these seven and a few others, to smooth out the risk in any one stock but keep that dividend yield high.
Also, invest and reinvest your dividends for as long as you can. We all want that fifty-grand laying around to immediately start collecting enough dividends to make the car payment but the only way that happens is by reinvesting and earning dividends on your dividends.
I used this chart in a recent video and really like the message. If you invested $10,000 in shares of JP Morgan in 2017 and cashed out the dividends each quarter…you’d now have just over $12,000 worth of stock. That’s a decent return for just five years but look at what happens if you reinvest the dividends you receive into more shares. By the end of the five years, you’d have an additional $2100 and that difference is just going to keep growing over time.
Keep doing this long enough and not only will your dividend stocks pay for your car but they’ll pay the rent! In fact, I’ll link to another video in the description revealing seven monthly dividend stocks that will pay your rent!
We’re starting to roll in style now with one of the most popular luxury crossovers, the Mercedes-Benz GLC class at a sticker price of $43,800 your payment would be $581 per month.
I’m upping the down payment to $6,500 from here on out because…if you’re ballin’ enough to roll in a Benz GLC, you can put a little more down.
To handle that bigger payment, you need a bigger yield and I’ve found it with USA Compression Partners, ticker USAC, with its 11.85% dividend.
USAC does one thing and it does it very well. The company provides compression services for natural gas producers, allowing the gas to be moved through pipelines. Focusing on just this small part of the midstream component makes USAC the go-to for services and removes a lot of the reliance on natural gas prices.
You see that volatility in natural gas prices here in the red line jumping up and down but look at the green and blue bars, adjusted earnings for the company. USAC has been able to drive stable and growing earnings even in the worst times for nat gas because it’s built a business based on demand, not price.
And demand for natural gas is expected to jump 28% over the next 30 years with US exports rising more than five-fold.
The company has paid out a consistent dividend of $0.525 per share quarterly since 2015 and returned over a billion to investors since the IPO.
At $581 a month or $1,743 to cover your Benz payment every three months, you’ll need to invest just over $58,800 on that 11.85% dividend yield to cover it.
You know we had to get a Tesla on the list and the Model 3 is the most popular with a list price of $46,990 before rebates, your payment would be $631 per month.
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Carl Icahn and Elon Musk have had an interesting relationship to say the least, so it’s fitting that we’re paying for our Tesla with Icahn Enterprises, ticker IEP, and its 15% dividend yield.
IEP is the holding company for Carl Icahn’s investments and businesses in energy, industrials, auto parts, real estate and pharmaceuticals. Owning or using controlling shares in some strong companies like PepBoys, CVR Energy and Vivus.
What’s really exciting about this though is the ability to invest alongside Carl Icahn, the original corporate raider of the 80s which personally, and maybe I’m just too much Gordon Gekko but I like the term much more than what investors are calling it now with ‘Activist Investor’…sounds too nice!
Icahn’s history is one of the most interesting stories in investing, starting with his first takeover attempt of Tappan in 1978, forcing the sale of the company to Electrolux for a $2.7 million profit. Even his unsuccessful takeovers like the ’86 bid for U.S. Steel make money. He dropped his bid in ’91 making $200 million on a $1 billion investment.
The usual strategy is Icahn buys up the stock or company’s debt for a controlling share. He then pushes the management to change management, spinoff assets or outright sell the company. The ability to move billions of dollars around quickly means company directors take him seriously and even when he’s not able to force a change, a lot of times the company will pay him a premium on his investment just to make him go away…it’s a win-win strategy Icahn has perfected to make billions.
And you’re going to need some of that money to pay ol’ Elon the $631 a month. On a 15% yield, investing $50,312 in IEP will pay for your Tesla!
We’ve still got two more dividend stocks to highlight, two with yields so high, you’ll need less money to invest than it costs to buy the cars, but Nation I’ve got to warn you on these high yield dividend stocks.
You cannot just blindly invest in the highest dividend paying stocks you find! For example, information on SuRo Capital says it’s paying an outstanding 77% dividend yield. At that yield, you’d need to invest less than $10,000 to make your Tesla payments!
The problem is, if we look at the dividend history, it’s all over the place and the payout has been continuously cut from over $2 a share last year to just $0.11 currently.
Beyond the dividend cut, these high yield stocks can often destroy shareholder value over time. Shares of LoanDepot may look great with a 17% yield until you realize the share price has fallen 94% in just over a year. Not only is the dividend likely unsustainable but if you ever need to sell the shares, that cash return is wiped out with stock losses.
What I’ve tried to do in these seven stocks is find a balance between high dividends and the share price. Each of the stocks in the video is up over the last five years so you’re not just earning that dividend check but also growing your portfolio!
We’re getting back to our list of dividend stocks but I want to get your input on this as well. Does that price gain matter to you in dividends? Let me know in the comments, Would you rather the higher dividend yield even if it comes with a falling stock price or do you want a little of both; slightly lower dividend yield but price returns as well?
The Cadillac Escalade is the most searched luxury vehicle and if you’ve ever ridden in one, you know why. Cadillac helped make tanks in World War II and this thing is like a tank and a cady had a baby! At just over $76,000 though, the grunts like me are going to have to save their pennies for the $1,088 a month payment.
Paying for your Escalade is one of my favorite long-term trends and CVR Partners, ticker UAN, with its 16.8% dividend yield.
CVR is a leading producer of nitrogen fertilizer with facilities in the Midwest and production of 1.6 million tons a year. Grain prices hit records earlier this year and a rising global population is driving food demand. With arable land used in agriculture falling, that means higher fertilizer usage to increase crop yields to satisfy the demand. Global nitrogen demand is expected to increase by half a percent annually through 2030 and could go even higher.
As a master limited partnership, CVR is focused on investor cash return and that 16.8% yield means you only need $77,700 invested to cover your payments…about the same as it would take to buy the truck but you’ll get that cash payment forever.
And for the champagne wishes and caviar dreams out there, the Lamborghini Gallardo, the most widely sold Lambo with 14,000 produced. Even the latest model here, the 2011, sells for a base price of $93,500 which puts your payments at $1,356 a month!
Big dreams need a big dividend and Mesabi Trust, ticker MSB, pays the highest yield of the group at 18.65% annually.
Mesabi is a steel royalty trust with an investment in mines operated by Northshore Mining, a subsidiary of Cleveland Cliffs. Northshore mines the ore, process it into pellets and sends it off to Cleveland Cliffs and then pays Mesabi royalties based on the selling price. So, Mesabi has no operational duties or costs here, it’s just a trust that receives the royalties.
That means the return here is going to be a function of iron ore prices which hit multi-year highs recently but still below the peak in 2008. Goldman Sachs believes we could be heading into a new commodity super-cycle and as the money from the infrastructure bill gets used, my guess is prices are going much higher and this stock will climb further.
This is also one of the longer-life trusts in the list with estimated reserves of nearly 800 million tons and over 15 years left of production. The trust pays quarterly dividends instead of monthly but has increased the payout 78% over the last year to April.
On an 18.6% dividend yield, you’ll only need $87,250 invested to cover the monthly payments on your red-hot Lambo…less than it would cost to buy the car outright.
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