Retirees: This Stock Yields 7.2%
You worked so hard.
You busted your butt to build a nest egg. Then interest rates crashed and your income with it.
Saving accounts yield next to nothing. Bank certificates of deposit pay just one or two percent. You can stash some money in bonds, but they don’t yield much more.
Investors, though, can still find safe, high yields in plain dividend stocks. One of my favorites has cranked out income for over a decade. A right now, shares yield 7.2%. Let me explain.
Over the years, I’ve pitched Student Transportation Inc (NASDAQ:STB) to readers several times. Of course, I can refer people to lots of stocks. I’ve always really liked this firm, though. I guess that’s because:
- They hate risk. Management has always kept a big cash reserve and a light debt load.
- They put owners first. Executives brag about their dividend on every conference call.
- They aren’t flashy. Management runs a boring shop, content with slow, steady growth. This won’t make you the talk of your next cocktail party, but owners like it just fine.
The name tells you exactly what they do: the company picks up 1.3-million children for school each day. It’s a crisis-proof business that cranks out steady profits. Even when stocks crashed in 2008, the kids still needed to catch the bus every morning.
Investors love the 7.2% yield. You have a mature industry here, so management doesn’t plow profits back into big growth projects. For owners, this frees up a lot of cash to pay out dividends.
You get paid monthly, too. Rather than sticking to a quarterly payment schedule, the firm sends out checks every 30 days. At first, I considered this a small point. All my readers, though, say this feature makes it easier to balance their dividend income with regular bills.
Of course, when you have a business so stable, shares won’t explode higher in a bull market. So you have to grit your teeth once in a while when a hare goes whizzing by. You have your cash on the tortoise here.
Because these cash flows resemble bond coupons, the stock competes with fixed-income securities. Once in a blue moon, you’ll see a big run in interest rates. That tends to put pressure on the share price, though the firm has soldiered through these events before.
The Bottom Line on STB Stock
Low rates have hammered retirees. But for those shifting through top dividend stocks, you can still find good yields. And with a payout topping seven percent, you should give Student Transportation a second look.