Key Points
- Insiders are conspicuously buying these two high-yield stocks.
- LKQ Corporation pays a healthy 3% yield with an expectation for significant distribution increases.
- Small-cap FutureFuel's 5% yield comes with some risks, but a fortress financial position and outlook for growth offset them.
Insider buying is always an interesting topic, but rarely more so than when a high-yielding stock is questioned. Today, we’re looking at two high-yielding names that insiders are buying, and the buying is significant for more reasons than yield. In both cases, insider buying contradicts trends, including regular share sales associated with share-based compensation. The takeaway is that something changed for the insiders, and their buying is a signal for investors.
LKQ Corporation Insiders Started Buying Again
LKQ Corporation (NASDAQ: LKQ) manufactures and markets a range of aftermarket and replacement automobile parts in North America and Europe. The company’s insiders conspicuously began purchasing stock in Q2 following years of only selling. The insiders include a director, the CEO, an SVP, and a VP, bringing their holdings up to about 50% of the stock. Institutional buying is more significant. The institutions have bought this stock on balance for four consecutive quarters and now hold about 95% of the stock.
Among the drivers for this investment is sustained growth, although growth is expected to slow in 2025. Among the opportunities for inventors is the chance that the 2025 outlook is cautious. Auto sales, including replacement and aftermarket parts, are sluggish in 2024 due to high inflation and high interest rates but a change is in the wind. The FOMC is expected to lower rates soon, possibly aggressively, and will reinvigorate economic activity globally.
LKQ’s dividend is attractive, with the stock trading only 10x its earnings. The payout is worth more than 3% and comes with an expectation for distribution increases. The company has only paid dividends for three years but increased the payout twice, and the payout ratio is still very low. The payout ratio is running at less than 35% of the earnings, with earnings expected to grow, so substantial distribution increases are expected. The two increases so far were 10% and 7.5%, suggesting a high-single to low-double-digit increase is on tap for this year. The next distribution increase is due in August and will likely be announced with the Q3 results.
Insiders Buy High-Yielding Small-Cap, FutureFuel
FuturesFuel (NYSE: FF) is not a big business but has a robust capital return and stout ownership. Between executives, major shareholders, and institutions, this stock is nearly 100% owned by insiders, who keep buying more. The latest data shows four executives made purchases in June, bringing the total for execs and large shareholders to roughly 40%, with nearly 50% held by institutions.
Among the noteworthy details is that soon-to-be-retiring CEO M. Thomas is among the buyers, showing a strong conviction in the business's health and future capital return. Regarding the institutions, ownership is broad, including numerous private capital investors alongside BlackRock and Vanguard, which hold a double-digit portion of shares in their investment funds.
What is FutureFuel? FutureFuel is a small-cap biodiesel and bio-chemical company operating in the mid-West. Among the revenue streams are biodiesel sales, specialty chemicals, and on-demand chemical processing for business and industry. Highlights in 2024 include a significant contraction in revenue and margin due to deteriorating biodiesel prices and the impact of weather-related shut-downs offset by an expectation for positive cash flow and improving margin now that operations are back to normal.
The dividend is attractive with its 5% yield, but there are risks. Due to business deleveraging, the payout ratio will run above 100% in 2024, but the company’s financial strength will offset it. Robust margin over the past few years allowed for a substantial cash build and special dividends payments that more than doubled the regular yield. The company paid a special dividend in 2024, but it may be the last until business growth resumes or the margins widen. Salient details from the balance sheet include a net-cash position after the special dividend payment, no long-term debt, and ultra-low leverage with total liabilities running less than 0.25x assets.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| LKQ (LKQ) | $30.99 | -0.2% | 3.87% | 11.48 | Moderate Buy | $44.33 |
| FutureFuel (FF) | $3.36 | -3.0% | 7.15% | -4.25 | Sell | N/A |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
- Professional Background: Thomas Hughes is the Managing Partner of Passive Market Intelligence LLC, a market research platform he launched in 2023 with the mission: “We watch the market so you don't have to.” He has worked as a blogger, stock market commentator, and independent analyst since 2010 and has been actively involved in trading and investing since 2005.
- Credentials: He holds an Associate of Arts in Culinary Technology—training that honed his discipline, attention to detail, and ability to anticipate outcomes, all of which carry over into his work as a market analyst.
- Finance Experience: Thomas has been writing about finance and investing since 2011, when he discovered it could be more than a personal passion—it could be a profession. He’s been a contributing writer for InsiderTrades.com since 2019.
- Writing Focus: He specializes in the S&P 500, small-cap stocks, dividend and high-yield strategies, consumer staples, retail, technology, oil, and cryptocurrencies. His analysis blends chart-based technical setups with key fundamental insights, helping readers identify actionable trends.
- Investment Approach: Thomas takes a hybrid approach that combines technical analysis with deep fundamental research. He often writes about macroeconomic shifts, earnings trends, and sentiment-based trading signals.
- Inspiration: Thomas first became interested in stocks after attending a seminar on how to buy and sell your own shares. That event opened his eyes to the market's potential and sparked a lifelong interest in investing.
- Fun Fact: Thomas took up model railroading by accident a few years ago—and now he can’t stop running the rails.
- Areas of Expertise: Technical and fundamental analysis, S&P 500, retail and consumer sectors, dividends, market trends
Education
Associate of Arts in Culinary Technology
