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Four High-Yielding Contrarian Stocks That Just Got a Serious Jolt

On December 21, I alerted you to a specific MLP-tracking share: Linn Co. LLC (LNCO).

Well, LNCO has been on a tear this week, having surged as much as 3.5% in just a couple of days.

The reason: Tuesday’s Fiscal Cliff agreement was very bullish for dividend stocks.

You see, many investors panicked about the potential tax increases set to come as a result of the Fiscal Cliff. The fear was that the tax rate on qualified dividends would rise from 15% to as much as 39.6%.

But in the end, those fears were unfounded.

The tax hike on ordinary dividends was not major. It was raised to just 20% – not 39.6%. And the overall tax hikes on ordinary income kick in at $400,000 for individuals and $450,000 for joint filers, not $200,000 and $250,000. That means more than 98% of taxpayers will continue to enjoy the previous tax structure.

As a result, many dividend-paying shares – both MLPs and “ordinary” dividend payers – are bolting higher.

That’s especially true of LNCO, which is now trading higher than Linn Energy LLC (LINE), the MLP that it tracks. That makes perfect sense. After all, why pay for the extra work of an MLP when you can get the same high yield without all of the extra tax-filing headaches?

But that’s not all. The story gets even better from here, because there’s actually a host of companies whose regular dividends are extremely attractive and well-funded.

And I’m going to share a few of them with you right now…

High Yields Flying Under the Radar

Currently, the top dog among dividend-paying energy companies is BP plc (BP), which currently yields about 5%.

If you’re a regular reader, you know that we’ve been following BP’s turnaround very closely. And the company is close to finally breaking through.

In fact, if it’s able to beat the rap in its civil case, it won’t be long before BP stock soars back to its pre-spill levels of $60 a share.

Of course, while BP may be making one of the greatest comebacks in history, it’s certainly not the only turnaround play worth watching.

There are actually quite a few to be found in the utility sector.

Remember, utility stocks were totally decimated by the tax talk. Dividend shares fell by more than 10% in many instances, often eclipsing the benefits of the cash payout. But now they’re starting to show life, and the trading on January 2 was very encouraging.

That’s why I’ve dug up two top tier utility picks that you should consider adding to your portfolio.

The first is TECO Energy (TE), which services the Tampa Bay area. It’s little-known outside the region, but it pays a nice 5.2% dividend and has strong growth potential. The stock is already up 2.6% this year.

And the second play is The Southern Company (SO), which sports a 4.5% yield and has paid dividends regularly for decades. It services areas such as Alabama, Mississippi, Georgia and parts of Florida. SO has about 10% appreciation potential from current levels, as well as the possibility of continued dividend increases.

So take the current opportunity to lock in some of these sweet dividend payers at bargain prices before regular investors catch on.

The best strategy would be to buy a few shares now and then some more in a couple of months, when the market once again gyrates over the debt ceiling debate.

Until then, we’ll be right here to keep you posted.

And “the chase” continues,

Karim Rahemtulla