Saturday, October 15, 2011

Five High Yield Dividend Stock Lists

          As investors who seek out income from dividend growth stocks we can be forgiven for letting our eyes stray occasionally to the very top of the “High Yielder” lists. The stocks at the top of these lists offer yields that are well above average, some could even repay your investment in them on the basis of yield alone in less than a decade…if that yield is maintained!. I’ve put together five “Top 5” type high dividend stock lists by pulling from the Dow Jones Industrial Index, S&P 500 Index, and the DCCC lists (CCC = Champions Contenders Challengers).

 
               In each chart I have included the yield, rate at which the dividend was increased in the most recent year, and the Free Cash Flow (FCF) Payout Ratio. You’ll notice some stocks with 0% dividend growth rates for the past year: in some cases this is because they have not announced their final payout for the year (where an increase is expected) and in others it is because the dividend has been frozen. Keep in mind these are one year increases and not five or ten year increases so don’t try to project future returns off of them!

               These lists are not recommendation lists, merely lists of high yielding stocks that could possibly lead you to productive purchases (which may not necessarily be listed here). You’ll be able to see from the FCF Payout Ratios that many of these dividends are unsustainable and the growth rates of many of these dividends do not meet the requirements of most dividend growth portfolios. This is the risk involved when “chasing” high yield stocks as opposed to lower yielding stocks in the 2.5%-4.5% with more reliable growth rates and sustainable payout ratios.

               The Dow Jones Industrial Index is an index consisting of 30 of the largest publicly traded American corporations. The “Dow” quote is one of the stock market terms daily viewers of television news shows are most familiar with. Below is a list of the of the high yield dividend stocks included in the index based on their closing prices on Friday, October 14th.

TOP 5 HIGHEST YIELDS FROM THE DOW JONES INDUSTRIAL INDEX
Company
Yield
1 Yr Div Increase
FCF Payout
Sector
AT&T
5.90%
2.38%
71.08%
Telecommunication Services
Verizon Communications
5.36%
2.56%
39.01%
Telecommunication Services
Merck
4.61%
0.00%
57.70%
Health Care
Pfizer
4.20%
11.11%
53.98%
Health Care
General Electric
3.61%
25.00%
15.92%
Industrials

               The S&P 500 Index is an index consisting of 500 of the largest publicly traded American corporations. Along with “the Dow” the S&P 500 quote is one of the stock market terms daily viewers of television news shows are most familiar with. Unlike the Dow, which is weighted by price, the S&P 500 is weighted by market capitalization. Below is a list of the high yield dividend stocks included in the index based on their closing prices on Friday, October 14th.

TOP 5 HIGHEST YIELDS FROM THE S&P 500 INDEX
Company
Yield
1 Yr Div Increase
FCF Payout
Sector
Frontier Communications
12.56%
0.00%
73.97%
Telecommunication Services
Windstream
8.44%
0.00%
83.49%
Telecommunication Services
CenturyLink
8.38%
0.00%
64.39%
Telecommunication Services
Pitney Bowes
7.31%
1.37%
37.12%
Industrials
R.R. Donnelley and Sons Co.
6.56%
0.00%
63.48%
Industrials
            
          The Dividend Champions list includes stocks that have increased their dividends every year for at least twenty-five years. It is similar to the Dividend Aristocrats list however stocks are less likely to mysteriously drop off the index even though they meet the membership criteria as can happen with the Aristocrats. The Dividend Champions list is part of the DCCC and is maintained over at dripinvesting.org. Below is a list of the high yield dividend stocks included in the Champions list based on their closing prices on Friday, October 14th.

TOP 5 HIGHEST YIELDS FROM THE DIVIDEND CHAMPIONS LIST
Company
Yield
1 Yr Div Increase
FCF Payout
Sector
CenturyLink
8.38%
0.00%
64.39%
Telecommunication Services
Old Republic International
7.39%
1.45%
-63.93%
Financials
Pitney Bowes
7.31%
1.37%
37.12%
Industrials
Washington REIT
6.05%
0.29%
95.94%
Financials
Cincinnati Financial
6.03%
0.63%
65.02%
Financials

               The Dividend Contenders list includes stocks that have increased their dividends every year for at least ten years and no more than twenty four years. It is also part of the DCCC and is similar to the Dividend Achievers index. Before a company can become a Champion it first has to be a contender so this is a great place to look for companies that have established at least one decade of dividend increases and have a chance to break into the elite levels of dividend paying stocks. Below is a list of the high yield dividend stocks included in the Contenders list based on their closing prices on Friday, October 14th.

TOP 5 HIGHEST YIELDS FROM THE DIVIDEND CONTENDERS LIST
Company
Yield
1 Yr Div Increase
FCF Payout
Sector
Inergy, LP
11.28%
0.00%
751.39%
Energy
Vector Group Ltd.
8.65%
5.00%
187.42%
Consumer Staples
NuStar Energy, LP
7.93%
1.86%
-97.52%
Energy
Corporate Office Properties Trust
7.32%
0.00%
76.06%
Financials
Suburban Propane Partners, LP.
7.18%
0.89%
115.50%
Utilities

             The Dividend Challengers list includes stocks that have increased their dividends every year for at least five years and no more than nine years. It is also part of the DCCC. This is the place to look for companies that have taken the first steps on their way to become Contenders and Champions (and those that make it will reward you with both increasing income and capital gains along the way!). Selecting a future Champion from this list means almost two decades, and maybe more, of annual increases to your dividend income. The attrition rate is high though so any purchases from this list will have to be properly monitored in order to prevent any surprises and damage to your portfolio! Below is a list of the high yield dividend stocks included in the Challengers list based on their closing prices on Friday, October 14th.

TOP 5 HIGHEST YIELDS FROM THE DIVIDEND CHALLENGERS LIST
Company
Yield
1 Yr Div Increase
FCF Payout
Sector
PennantPark Investment Corp
10.67%
3.85%
-33.61%
Financials
Omega Healthcare Investors
9.31%
11.10%
93.07%
Financials
Telefonica, S.A. (ADR)
9.25%
20.48%
94.29%*
Telecommunication Services
Exterran Partners, L.P.
8.87%
4.32%
275.88%
Energy
National Presto Industries*
8.60%
1.23%
238.18%
Industrials
              
          As I said in the opening paragraphs high yield stocks are not guaranteed cash machines. Often times yields are high because the market has lost faith in the future prospects of the company. This results in price pressure which causes a corresponding rise in yields. As you can see many of these stocks have extremely high payout ratios which most likely mean the dividend is in danger of being frozen or cut, and that doesn’t even consider the other financial problems facing the company! Always use caution when pursuing these kinds of stocks and remember that sometimes the best investment decision is to do nothing at all.

Full Disclosure: Long AT&T

Related Post: Four Criteria For Evaluating Dividend Growth Stocks
Related Post: Looking Beyond The Dividend Payout Ratio
Related Post: How To Read A Cash Flow Statement



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