Best High Yield Dividend Stocks for 2009

There is a stock picking competition between several US and Canadian bloggers to pick the best four stocks for 2009, which I was invited to participate in. The rules do not allow trading or selling of these picks, and requires a quarterly review of how the stocks selected have performed.

The stocks that I selected are representative of four high-yield sectors, where dividend investors typically shop for current income. Furthermore despite their high current yields, the dividend payments for the four stocks below seem sustainable.

Realty Income (O) a commercial retail real estate company yielding 7.30% . Realty Income is a dividend achiever which pays dividends monthly to its shareholders. If the credit market remains frozen in 2009 Realty Income could suffer if its vacancies increase or it can’t find more funds to keep expanding. If the financial situation normalizes however, real estate stocks in general will benefit from low interest rates.

Kinder Morgan Energy Partners (KMP) is a pipeline transportation and energy storage company in North America yielding 9%. This master limited partnership is a member of the dividend achievers index. The low energy prices could stimulate demand in 2009, which could positively affect pipeline businesses like Kinder Morgan.

Consolidated Edison (ED) provides electric, gas, and steam utility services in the United States yielding 6.10%. Even during tough economic conditions people keep paying their electric bill and keep heating their homes. Con Edison is a member of the dividend aristocrats index.

Phillip Morris International (PM) is an international tobacco company yielding 5.10%. The international tobacco market is a growth story, and unlike the US market is not facing as many issues in the short term as Altria (MO). Even during a recession, people continue smoking, as this product is very difficult to stop using.

With an average yield of 6.9% and the possibility for long-term dividend growth, these stocks should weather well any market conditions in 2009. In order to generate dividend income for the long run however, a more diversified portfolio consisting of at least 30 stocks should be constructed in order to withstand market forces. Check out the Best Dividend Stock for the Long Run list, which is a good addition to today's post.

Disclaimer: At the time of this writing author owned shares of O, KMR and ED

Comments

[Dividends4Life:]

ED and O are strong picks - I own both of them.

Best Wishes,
D4L

2008 Dec 30 11:42 AM

[bassetti:]

These stocks have such lamentable capital appreciation potential that it is difficult to see why anyone would buy them in the riskiest market in recent history. The dividend may be the bait on the trap.

bassetti

2008 Dec 30 02:07 PM

[Dividend Gr...:]

Bassetti,

I have never seen any stock that is not risky. The riskiest stock of the four is Realty Income. KMP and ED are pretty much utility like investments, while PM should do fine in a crisis, as smokers find it tough to quit and the tough life makes more people smoke.

2008 Dec 30 03:21 PM

[Emerald:]

Yes, the dividend could be a trap if the company is overleveraged and has short term debt maturities. Absent these issues, dividends represent 40% of the total return of a stock that is held over time. ED is a utility with a long, solid track record and would be bought for the income as part of a diversified portfolio of income stocks and pure capital appreciation plays. KMP is also a solid cash flow/yield play in a turbulent market where Treasuries and money market yields are rock bottom.


On Dec 30 02:07 PM bassetti wrote:

> These stocks have such lamentable capital appreciation potential
> that it is difficult to see why anyone would buy them in the riskiest
> market in recent history. The dividend may be the bait on the trap.
>
>
> bassetti

2008 Dec 31 11:14 AM

[searcher:]

Bet the fellows who don't look both ways when approaching a green light are too risk averse to buy steady yielding but slow growing stocks, yet are in cash at .5%.

2008 Dec 31 03:20 PM