22 Dividend Stocks with Good Fundamentals

If you believe that we've already seen the bottom of the market and it has nowhere to go but up (or sideways at the worst), then you might be thinking that now would be a good time to start lining your larder with some high dividend-paying stocks. Why would you want to do this? For the following reasons:

1. Dividends account for most of the wealth accumulated in the stock market. And don't believe that dividend stocks are for income generation only—au contraire mon ami! In fact, if you're a young person just beginning to save for retirement (which you should be doing!), adding some high-quality dividend-paying stocks to your portfolio is one of the wisest things you can do. Especially if you elect to re-invest your dividends into buying shares of your stock. This is a form of compounding, one of the most powerful methods of generating long-term wealth.

2. Buying dividend-paying stocks at depressed prices boosts your dividend yield because of the low cost basis.

3. Buying dividend stocks at depressed prices also gives you the added benefit of price appreciation.

To find stocks that have high dividends and with good fundamentals, I ran a stock screen on the MSN Money Central Stock Screener (which is free to all and with whom I have no affiliation) according to the following criteria:

* Average daily volume greater than 100,000 shares. This ensures liquidity and a narrower bid/ask spread.

* Last price greater than $2. In bullish environments, this criterion could be raised, but I chose this value since many issues are so undervalued.

* Current dividend yield = As high as possible

* Stock Scouter rating greater than or equal to 7. This is an attempt to capture the higher quality issues.

I screened the top 50 stocks according to the bullish strength in their charts. (I know this is subjective but judging from Monday's action, this group is up on average over 3.5% as of this writing.) The following twenty-two stocks are my top picks. The stocks highlighted in rose are those that broke out Monday.

The table is divided into three groups: the top seventeen stocks are drawn from the energy, financial, real-estate, and utility sectors—exactly where you'd expect to find the high-dividend payers. The next three are from other sectors that are trending up. The last two are currently in a holding pattern after an initial run up. [Click on the chart to enlarge.]



So, how should you play these?
I know you've heard that stocks that pay a high dividend should be avoided because there's usually a reason for the high payments. But in many of these cases, I think that the reason is just that they've been way oversold. Some of these stocks are as much as 75% off their highs. However, that doesn't mean you should neglect your due diligence!

I grouped the table according to sector because it's important to diversify your holdings. You don't want your nest eggs to all come from the same basket as doing so increases the risk to your portfolio. Remember, it's not only profits that count, but also the amount of risk that goes into getting that return.

If you don't like my picks, try modifying the screening parameters to reflect your investment taste, but don't waste too much time. I think that now is THE time to begin stocking up on dividend-paying stocks. Go get 'em!

Comments

[AlNieder]

ATN is ~50% owned by ATLS, which announced ~ 2 weeks ago that it will buy (exchange) all shares of ATN for 1.16 shares of ATLS. The intent is to delete the high paying dividend of ATN and use that money to fund more wells in the Marcellus shale. Despite the dividend cut, it it appears overall to be a good deal for investors.

2009 May 05 07:43 AM

[cocomurph]

Methinks you better revisit the definition of the word "fundamentals". Hint: It is NOT an synonym for "Stock Scouter Rating"....or yield chasing.

2009 May 05 08:28 AM

[Bondtrader]

Dividend as high as possible? I try to look to where a companies dividend yield is relative to its peers.

Also, I find dividends can be redflags that require some significant investigation if the dividend is above 6%.

2009 May 05 08:45 AM

[johmw]

Buy and Hold, I don't think so! I have seen to many charts presented at investment seminars showing that over decades it nets you nothing in return. Just look at some of the financial, manufacturing and automotive stocks as compared to a year ago. Many of the blue chip stocks are trading at 10% of there price. With that in mind even using your dividends to buy more would have gotten you nothing. I will keep day trading and watch others loose their money when the tide turns as many think it will!

2009 May 05 08:49 AM

[MexCom]

I too like the dividend payers. You need to catch them now becuase the prices are going up and yields are droping. My IRA portfolio model keeps getting worse becuase of value appreciation. Over time with decreasing yields the compounding after 7 years gets zapped!
Try to add dividend increasers in your next picks.

2009 May 05 09:47 AM

[tc1]

Thank you for this, Dr. Kris, but you and readers need to note that the dividend figures given for some of these may be OBSOLETE.

For instance, GE's dividend will no longer be $1.24/year ($0.31/qtr) --for, as you surely must have heard-- a few months ago it was famously slashed for 2H 2009 to an annualized $0.44/yr ($0.11/qtr). (In time, with a likely economic recovery and some solution to GE's finance segment, that dividend may come roaring back, but for now, as you can see from the math, its div has been cut by 2/3rds.)

So do some careful reading before you invest in any of these-- yahoo.finance and other sites often don't show the up to date dividend info on these firms.

2009 May 05 10:15 AM

[Emerald]

Dividends are grate until they are cut. Solid, low debt balance sheets with quality management are best. Even better are investment grade corporate debt from these companies as spreads are wide and will come in as the economy improves over the next two years. Meanwhile, you can earn 6%. Buy dividend stocks after the next corrction, not now.

2009 May 05 11:16 AM

[David Van Knapp]

This is shallow analysis. Screening for high yields can give you stocks that are worthy investments or stocks that are about to implode. I don't know what's in the Stock Scouter rating, but unless you understand it thoroughly, it's a black box to you and is no better than a tip at the water cooler. The fact that GE--which has already announced a significant dividend cut--slid through the analysis illustrates the folly of relying on misunderstood tools.

Mex: Decreasing yields DOES NOT zap compounding over time. Decreasing DIVIDENDS zap compounding. Decreasing YIELDS can (and often do) come from price appreciation, which has nothing to do with how much the dividend actually is. As long as the dividend itself is increasing, the compounding continues.

Dividend investors must educate themselves on the difference between "yield on cost" (the yield to you, based on the original price you paid and which goes up each time the dividend payout is increased) and "current yield" (which applies to new buyers and varies with both the price and dividend payout).

As a dividend investor, you don't care what the current yield becomes after you've bought the stock. Your yield was determined at the time you bought it. If the company increases its dividend payout over time, your personal yield goes up in lock-step, because the divisor (Yield = Dividend / Price) is always your price, not the current price.

2009 May 05 11:19 AM

[User 407675]

ATN has suspended its dividend at this time due to the merger. ATLS does not have the same value or dividend

2009 May 05 11:30 AM

[limitout]

ATN was a $14 stock on 4/24/09, hit $19 yesterday! Where will it go from here?


On May 05 07:43 AM AlNieder wrote:

> ATN is ~50% owned by ATLS, which announced ~ 2 weeks ago that it
> will buy (exchange) all shares of ATN for 1.16 shares of ATLS. The
> intent is to delete the high paying dividend of ATN and use that
> money to fund more wells in the Marcellus shale. Despite the dividend
> cut, it it appears overall to be a good deal for investors.

2009 May 05 11:47 AM

[Living4Dividends]

I too love dividends, and I am glad more attention is being brought to this area. Your screener merely shows a list of high dividend yielders. As DVK pointed out - GE has cut their dividend - so the yield you display is incorrect. That is the big shortcoming of using stock screeners: A company announces a dividend cut, but the stock screener still displays the old dividend rate. Wether or not these dividend are sustainable remains to be seen. The screener only shows candidates for further analysis. Some of those stocks are good - some are dogs. Biovail has some heavy problems facing it and it's dividend is unsupportable. As well, I seriously doubt that the shipper, DHT Maritime can sustain it's dividend in this economy.

2009 May 05 11:59 AM

[aber]

i really like to know your favorites dividend stocks


On May 05 11:22 AM dividendgrowthinvestor wrote:

> Love your philosophy about dividends.however as aperson who has achieved
> financial independence SOLELY through dividend investing I do not
> approve of the MAJORITY of the stocks you have recommended.I have
> chosen other ones.

2009 May 05 12:16 PM

[postnasaldrip]

Over the long haul investing in the right dividend paying stocks will reap great benefits but it doesn't alleviate the investor from keeping a close eye on his stocks. This has been a market like no other and as great dividend paying companies have either slashed or cut out completely their dividends one has to determine whether they will recover. Two examples of my dividend reinvesting success are ED and ATT. I bought 100 shares of ED for $14 per share back in 1974 the day after they omitted their dividend for the first time in their history. That $1,400 investment now generates me over 5k a year in dividends, not including the 500 shares given to my grandchildren. ATT, bought in 1983, 100 shares at $57 now generates over 4k per year in dividends for me, after all the splits and spinoffs (NYNEX, BELL Atlantic, VZ) and not even including stock I've sold such as LU, Comcast,and others, and stock again given to my family. It's not the market of the past but there are great companies to invest in for the younger crowd which will pay solid dividends for reinvestment, if one is looking towards the future, which should be a primary focus with the way this country is going.

2009 May 05 12:42 PM

[hwood007]

I have 12 different stocks in a DRIP fund, where I invest $100 each month to each stock. I first research looking for good companies to replace any that I may have sold. I also look at the fees charged by the agent banks, anything over 0% is not considered. Then I look at the size of the dividend and also the payout raito of the dividend. I do not just pick the 12 highest dividends I can find. I would not buy any of those on her list at this time, but that is just me..

2009 May 05 01:12 PM

[disaster2008]

schwab's stock screener is pretty good for searching out high dividend paying stocks using many other criteria, including payout ratio (generally the lower the better) they also rate stocks (A-F) and mark the rating with an asterisk (*) if an announcement to cut the dividend has been made.

2009 May 05 01:17 PM

[stocknerd]

Yes, one must do some DD further about these stocks. BVF is on my radar screen and looks good. Thanks doc for more info. This is all an investor can hope for---more info---then we get to make out own decisions.

2009 May 05 01:34 PM

[Oldguy67]

I HAVE BEEN DIVIDEND INVESTING FOR 52 YEARS
AND IT HAS YIELDED ME MILLIONS !
1 MUST PAY MINIMUM 5%
2 MUST PROVIDE SERVICE/PRODUCT NEEDED LONG TERM
3 MUST HAVE PAID DIVIDENDS FOR 5 YEARS OR MORE
4 MUST HAVE RAISED DIVIDENDS 4 OUT 5 YEARS
5 MUST HAVE MGMT COMMITTED TO PAY DIVS
ENERGY, HEALTH CARE, MEDICAL REITS ARE SOME
OF THE CONSISTENT PERFORMERS.


On May 05 08:49 AM johmw wrote:

> Buy and Hold, I don't think so! I have seen to many charts presented
> at investment seminars showing that over decades it nets you nothing
> in return. Just look at some of the financial, manufacturing and
> automotive stocks as compared to a year ago. Many of the blue chip
> stocks are trading at 10% of there price. With that in mind even
> using your dividends to buy more would have gotten you nothing. I
> will keep day trading and watch others loose their money when the
> tide turns as many think it will!

2009 May 05 01:43 PM

[jculley]

Oldguy67 has learned that Caps Lock is cruise control for cool.

2009 May 05 10:23 PM

[Finance Fanatic]

High dividend stocks are risky at this point, because of the huge slash that has been given to many company's earnings. If a company has a high yielding dividend with a diminishing stock price, most likely that dividend will be cut, shedding more demand for the stock.

2009 May 06 02:01 AM

[Smackdown]

Not so. MLPs have been amazing. Look into it. I try and stick with the fee based midstream variety. Very safe dividends and increasing too. Only reason they were down was hedge deleveraging and Lehman forced sales.


On May 06 02:01 AM Finance Fanatic wrote:

> High dividend stocks are risky at this point, because of the huge
> slash that has been given to many company's earnings. If a company
> has a high yielding dividend with a diminishing stock price, most
> likely that dividend will be cut, shedding more demand for the stock.

2009 May 06 11:40 AM