23 High Quality, High Dividend Stocks

With the market resuming its upward motion, now might be a good time to consider adding dividend stocks to your portfolio. Buying dividend paying stocks at low prices not only locks in the dividend yield at current prices but also packs the double whammy of price appreciation. To that end, I did a search on the MSN Money Central Stock Screener (free to everyone) to find high quality, high-dividend paying stocks. (The only tie I have to MSN Money Central is that it’s my home page.)

Here are my search criteria:

Stock price > $2

Average daily volume > 100,000 shares

Current dividend yield = as high as possible

Stock Scouter rating >= 8 (out of 10; based on expected 6 month return vs expected volatility. Top-rated stocks are expected to gain the most in the future with relatively less volatility. See site for more info on Stock Scouter ratings.)

I also displayed other parameters including dividend payout over the previous twelve months compared with five years ago. A twelve month figure greater than the five year figure indicates an increasing dividend—tough to do nowadays.

So, culled from the top 50 candidates and all having current dividend yields greater than 7.5%, here are my picks arranged into three tiers according to their chart technicals.

The top tier
All of the stocks in this tier are making new highs (click on chart to enlarge). The first two, Hattaras Financial (HTS) and American Capital Agency (AGNC), are making new all-time highs on better than normal volume. This is a really good sign of price continuation. The other three are making new relative highs on lower than normal volume. In this group, Telecom Corp. of New Zealand (NZT) is the only stock whose latest twelve month dividend payout is greater than its five year payout. There’s no stock where the reverse case was true because the rest of them have only been paying dividends for less than five years.

The second tier
These stocks have been in an up-trend but are currently off their highs. Many are well off their historic highs. Those whose twelve month dividend payouts are less than their five year payouts are Anworth (ANH), Capstead (CMO), and Nisource (NI). Those whose twelve month dividend payouts are greater than their five year payouts are CenturyTel (CTL), Lan Airlines (LFL), and Realty Income (O). The rest of the group has not been paying dividends for five years.

The third tier
These stocks have been trending upwards but may be stuck in a channel or are nearing resistance. Those whose twelve month dividend payouts are less than their five year payouts are Grupo Aeroportuario (ASR), Empire Electric (EDE) and Nustar (NS). Those whose twelve month dividend payouts are greater than their five year payouts are MFA Financial (MFA), PDL BioPharma (PDLI), Western Gas (WES), and Windstream (WIN). The rest of the group has not been paying dividends for five years.

Conclusion
You can see that most of these fall into the traditional high-dividend stock groups: REITs, mobile communications (still a huge field ripe for M&A activity), natural gas MLPs (UNG, the natural gas ETF, looks like it’s basing and possibly rebounding), and “specialized” airports (ASR and PAC in Mexico, and LFL in Columbia).

The latter are interesting precisely because they shouldn’t be. (Money laundering, off-shore tax havens...?) I am but a gringo–perhaps the subject of another article...?

Comments

[cocomurph]

Your definition of "high quality" sure is thin...a Stock Scouter rating is essentially the only "quality" parameter you use. In investing, there is no "free lunch" ( i.e.7.5% dividends from what most consider really "high quality" stocks, i.e. JNJ. PEP, PG, etc ). I think you are misleading the novice investor... a better headline might be "23 High Dividend Stocks"

You can "trade on"...I'll continue to invest in REAL high quality, dividend payers/dividend growers

2009 Jun 26 08:39 AM

[YoYoMama]

I'm glad you pointed out AGNC, a company with solid fundamentals. I have been watching this one for a while. They recently raised their dividend in an astounding way - from 85 cents to $1.50!! Talk about a vote of confidence in your company. The yield is incredible, perhaps unsustainable, at 25%, but WOW what a find. I'm waiting for a pullback.

ANH also recently raised its dividend, is in my portfolio, and has treated me nicely. FLY has also been good to me, and is on a nice upswing.

Dr. Kris may not have dug as deep as many would prefer This does not mean that there are not some good finds in this article.. Whether an article's analysis is light or deep, we all still must conduct our own due diligence.

2009 Jun 26 09:52 AM

[a. palmer jr.]

I'll take any stock information I can get..of course then I do a little more research on my own. I never take anyone's word on a stock by itself because they might be a pump-and-dumper. I have a few shares of FLY and so far so good on that one.

2009 Jun 26 10:05 AM

[je]

Hi Kris,
I have been watching APL -I'm surprised that it does not get much notice. I think it has some down side yet this summer but I like it a lot.

2009 Jun 26 10:26 AM

[FranzSchubert]

The AGNC dividend included what is essentially a one time gain of $0.31. Thus, if the next quarter is as good for amREITs as this quarter, AGNC will probably declare a dividend in the range of $1.15-1.25

2009 Jun 26 10:48 AM

[Edit or perish]

"natural gas MLPs (UNG, the natural gas ETF, looks like it’s basing and possibly rebounding), "

Are you implying that the price of NS, a company described as having:

"...attractive crude oil and refined products pipelines and storage businesses. After growing into one of the largest independent liquids storage operators in the world, Nustar recently expanded its reach into the asphalt business..."

is in someway correlated to the performance of UNG which:

"invests in near-month natural gas futures contracts that trade on the New York Mercantile Exchange.?"

finance.yahoo.com/q/bc...

There's no correlation whatsoever and no reason why there would be since the one has virtually no bearing on the other.

2009 Jun 26 12:10 PM

[notsosmart]

its a good article.you still have to think for yourself as all have an agenda.

2009 Jun 26 02:20 PM

[13958]

LFL, Lan Chile ("...specialized airport"...???) is a Chilean airlines, and nothing to do with Columbia (this country does not exist!)....maybe COLOMBIA???

2009 Jun 26 03:25 PM

[Dr. Kris]

Thanks for noting my error on LFL. (I have no idea what company description I could have been looking at!) LFL is indeed an airline company (LAN airlines) and it's based in Chile, not Colombia. It does not own any airports but it does have interests in a couple of concessionaries. I also apologize for my misspelling. (The spell catcher doesn't know the difference between Colombia and Columbia.)

As for the "quality" rating of these dividend stocks: I don't have time to research every single stock that was output from the stock screener. These results are meant to be a springboard for your own research. It appears that most of the people here understand that, but I guess I should have stated it in the article. I shall do so in the future.

Thanks for everyone's comments and for keeping me honest!

2009 Jun 26 03:58 PM

[David Van Knapp]

To each his/her own. I personally have difficulty seeing the benefits of publishing the outputs of a stock screen without including analysis. Analysis that might, for example, have revealed that a Chilean airline company was mistakenly in the mix. But at least you revealed what your screening criteria were, so readers can evaluate the usefulnss of the screen itself.

I know that Seeking Alpha sometimes changes headlines, so the "High Quality" part of the article title can be taken with a grain of salt, given that there is no independent quality analysis here. You may have submitted a different title.

I think that trying to mix the strategies of dividend-growth investing with capital-appreciation investing often leads to hybridized approaches that serve neither end well. For dividend growth investors, the highest yield is not necessarily an atttractive one--in fact, very high yields (say 10%+) are often red flags of an unsustainable yield that is in jeopardy. In the screen's output, only 8 of 24 stocks have dividends that are higher now than 5 years ago. In fact, many of them have not even been paying dividends for 5 years, while others have cut their dividends. In contrast, for many dividend investors, an uninterrupted string of 5+ years of dividend increases is an entry-level requirement, and a dividend cut is a strong reason to sell.

2009 Jun 26 04:37 PM

[sticktoitiveness]

agnc is rockin' and rollin', but I just don't trust the management. They are the same people as their parent company acas. These people use creative accounting regularly, like adding a "control premium" to ecas. Oh and claiming their losses were mostly mark to market related and they change the mark to market rules. So of course they say report a huge loss and say the mark to market rule change didn't affect them much.

2009 Jun 26 08:49 PM

[Sovestor]

High dividend is good until the dividend is cut. Another risk is that after dividends are paid, the company's stock price could go down significantly depending on the company's industry. Be extremely careful.

2009 Jun 27 10:37 AM

[daniel3582]

On Jun 26 12:10 PM Edit or perish wrote:

> "natural gas MLPs (UNG, the natural gas ETF, looks like it’s basing
> and possibly rebounding), "
>
> Are you implying that the price of NS, a company described as having:
>
>
> "...attractive crude oil and refined products pipelines and storage
> businesses. After growing into one of the largest independent liquids
> storage operators in the world, Nustar recently expanded its reach
> into the asphalt business..."
>
> is in someway correlated to the performance of UNG which:
>
> "invests in near-month natural gas futures contracts that trade on
> the New York Mercantile Exchange.?"
>
> finance.yahoo.com/q/bc...;t=2y&l=off&am...
>
>
> There's no correlation whatsoever and no reason why there would be
> since the one has virtually no bearing on the other.

I think you should give her the benefit of the doubt... If you think about it, the price of natural gas does have a lot to do with the profitability of a company that is involved with NG in either transport, storage, or exploration... which the company in question does 2 of the 3.

As the price of NG rises, so does the % of margin.

2009 Jun 27 02:04 PM

[Fabien Hug]

At a point in your life, I think dividend investing is the only way to go (when you live out of your portfolio). Growth and value styles take way to much time and when you see the score cards of well paid and educated analysts, it is clearly more guesswork than science. What's the difference with dividend investing? Dividend investing gives you clear entry points, holding criterions and selling signals. No guesswork, facts. In the meantime, you cash in.
I invested a good bunch of money in high dividend strategy funds, BEFORE the crash. I loose a bunch on capital, if I HAVE TO sell, like everybody else. In the meantime, I still get more than 9% cash dividends on the amount initially invested. I can wait. The key is to have an asset allocation that doesn't put you in a situation where you have to sell but that's valid for any investment style anyway.

2009 Jun 27 02:05 PM

[Teutonic Knight]

Dr. Kris did good research identifying the 22 stocks. These are welcome recommendations at these volatile and speculative times.

However, the reader is cautioned that these are not recommendations for short-term trades, i.e., 6 months or less. They would serve well in longer-term buy and hold for most likely at least over a year.

I did a cursory check on all 22 on Yahoo Finance and found that most have an 1-year target lower than its closing price on last Friday June 26.

TK

2009 Jun 27 06:51 PM

[AssetReset]

STO, BP, and RDS are all yielding over 5% annually and are effective hedges against inflation

I understand the growth isn't there but for dividend play only you cant look pass the multinational oils

2009 Jun 27 09:49 PM

[HerrHansa]

Agreed on Statoil (STO) as a dividend yielding investment, and I did get a nice payout on that, though the share price is somewhat slow moving this quarter. The over investment direction I went was shipping industry stocks, though caution is advised on many of these, since they are volatile.

2009 Jun 28 02:41 AM

[Graham and Dodd Investor]

German investors buy stocks more for income than for capital gains, right? At least a German-American investor named Ben "Graham: (born Ben Grossbaum) did.


On Jun 27 06:51 PM Teutonic Knight wrote:

> Dr. Kris did good research identifying the 22 stocks. These are
> welcome recommendations at these volatile and speculative times.
>
>
> However, the reader is cautioned that these are not recommendations
> for short-term trades, i.e., 6 months or less. They would serve
> well in longer-term buy and hold for most likely at least over a
> year.
>
> I did a cursory check on all 22 on Yahoo Finance and found that most
> have an 1-year target lower than its closing price on last Friday
> June 26.
>
> TK

2009 Jun 28 10:45 AM

[enigmadude]

I agree with David Van K's comment above. The only stocks that interest me in this article include Realty Income (O) and Western Gas (WES), which are both on my watchlist.

Both are in sectors that are not currently in favor (REITs due to the fear of the commercial real estate sector meltdown that many are expecting, and Natural Gas because of the lack of demand and recent drop in future prices). Now would be the time to buy shares of those stocks before the tide turns.

2009 Jun 28 12:37 PM

[coolsoupy]

She didn't mention the fact that they may be out of business by the end of the year!


On Jun 26 09:52 AM YoYoMama wrote:

> I'm glad you pointed out AGNC, a company with solid fundamentals.
> I have been watching this one for a while. They recently raised their
> dividend in an astounding way - from 85 cents to $1.50!! Talk about
> a vote of confidence in your company. The yield is incredible, perhaps
> unsustainable, at 25%, but WOW what a find. I'm waiting for a pullback.
>
>
> ANH also recently raised its dividend, is in my portfolio, and has
> treated me nicely. FLY has also been good to me, and is on a nice
> upswing.
>
> Dr. Kris may not have dug as deep as many would prefer This does
> not mean that there are not some good finds in this article.. Whether
> an article's analysis is light or deep, we all still must conduct
> our own due diligence.

2009 Jun 28 01:29 PM