13 Fundamentally Sound Stocks with Big Dividends

by: John P. Reese

Earlier this month, The Wall Street Journal had an interesting piece on the challenges — and opportunities — facing income investors. Dividend payouts have dropped dramatically since the market made its big declines last year, with second-quarter S&P 500 dividends coming in $14.3 billion lower than they were a year ago — the largest drop in more than 40 years. June dividends alone for the index were down $6.6 billion, the largest drop on record, the Journal’s Tom Lauricella reports.

But there’s another side of the coin: “Dividends are down,” S&P’s Howard Silverblatt told the Journal, “but the market is down more.” And that means that yields are up, with the S&P yield almost 2.5% this month, versus less than 2% two years ago.

And certain sectors and styles are offering bigger payouts — the Vanguard Utilities ETF has been yielding in the 4.5% range, for example, while the iShares Dow Jones Select Dividend Index fund has been in the 5.5% range.

Blended bond/stock funds and pure bond funds are also offering some nice yields, Lauricella notes, as are funds investing in mortgage-backed securities (those focusing on mortgages backed by the government may have particular appeal).

Quite a few individual stocks are offering even bigger yields. But, as Morningstar Director of Personal Finance Christine Benz told the Journal, blindly jumping into high-yielding plays is dangerous. Don’t buy a high-yielding investment if it doesn’t fit your underlying strategy, she says: “It’s a mistake to just gun for income no matter what.”

I think Benz is right on with that warning. With that in mind, I scanned the market today for some of the top-yielding stocks that also get approval from at least two of my Guru Strategy computer models — each of which is based on the approach of a different investment great. To pass two of my strategies, a stock has to be quite fundamentally sound. For these stocks, the combination of strong fundamentals and big dividend yields thus makes for some intriguing possibilities:

Stocks with Multi-Guru-Strategy Approval, 5%+ Yield

Ticker Company Passes Strategies Based On Yield

Royal Dutch Shell

Peter Lynch, James O'Shaughnessy 6.7%


Eni S.p.A Lynch, O'Shaughnessy 7.5%
AZN AstraZeneca Lynch, O'Shaughnessy 6.7%
OTCQX:BASFY BASF SE David Dreman, Lynch, O'Shaughnessy 5.8%
OTCPK:NDBKY Nedbank Group Martin Zweig, Lynch 5.1%
STD Banco Santander

Lynch, O'Shaughnessy

LO Lorillard, Inc. Joel Greenblatt, Lynch 5.3%
T AT&T Lynch, O'Shaughnessy 6.8%
BP BP Plc Lynch, O'Shaughnessy 6.9%
MTA Magyar Telekom Dreman, Lynch 11.2%
AGL AGL Resources Lynch, O'Shaughnessy 5.4%


Barclays Lynch, O'Shaughnessy 8.3%
TOT Total, S.A. Lynch, O'Shaughnessy 5.8%

Disclosure: I'm long E, AZN, BCS, STD, TOT, T, BP, AGL

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