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%|
|OTCQX:BASFY||BASF SE||David Dreman, Lynch, O'Shaughnessy||5.8%|
|OTCPK:NDBKY||Nedbank Group||Martin Zweig, Lynch||5.1%|
|STD||Banco Santander|| |
|LO||Lorillard, Inc.||Joel Greenblatt, Lynch||5.3%|
|BP||BP Plc||Lynch, O'Shaughnessy||6.9%|
|MTA||Magyar Telekom||Dreman, Lynch||11.2%|
|AGL||AGL Resources||Lynch, O'Shaughnessy||5.4%|
|TOT||Total, S.A.||Lynch, O'Shaughnessy||5.8%|