13 Fundamentally Sound Stocks with Big Dividends

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
RDS.A	Royal Dutch Shell	Peter Lynch, James O'Shaughnessy	6.7%
E	Eni S.p.A	Lynch, O'Shaughnessy	7.5%
AZN	AstraZeneca	Lynch, O'Shaughnessy	6.7%
BASFY.PK	BASF SE	David Dreman, Lynch, O'Shaughnessy	5.8%
NDBKY.PK	Nedbank Group	Martin Zweig, Lynch	5.1%
STD	Banco Santander	Lynch, O'Shaughnessy	5.9%
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%
BCS	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

Comments

[Uncle Pie:]

You might also consider:
BCE (Canada's biggest telecom) 6.3%,
Crescent Point Energy Corp CSCTF (Bakken oil play) 8.4%,
Glaxo Smithkline GSK 5.3%, (big pharma with many biotech investments)
HSBC Holdings (Global bank with big presence in China) HBC 6.4%
Telefonica TEF 5.5% (Spanish telco with operations in Europe and Latin America)
This writer holds positions in all of the above.

Jul 21 09:16 AM

[mstrb:]

Are you sure about the sanctity of these dividends?
Last dividend declared by BCS was 8/20/08 for payment on 10/1/08.
While they stated (in March) that they were getting the funds from the 2 Middle East country investment arms to be able to maintain their dividend, they did not declare a dividend at that time (which they had done in 2008).
Both Bloomberg & Thompson/Reuters are staing that BCS has omitted their dividend for 2009 - so far. Given the capital pressure they are under, it may be questionable.
Are you really sure they will declare one this August? Or are you, and anybody following your advice, just hoping?

Jul 21 02:45 PM

[Boubou:]

BCS, HSB, DB and several other banks now considered safe have preferreds yielding over 8% and still selling below par.
I like this way.

Jul 21 03:34 PM

[cam addis:]

The European companies on the list are in Wisdom Tree's DTH, with 7+% Yield and .58 fee.

Jul 21 05:33 PM

[Dividend Gr...:]

This is an interesting screen. I wouldn't add Barclay's to it however. Check this out:

"the Board of Barclays has concluded that it would not be appropriate to recommend the payment of a final dividend for 2008. This dividend, amounting to c£2bn, would otherwise have been payable in April 2009. Our intention is to resume dividend payments in the second half of 2009." source: tinyurl.com/npnpz7

Other than that, few of them have a long history of regular dividend increases.

Jul 22 04:41 AM

[neuflostein:]

Why not just invest in a Dividend focused ETF like the Stoxx Select Dividend 30 (for European companies). Eliminates many risks associated with the picking of single stocks but should still yield about 4-5%.

Jul 22 05:25 AM

[ZEN.YANG:]

General Maritime 24% yield, quarterly ! Or some of those monthly canadian payout funds

Jul 22 07:30 AM

[No Free Cake:]

You might want to look at the price chart for GMR since 2005. Not pretty. And, it's a 24% forward annual yield - paid quarterly - not a 96% annual yield.


On Jul 22 07:30 AM ZEN.YANG wrote:

> General Maritime 24% yield, quarterly ! Or some of those monthly
> canadian payout funds

Jul 22 09:16 AM

[YoYoMama:]

Just got out of GMR. Chart is going south.

DB appears to have cut dividend. Latest info on finviz.com has dividend at 1%.

STD has been very good to me, and has been on an extended climb for some time.


On Jul 22 09:16 AM No Free Cake wrote:

> You might want to look at the price chart for GMR since 2005. Not
> pretty. And, it's a 24% forward annual yield - paid quarterly -
> not a 96% annual yield.

Jul 22 09:26 AM