30 High Dividend Stocks and ETFs

Many investors thought that they could time the market to their advantage. But actually they just guessed about the psychology of other investors, trying to figure out when others might start selling. In fact this explains why so many investors were holding stocks while they also thought the market was overpriced, according to Robert Shiller from The Washington Post.

In today’s low interest rate environment, yield-hungry investors might want to invest in financially strong blue chip companies that offer the potential for stable and solid dividends. I filtered the 200 largest U.S. stocks (by market cap), and below are 20 highest dividend yield companies (sort by yield %).

Company	Ticker	P/E	Yield	Debt/Cash Flow
Reynolds American Inc.	RAI	16	7.4%	2.3
Altria Group Inc.	MO	12	7.4%	3.4
Progress Energy Inc.	PGN	14	6.3%	13.6
Duke Energy Corporation	DUK	17	6.2%	6.0
AT&T, Inc.	T	13	6.2%	2.1
Consolidated Edison Inc.	ED	16	5.9%	14.7
Lilly & Co.	LLY	5.9%	1.4
Verizon Communications Inc.	VZ	14	5.9%	2.3
Southern Company	SO	15	5.6%	7.7
Bristol-Myers Squibb Co.	BMY	8	5.6%	2.1
Lorillard, Inc.	LO	13	5.5%	0.9
Spectra Energy Corp.	SE	13	5.3%	5.9
Dominion Resources, Inc.	D	12	5.2%	4.4
American Electric Power Co.	AEP	11	5.2%	7.7
EI DuPont de Nemours & Co.	DD	44	5.1%	2.9
FirstEnergy Corp.	FE	10	4.9%	4.9
PPL Corporation	PPL	15	4.7%	6.9
Merck & Co. Inc.	MRK	11	4.7%	2.6
Philip Morris International, Inc.	PM	14	4.7%	1.9
HJ Heinz Co.	HNZ	13	4.4%	4.1

Out of 20, 9 of them are utilities. Even though some utilities companies could be benefiting from the record low natural gas price, investors might be uncomfortable about their heavy debt.

Four of them are tobacco companies. Tobacco, specifically international tobacco, is proving to be exceptionally resilient to recession. However, not all of them are created equal. For example, Reynolds American and Altria Group Inc’s payout ratios are more than 100%. The best seems to be Lorillard, Inc. Its debt to operation cash flow ratio is 0.9. In other words, in theory it could pay off all its debt within 1 year. No wonder LO’s price is near its 2–year-high.

Three of them are pharmaceutical and 2 are tech related. Mary Buffett and David Clark point out in their new book Warren Buffett And The Interpretation of Financial Statements, what seems like a long-term competitive advantage is often an advantage bestowed upon the company by a patent or some technological advancement. If the competitive advantage is created by a patent, as with the pharmaceutical companies, at some point in time that patent will expire and the company’s competitive advantage will disappear. If the competitive advantage is the result of some technological advancement, there is always the threat that newer technology will replace it. Today’s competitive advance may end up becoming tomorrow’s obsolescence. I would rather own them through tech and pharmaceutical ETFs, instead of cherry picking potential winners.

As always, if you like ETFs, the following are the top 10 dividend ETFs (by net assets):

#	Fund Name	Ticker
1	iShares Dow Jones Select Dividend Index	DVY
2	Vanguard Dividend Appreciation ETF	VIG
3	SPDR S&P Dividend	SDY
4	WisdomTree LargeCap Dividend	DLN
5	Vanguard High Dividend Yield Indx ETF	VYM
6	WisdomTree International SmallCap Div	DLS
7	PowerShares Intl Dividend Achievers	PID
8	WisdomTree Europe Total Dividend	DEB
9	WisdomTree Dividend ex-Financials	DTN
10	WisdomTree International Div ex-Fincls	DOO

Disclosure: I have a long position on PM.

Comments

[whisperonth...:]

I'm surprised you didn't add DTE in there with the other utilities. Along with being within range, they've paid a very nice dividend for more than 20 years, and they are planning to add another nuclear power plant at some point. If there really is global warming, DTE will be there to help control it.

Sep 03 09:54 AM

[Brady:]

check out this website tracks high yield dividend (>3%) stocks that go ex-dividend every week:
linked8.com

Sep 03 12:00 PM

[Stan Sutfin:]

Need to be careful in that web site. It shows CTL going ex on 9/4 whereas it actually went ex 9/3

Sep 03 01:45 PM

[Brady:]

Good catch, Stan

Sep 03 02:15 PM

[Anonymous 2:]

I believe it might be of interest if you were able to screen out ETFs which since inception did not have an increasing 12 month dividend payout. We all know the Aristocrats have had 25 years of annual dividend payout increases- without exception. One would think that if the managers of ETFs which include the words Dividend and Growing in the title should also have the same profile.
In any event, some screen should be used to indicate the "volatility" of the following 12 month actual dividend payout rather than a
current yield" based on an annualized return based on the most recent (monthly or quarterly) declared dividend payout.
In addition,another way of indicating the volatility of the dividend payout record would be to provide a range of past 12 month dividend payouts as well as the most recent past 12 month payout and yield based on current price.
Just some thoughts suggestions.

Sep 03 09:38 PM

[frogmatic:]

Although there's nothing wrong with this article per se, it's not at all clear to me how buying "financially strong blue chip companies that offer the potential for stable and solid dividends" is the best way to avoid ending up with a portfolio of overpriced stocks (the argument in the first paragraph). Isn't it possible that these blue-chip stocks are overpriced today as well?

I think any stock screen run in 2007 for financially strong, blue-chip companies with stable and solid dividends and would have included GE, Citigroup, and Bank of America. In hindsight, buying these three in that timeframe would have been utter disaster.

And buying an ETF doesn't necessarily protect you either: Looking at the first one on your list, DVY, it traded between $60-$75 in '07 vs. $40 today (and $26 at the March low), a capital decimation of roughly 35-45%. A 4% yield and knowing you held the bluest of the blue-chips would have been cold comfort indeed, relative to watching your retirement nest egg slashed.

So while the article presents some useful ideas, there's got to be more to defensive investing than just simple yield screens on the perceived "stable" big boys.

Sep 04 09:39 AM

[Editrice:]

Thanks, Brady! This is very helpful.


On Sep 03 12:00 PM Brady wrote:

> check out this website tracks high yield dividend (>3%) stocks that
> go ex-dividend every week:
> linked8.com

Sep 04 01:04 PM

[bobbybutte:]

FYI Altria's payout ratio is not over 100% like you have seen on Yahoo and Morningstar and other places

I have made a considerable amount of money owning the stock the past 16 years or so and i can assure you the payout ratio is about 73%

Sep 04 01:16 PM

[David Van K...:]

Chasing the highest yields can be dangerous. High yields are better than low yields only if the yield is high because of the financial strength of the company + its culture and history of raising dividends. If the yield is high because the stock's price has collapsed--which may be for some fundamental reason, such as the company is about to go over a cliff--the high yield is a big red warning sign, not a good reason to buy. Doing the research to figure out the difference would have caught GE, C, and BOA mentioned above in frogmatic's post. (BTW, frogmatic, I have added your name to my list of best screen names on SA. Extra credit for your picture.) The only way to discover the financial strength and prospects of a company , including whether its dividend is in peril, is to get your hands dirty and do some real research.

Great idea to develop an "Aristocrat"-like ranking for dividend ETFs. IMO, most investors who want to do a little work, and are serious about following a long-term dividend growth strategy, can do much better for themselves by compiling their own list of strong dividend-raising stocks rather than buying an ETF or fund for that purpose. Reason: Most income/dividend funds and ETFs end up holding the GE's and C's of the world, and they are stuck with them when the dividend--or the whole company--come crashing down. Most dividend freezes and cuts can be foreseen by examining the company's actual financial situation and asking whether they can support--let alone raise--the dividend they are already paying.

Sep 04 02:30 PM

[William M. ...:]

Great point Frogmatic. Still, the screen is the starting point.

Step Two is the Bottoms Up company analysis and
Step Three is the Sector Analysis and
Step Four is the Top Down Economy/Market Analysis.

Thanks Hao, loved to see you build a four step screen.


On Sep 04 09:39 AM frogmatic wrote:

> Although there's nothing wrong with this article per se, it's not
> at all clear to me how buying "financially strong blue chip companies
> that offer the potential for stable and solid dividends" is the best
> way to avoid ending up with a portfolio of overpriced stocks (the
> argument in the first paragraph). Isn't it possible that these blue-chip
> stocks are overpriced today as well?
>
> I think any stock screen run in 2007 for financially strong, blue-chip
> companies with stable and solid dividends and would have included
> GE, Citigroup, and Bank of America. In hindsight, buying these three
> in that timeframe would have been utter disaster.
>
> And buying an ETF doesn't necessarily protect you either: Looking
> at the first one on your list, DVY, it traded between $60-$75 in
> '07 vs. $40 today (and $26 at the March low), a capital decimation
> of roughly 35-45%. A 4% yield and knowing you held the bluest of
> the blue-chips would have been cold comfort indeed, relative to watching
> your retirement nest egg slashed.
>
> So while the article presents some useful ideas, there's got to be
> more to defensive investing than just simple yield screens on the
> perceived "stable" big boys.

Oct 03 03:25 PM