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Dogs of the S&P 500? Yes, you read the headline correctly, and, no, I did not mistakenly insert "S&P 500" in place of "Dow." This is our third annual Dogs of the S&P 500 series (link to Dogs Of The S&P 500 - Part 2). Most of us are at least acquainted with the classic Wall Street strategy known as "Dogs of the Dow," which was first popularized some twenty years ago. The strategy calls for buying shares of the ten highest yielding companies in the thirty stock Dow Jones Industrial Average. A major part of the attraction of the rules-based strategy is its simplicity, but inherent in the strategy of attempting to discover high dividend yielding value stocks that have fallen out of favor are elements of reversion to the mean and dollar cost averaging.

One major shortcoming of the "Dogs of the Dow" is, with only 30 stocks in its universe, it becomes unlikely to produce a diversified portfolio. After giving the matter some thought, we decided it seemed intuitive that the strategy could be improved by applying the same theory to the larger and more representative S&P 500 Index. We would note that last year the overall S&P 500 index showed price appreciation of 29.60 percent and dividends of 2.3 percent for a total 2013 return of 31.9 percent. The fifteen Dogs of the S&P 500 from 2013 showed price appreciation of 18.1859 percent and dividends added 6.5239 percent for a total return last year of 24.7098 percent. With dividend paying stocks garnering continued interest from all types of investors, we think this could be a good strategy for 2014. To that end, we have computed the highest yielding stocks in the S&P 500 as of December 31, 2013, and are profiling the 15 highest yielding companies in this three part article. Here are the final five companies:

TECO Energy, Inc. (NYSE:TE)

The stock closed the year at $17.24 giving the company a market cap of $3.75 billion. TECO is an electric and gas utility holding company that engages in the regulated electric and gas utility segment here in the United States. Book value is $10.69 per share. The dividend is $0.88 per share per year. The year-end yield was 5.10%.

Ventas, Inc. (NYSE:VTR)

The stock closed the year at $57.28 giving the company a market cap of $16.84 billion. Ventas is a publicly owned real estate investment trust that primarily invests in healthcare related facilities in the United States and Canada. The dividend is $2.90 per share per year. The year-end yield was 5.06%.

Reynolds American Inc. (NYSE:RAI)

The stock closed the year at $49.99 giving the company a market cap of $27.02 billion. Reynolds American manufactures and sells cigarettes and other tobacco products in the United States. The dividend is $2.52 per share per year and was raised again last year. The year-end yield was 5.04%.

Altria Group, Inc. (NYSE:MO)

The stock closed the year at $38.39 giving the company a market cap $76.70 billion. Altria manufactures and sells cigarettes, smokeless products and wine in the United States and internationally. The dividend was increased again last year and is now $1.92 per share per year. The year-end yield was 5.0013%.

Integrys Energy Group. Inc. (NYSE:TEG)

The stock closed the year at $54.41 giving the company a market cap of $4.31 billion. Integrys is a diversified energy holding company engaging in both regulated and nonregulated energy operations in the United States. Book value is $39.95 per share. The dividend is $2.72 per share per year. The year-end yield was 4.9991%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Dogs Of The S&P 500 - Part 3