Two months ago, I wrote A Simple Indicator for Dividend Investors, a post about a dividend indicator for finding high sustainable dividends. Since then, the ten stocks in the S&P 500 with the highest SDividend yields have outperformed the S&P 500 by almost 4% and the Dow Jones Select Dividend Index by 1.5%. Given the strong performance, I thought I would revisit the indicator and update the table.
Research has indicated that stocks with high yields and low payout ratios outperform stocks with high yields alone. To take advantage of this strategy, I created the SDividend yield, an indicator that “adjusts” the dividend for the payout ratio. Combining two indicators into one not only allows me to find stocks with high payout adjusted yields, it also allows me to easily compare one stock against another.
Because of the method of calculation, the value of the SDividend yield is lower than the normal dividend yield. The median SDividend yield for dividend paying stocks in the S&P 500 is around 1.1%, while the median of the normal dividend yield is around 2%.
|Top Quartile||greater than 1.57||greater than 3.25|
|2nd Quartile||between 1.07 and 1.57||between 2.11 and 3.25|
|3rd Quartile||between 0.58 and 1.07||between 1.14 and 2.11|
|Bottom Quartile||less than 0.58||less than 1.14|
Below is a list of the 10 stocks in the S&P 500 with the highest SDividend yield. Public Service Enterprise Group Inc. (NYSE:PEG), Time Warner Cable Inc. (TWC), The Travelers Companies Inc. (NYSE:TRV), and Entergy Corporation (NYSE:ETR) are new to this list, replacing The Chubb Corporation (NYSE:CB), American Electric Power Co., Inc. (NYSE:AEP), FPL Group Inc. (NYSE:FPL), and Lockheed Martin Corporation (NYSE:LMT).
|Company||Ticker||Dividend Yield (%)||SDividend Yield (%)|
|Merck & Co. Inc.||MRK||4.49||3.143|
|Eli Lilly & Co.||LLY||5.975||2.92775|
|Cincinnati Financial Corp.||CINF||5.895||2.65275|
|Constellation Energy Group Inc.||CEG||2.74||2.6304|
|Public Service Enterprise Group Inc.||PEG||4.435||2.61665|
|Time Warner Cable Inc.||TWC||2.935||2.55345|
|The Travelers Companies Inc.||TRV||2.93||2.3733|
Disclosure: Long CEG