10 Stocks With Sustainable Dividends

by: Jersey Trader

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%.

SDividend Normal Dividend
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
Click to enlarge

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).

Subscribers to our premium service can access a list of the SDividend yield for S&P 500 stocks as well as the SDividend yield for any single stock.

Company Ticker Dividend Yield (%) SDividend Yield (%)
Merck & Co. Inc. MRK 4.49 3.143
Eli Lilly & Co. LLY 5.975 2.92775
Exelon Corp. EXC 5.54 2.7146
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
Ameren Corporation AEE 6.295 2.45505
The Travelers Companies Inc. TRV 2.93 2.3733
Entergy Corporation ETR 4.555 2.3686
Click to enlarge

Disclosure: Long CEG