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Summary

  • Good yield is getting harder to come by with stocks hovering around all-time highs.
  • Be cautious of getting too overweight in MLPs and REITs.
  • The 5 stocks highlighted below have an average yield of 3.3%.

With 10-year Treasuries hovering around 2.5% and stocks hovering around all-time highs, it's getting harder and harder to maintain a decent average yield in your dividend portfolio. So what is a long-term dividend investor to do?

Obviously, you could add more high-yielding real estate investment trusts ("REITs") and master limited partnerships ("MLPs") to your portfolio to juice your income...but these securities are inherently more risky than the average stock (hence the high dividend/distribution yield). Don't get us wrong, REITs and MLPs are a great addition to any DIY Dividend Portfolio, but we recommend that you limit your exposure to these asset classes to 25% of your total portfolio. There's no such thing as a free lunch...and don't forget that high-yield securities offer a high yield for a reason.

Non-REIT, Non MLP Stocks Yielding Over 3%

There are plenty of non-REIT, non-MLP, high-quality dividend stocks out there with yields over 3%. That said, we recently ran a screen through our rating system and came up with our "3% Yield Club." This Club is made up of 25 Non-REIT, Non-MLP Dividend stocks with the highest Parsimony Ratings that also meet this additional criteria below.

  • Parsimony Rating > 70
  • Dividend Yield > 3.0%
  • 5 and 10-year Dividend CAGR: > 2.0%
  • 5 and 10-year EPS CAGR: > 0.0% (i.e., positive growth)

We will highlight each of these stocks over the course of a 5-part series. Below is a schedule of the entire series.

The 3% Yield Club: Vice Presidents

There are hundreds of stocks out there yielding over 3%, but we only picked the best of the best for our 3% Yield Club. This article highlights the 5 Vice Presidents (stocks #11-15). The tables below summarize some of the key data points that we analyze when ranking our dividend stocks.

#15 Northeast Utilities (NYSE:NU)

Prior to briefly terminating its dividend in 1997 (due to regulatory changes that opened up competition in NU's markets), NU paid a dividend to shareholders for 30 consecutive years without a decrease. Since reinstating the dividend in 1999, the company has increased its distribution every year (including a solid 6.8% increase for 2014). Despite breaking the "golden rule" of many dividend investors (cutting its dividend), we believe NU has reestablished itself since restructuring and the stock warrants consideration in a long-term dividend portfolio.

#14 Toronto-Dominion Bank (NYSE:TD)

Toronto-Dominion has been one of the best bank stocks to own over the past 10 years. Unlike most of its U.S. bank counterparts, TD was not forced to cut its dividend during the financial crisis. In fact, TD has a compound annual dividend growth rate of 10.6% over the past 10 years and the company has paid a dividend to shareholders every year since 1857!

#13 AGL Resources (NYSE:GAS)

GAS has delivered shareholders a total return of 114% over the past 5 years driven by a compound annual dividend growth rate of 2.4% and a solid dividend yield of 3.6%. Despite a relatively low dividend growth rate, GAS has a very stable dividend track record and the company recently paid its 266th consecutive quarterly dividend (every year since 1948). In addition, GAS has one of the highest Financial Stability ratings (85) of any Utility stock in our coverage universe.

#12 Kimberly-Clark (NYSE:KMB)

Kimberly-Clark has a decent current dividend yield (3.0%) and a very respectable 5- and 10-year dividend growth rate of 6.9% and 8.7%, respectively. KMB has also performed well over the past 5 years, with a total return around 151%. All that with an ultra low beta of 0.23!

#11 Hasbro (NASDAQ:HAS)

Hasbro has been a dividend growth machine over the past 10 years, raising its dividend at a compound annual rate of 26.9%. Although the pace has slowed in recent years, we expect the company to continue to deliver 5-10% annual hikes for the foreseeable future.

Summary

If you are looking to generate stable income, dividend growth investing is a great way to accomplish this goal and any one of these 3% yielders would make a nice addition to your portfolio. Note that identifying good stocks is only the starting point of building a dividend portfolio and investors should pay close attention to valuation as well when deciding whether or not to buy a stock as many stocks right now are overvalued (i.e., good stocks can often trade at bad prices).

Please make sure to "follow" us so that you will be notified real-time when we publish future articles in this series.

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

Source: The 3% Yield Club: 25 Non-REIT, Non-MLP Dividend Stocks Yielding Over 3% (Part 3)