8 High Yield Dividend Stocks Still Offer Opportunity to Boost Income

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 |  Includes: ABT, CLX, GPC, JNJ, KMB, LEG, PBI, RPM
by: Avi Morris

With near record low yields on Treasury securities, investment grade bonds and stocks, investors are looking for alternatives earning higher yields. The benchmark 10 year Treasury bond yields less than 3% and the 2 year Treasury yields a meager 37 basis points. Dividends and capital appreciation provide investment earnings. With the dependability of earning profits from capital gains being called into question, a growing stream of dividends has become more important (especially after the financial meltdown in 2008). Dividend Aristocrats earned their elite status by increasing annual dividends for a minimum of 25 consecutive years. Below is a list of 8 Dividend Aristocrats reviewed 7 months ago with yields then and on June 22:

Company Yields------------------Nov 2010--Jun 2011

1) Pitney Bowes_______PBI____6.2%____6.6%
2) Leggett & Platt______LEG___5.3%____4.6%
3) Kimberley-Clark_____KMB___4.3%____4.2%
4) RPM______________RPM___3.9%____3.8%
5) Abbott_____________ABT_ _3.5%____3.7%
6) Clorox_____________CLX___3.4%____3.5%
7) Genuine Parts______GPC___3.5%____3.5%
8) Johnson & Johnson__JNJ____3.4%____3.4%


Since the earlier article, 7 of the 8 have higher stock prices along with dividends of roughly 2%. PBI fell 3% (much of that has been recovered by dividends) on continued worries about the demise of mail, the basis of its business. Current yields for these stocks are similar to the yields last November, aided by dividend increases.

In the last 10 years, capital appreciation has been limited in the stock market. Dow (NYSEARCA:DIA) has risen 14% while the S&P 500 (NYSEARCA:SPY) is only 5% higher. To achieve excellent rates of return, dividends, especially growing dividends, have additional importance. Stocks with different degrees of risk are presented to allow a choice involving accepting additional risk, which will be rewarded with higher yields. PBI has the highest risk because of flattish earnings over the last 10 years and only token annual dividend increases. Its yield is one the highest for any stock on the NYSE because many are writing off the mail business too quickly. The others have faltered, to some degree, in recent years. The 2 health care companies have stumbled and the others were seriously hurt by the recession.

Aside from PBI, these stocks are higher in the last 10 years plus all have increased dividends annually. PBI fell from the high $30s on growing worries over its postal business. The financial strength of these companies is impressive as each one continued raising annual dividends through the worst recession in decades, when some of the bluest chip companies did not.

The companies are doing well (even PBI) and are generally reporting increased earnings. With yields that are substantially higher than 2% (or less) which is common on industrial and service companies, added yield provides extra rewards to compensate for added risk and those rewards are key toward earning excellent rates of return.

Disclosure: I am long PBI.