5 Low Beta Dividend Stocks Yielding Over 5%

Includes: AGNC, DUK, MO, NLY, PPL
by: Parsimony Investment Research
The U.S. economy continues to have significant headwinds (e.g., high unemployment, end of QE2, weak housing market, debt ceiling debate, etc.) and signs are definitely pointing toward further weakness in the equity market.
In the current market environment, it is important for income investors to choose their dividend stocks wisely as they are putting new money to work. As volatility increases (especially downside volatility), investors may want to add some low beta stocks to their holdings to help dampen portfolio volatility. In general, companies with low betas will tend to be less volatile than the general market.
With that in mind, we did a screen with the following parameters to find companies that had high dividend yields, low betas, and P/E ratios under 20:
  • Dividend Yield > 5%
  • Avg. 3m Volume > 1,000,000
  • Stock Price > $10.00
  • Market Cap > $1 billion
  • P/E Ratio < 20.0x
  • Beta < 0.50
The stocks below meet the parameters above. Use this data as a starting point for your own analysis.

Note: American Capital Agency (NASDAQ:AGNC) and Annaly Capital (NYSE:NLY) are mortgage REITs and have a much different risk profile than the other stocks on the list. We caution investors to do their homework on these REITs before investing. Also note that P/E ratios are not the best valuation metric for REITs (P/BV is a more appropriate metric for REITs). AGNC and NLY have current P/BVs of 1.12x and 1.14x, respectively.

In general, we think interests rates will remain low for the foreseeable future (next 12-24 months). As such, we believe REITs offer investors an extremely compelling risk/reward profile. However, we caution investors to watch interest rates very closely if invested in the space.

Utility and tobacco stocks should also hold up really well in a stagnating economy.
In addition, since we feel that the market is due for a pullback, we recommend that investors consider selling covered calls on these stocks to further dampen portfolio volatility (see Double Your Dividend Yield: A Covered Call Strategy for Income Investors for details).

Disclosure: I am long MO, AGNC, NLY.

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