7 Dividend-Paying Opportunities Poised to Pop

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 |  Includes: CTL, DUK, FE, LLY, MO, PPL, RAI
by: David Alton Clark

These seven S&P500 stocks have great stories, positive catalysts for future growth, are extremely oversold and pay a hefty dividend. There may be more volatility in front of us even with the more than 10% drop in the S&P500 recently; nevertheless, this may be a good point to start a position in these dividend-paying buying opportunities. As Warren Buffett says, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

After the precipitous drop in the S&P500 in 2008, the high dividend payers were the first to recover. Seven top dividend-paying stocks in the S&P500 with a market cap of $15 billion or better are Altria Group Inc. (NYSE:MO), Eli Lilly & Co. (NYSE:LLY), Duke Energy Corporation (NYSE:DUK), CenturyLink, Inc. (NYSE:CTL), Reynolds American Inc. (NYSE:RAI), FirstEnergy Corp. (NYSE:FE) and PPL Corporation (NYSE:PPL).

My dividend investing approach is based on constructing a portfolio of stocks with exceptional dividend yields that generate money throughout the year. Characteristically, dividend investing is popular among retirees and those who wish to live on their savings and are no longer able to work. One reason to invest in dividend-paying stocks now is due to the fact they will be the investment of choice to fund the retirement of many Baby Boomers, which will create enormous demand for these stocks. Dividend-paying stocks have the potential for both capital gain and income production. Boomers will be looking for stocks that have a track record of increasing dividends, giving them yet another hedge against inflation. This combination will be necessary to fund the lengthening retirement that comes with a greater life expectancy. Combining these factors with the Fed’s recent announcement that rates will remain at ultra-low levels for at least the next two years, we can see that fixed income instruments such as bonds and CDs provide little protection against inflation. Factor this in with the fact that historically, dividend-paying stocks have outperformed non-dividend-paying stocks, and you have a recipe for outstanding returns.

Below is a summary of each company’s dividends and EPS growth details followed by a brief description of each company, a summary of current analysts' estimates and up/downgrade activity and a chart of the company's key statistics. I would scale in to any position a quarter or a tenth at a time. Please use this as a starting point for your own due diligence.

Company EPS and Dividend Detailed Statistics

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Company Reviews

Altria Group, Inc., through its subsidiaries, engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally. The company is trading below analysts' estimates. Altria Group has a median price target of $28.50 by eight brokers and a high target of $31. The last up/downgrade activity was on Aug. 10, when Davenport upgraded the company from Neutral to Buy.

Eli Lilly and Company develops, manufactures, and sells pharmaceutical products worldwide. The company is trading on par with analysts' estimates. Eli Lilly has a median price target of $35 by 13 brokers and a high target of $43. The last up/downgrade activity was on Aug. 10, when Argus upgraded the company from Hold to Buy.

Duke Energy Corporation operates as an energy company in the Americas. It operates through three segments: U.S. franchised electric and gas, commercial power, and international energy. The company is trading slightly below analysts' estimates. Duke Energy has a median price target of $19 by 13 brokers and a high target of $19. The last up/downgrade activity was on June 24, when RBC Capital Markets initiated coverage on the company with an Underperform rating.

CenturyLink, Inc., together with its subsidiaries, operates as an integrated communications company. The company is trading significantly below analysts' estimates. CenturyLink has a median price target of $46 by 17 brokers and a high target of $50. The last up/downgrade activity was on Aug. 5, when DA Davidson upgraded the company from Underperform to Neutral.

Reynolds American Inc., through its subsidiaries, manufactures and sells cigarette and other tobacco products in the United States. The company is trading below analysts' estimates. Reynolds American has a median price target of $38 by seven brokers and a high target of $43. The last up/downgrade activity was on Jan. 6, when UBS upgraded the company from Neutral to Buy.

Firstenergy Corp. operates as a diversified energy company. The company, through its subsidiaries and affiliates, involves in the generation, transmission, and distribution of electricity, as well as energy management and other energy-related services. The company is trading below analysts' estimates. Firstenergy has a median price target of $46 by 12 brokers and a high target of $56. The last up/downgrade activity was on June 24, when RBC Capital Markets initiated coverage on the company with a Sector Perform rating

PPL Corporation, an energy and utility holding company, generates and sells electricity; and delivers natural gas to approximately 5.3 million utility customers primarily in the northeastern and northwestern U.S. The company, through its subsidiaries and affiliates, involves in the generation, transmission, and distribution of electricity, as well as energy management and other energy-related services. The company is trading below analysts' estimates. PPL Corporation has a median price target of $30.00 by 11 brokers and a high target of $32. The last up/downgrade activity was on June 24, when RBC Capital Markets initiated coverage on the company with an Outperform rating.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.