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Defensive investors like high dividend yielding stocks and consider them as viable options in especially inflationary environments. We expect high dividend stocks to outperform the 10-year Treasuries over the next 10 years.

In addition, defensive investors may also seek sustainable dividend payments from each high dividend yielding stock. Since high dividend yielding companies with lower dividend payout ratios are more likely to continue paying high dividends in the future, we believe conservative investors like to pick such companies when seeking sustainability and inflation protection.

Below, we provide a list of mega-caps with high current dividend yields and low dividend payout ratios. (The market data are sourced from Fidelity) All companies in this list have market capitalizations above $10 billion, annualized dividend yields of at least 4% and EPS growth over the last five years of at least 5%.

Dividend Yield

Dividend Payout Ratio

YTD Return

AT & T

T

6.18%

74.78%

-1.1%

BCE Inc.

BCE

5.60%

74.19%

10.2%

Lockheed Martin Corp.

LMT

5.55%

55.10%

6.2%

Eli Lilly & Co.

LLY

5.43%

41.35%

7.2%

Entergy Corp.

ETR

5.09%

46.76%

-4.3%

Exelon Corp.

EXC

4.95%

51.72%

5.8%

Royal Bank of Canada

RY

4.69%

61.19%

-12.0%

Raytheon Co.

RTN

4.38%

35.91%

-13.0%

Xcel Energy Inc.

XEL

4.21%

64.20%

8.2%

Rogers Comm

RCI

4.12%

47.97%

4.0%

Nextera Energy Inc.

NEE

4.09%

51.16%

6.6%

Public Services Enterprise Group

PEG

4.08%

43.91%

9.1%

Du Pont

DD

4.05%

49.55%

-16.9%

Sysco Corp.

SYY

4.02%

52.53%

-9.6%

Kimberly-Clark Corp.

KMB

4.00%

59.83%

14.6%

AVERAGE

1.00%

All of these 15 large-cap stocks in our list have dividend payout ratio of less than 75%. Since the beginning of this year, the average return of these 15 stocks was 1.00%. vs. -8.87% for the SPY. Nine stocks in this group had a gain year-to-date, whereas two stocks –BCE and KMB – provided double digit returns in the same period.

Here are the top 10 US stocks with the highest dividend yields on our list:

  1. AT&T (NYSE:T): AT&T is a provider of telecommunications services in the United States and worldwide. T has a 6.18% dividend yield but lost -1.10% since the beginning of this year. The stock has a dividend payout ratio of 74.78%. T has a market cap of $165.04B and P/E ratio of 8.47. Phil Gross holds the largest T position among the 300+ hedge funds we are tracking (check out Adage Capital’s top stock holdings).
  2. BCE Inc. (NYSE:BCE): BCE Inc. is a telecommunications company providing telephone and Internet services primarily in Canada. BCE has a 5.60% dividend yield and returned 10.23% since the beginning of this year. The stock has a dividend payout ratio of 74.19%. BCE has a market cap of $29.16B and P/E ratio of 13.84. Louis Navellier had more than $40 Million in BCE at the end of June 2011.
  3. Lockheed Martin Corp. (NYSE:LMT): Lockheed Martin Corp. is an American corporation operating in aerospace, defense, security and advanced technology industries worldwide. LMT has a 5.55% dividend yield and returned 6.19% since the beginning of this year. The stock has a dividend payout ratio of 55.10%. LMT has a market cap of $24.20B and P/E ratio of 9.56. Both Jean-Marie Eveillard's First Eagle and John Shapiro's Chieftain Capital holds more than $200 Million of LMT.
  4. Eli Lilly & Co. (NYSE:LLY): Eli Lilly & Co. is a large pharmaceutical company operating worldwide. LLY has a 5.43% dividend yield and returned 7.22% since the beginning of this year. The stock has a dividend payout ratio of 41.35%. LLY has a market cap of $41.76B and P/E ratio of 8.49. Jim Simons holds more than $350M of LLY (see billionaire Jim Simons’ favorite stocks here).
  5. Entergy Corp. (NYSE:ETR): Entergy Corp. is an integrated energy company engaged primarily in electric power production and retail electric distribution operations. ETR has a 5.09% dividend yield but lost 4.34% since the beginning of this year. The stock has a dividend payout ratio of 46.76%. ETR has a market cap of $11.62B and P/E ratio of 9.30. Jean-Marie Eveillard is the most prominent ETR investor.
  6. Exelon Corp. (NYSE:EXC): Exelon Corp. is a utility services holding company. EXC has a 4.95% dividend yield and returned 5.84% since the beginning of this year. The stock has a dividend payout ratio of 51.72%. EXC has a market cap of $28.10B and P/E ratio of 10.61. Steven Cohen invested $60 million in EXC shares (check out Steve Cohen’s top stock picks).
  7. Royal Bank of Canada (NYSE:RY): Royal Bank of Canada is a diversified financial services company. RY has a 4.69% dividend yield but lost -12.01% since the beginning of this year. The stock has a dividend payout ratio of 61.19%. RY has a market cap of $64.45B and P/E ratio of 10.88. Daniel Bubis holds the largest RY position among the 300-plus funds we are tracking.
  8. Raytheon Co. (NYSE:RTN): Raytheon Co. is a US defence contractor and military equipment manufacturer operating worldwide. RTN has a 4.38% dividend yield but lost -13.01% since the beginning of this year. The stock has a dividend payout ratio of 35.91%. RTN has a market cap of $13.90B and P/E ratio of 7.32. Phill Gross has the largest RTN position, holding more than $250M of the stock. Ric Dillon is also among prominent RTN investors (see Ric Dillon’s other top stocks).
  9. Xcel Energy Inc. (NYSE:XEL): Xcel Energy Inc. is a public utility company that provides electricity and natural gas delivery services in the United States. XEL has a 4.21% dividend yield and returned 8.24% since the beginning of this year. The stock has a dividend payout ratio of 64.20%. XEL has a market cap of $11.96B and P/E ratio of 14.44. John A.Levin’s Levin Capital holds the largest XEL position among 300-plus funds we are tracking.
  10. Rogers Communications Inc. (NYSE:RCI): Rogers Communications Inc. is a large communications company providing cable TV, telephone and Internet services in Canada. RCI has a 4.12% dividend yield and returned 3.96% since the beginning of this year. The stock has a dividend payout ratio of 47.97%. RCI has a market cap of $14.91B and P/E ratio of 13.60. D.E.Shaw and Ray Dalio are prominent RCI investors.



Disclosure: I am long T, PEG.

Source: 15 Stocks With High And Sustainable Dividend Payments