Seeking Alpha
Momentum, newsletter provider, ETF investing, short-term horizon
Profile| Send Message|
( followers)  

With the market pulling back, so much cash is going into basically zero return "safe haven" investments like the dollar and money markets, and into US Treasury bonds yielding 3%, 2% or less. So it's probably a good time to look at some stocks that are paying dividends far in excess of that -- over 5% in this case.

The safety of the dividends of the stocks mentioned need to be researched and evaluated through your own due diligence. And of course the stock price itself can go lower (in which case the dividend yield will be higher, assuming the actual cash dividend payout remains the same or grows).

I ran a screen for optionable stocks with over 2 million in average daily volume (liquid), market capitalization over $2 billion (medium sized and above), and with dividend yields over 5%. To further narrow down the list, and likely increase the quality of the dividend stream, we also screened for some basic fundamental data, such as gross margin, operating margin, and net profit margin all over 10%, return on assets and return on equity over 5%, and debt-to-equity ratio under 1. (Data from finviz.)

This narrowed down the universe of stocks to a manageable 9 names currently, listed below:

Large Caps With 5%+ Dividends


First, a couple notes about the group in general: These are not "growth stocks," as seen by the low values for quarter-over-quarter sales growth and projected EPS (next 5 years), with the possible exceptions of Ares Capital (NASDAQ:ARCC), Southern Copper (NYSE:SCCO), and Statoil (NYSE:STO). The P/E ratios for this group are also low, reflecting the likely modest growth prospects. And the 2011 performance of these names hasn't been anything to write home about, with the exception of the YTD gains by Reynolds (NYSE:RAI) and Eli Lilly (NYSE:LLY).

Additionally, we can see that 3 big global telecom companies are in the group -- ATT&T (NYSE:T), Vodafone (NASDAQ:VOD), And SK Telecom (NYSE:SKM). Also, 5 of the 9 stocks are foreign-based.

Let's take a quick look at these stocks and their recent dividend paying histories (from dividata):

Ares Capital Corp tops the list. This is a private equity finance firm that makes loans to businesses and does other financial biz-to-biz investments and transactions. The company has paid a consistent dividend of between $0.30 and $0.50 per share in every quarter going back to December 2004.

United Microelectronics Corp (NYSE:UMC): This Taiwanese company is involved in semiconductor fabrication. According to my information, UMC pays annual dividends (most US companies generally pay quarterly) — but since 2002 the dividend has varied between $0.01 to $0.19 per share, and 3 years show no dividend (2003, 2004, 2009). More research on this with your broker may be worthwhile.

Southern Copper Corp pops up as the third-highest yield in the screen. SCCO is involved in copper mining, smelting and refining at properties in Peru, Mexico and Chile. SCCO has paid dividends every quarter since 1996, but the amount has ranged from under $0.01 to as high as $0.66 per share.

AT&T is an iconic name with over 250,000 employees worldwide. T's current dividend rate provides a yield of around 6% and the stock is basically flat on the year. Going back to 1984, AT&T has paid a steadily (albeit slowly) rising dividend every quarter, with only a couple of minor blips up or down. The rate has climbed from $0.11 per share in September 1984 to $0.43 in the most recent 2011 quarter.

Reynolds American – This "sin stock" is the maker of such tobacco brands as Camel, Pall Mall, Winston, Kool, Natural American Spirit, Kodiak, and Dunhill, among others. This cigarette company was founded in 1875 in North Carolina. Going back to 1999, RAI has paid a quarterly dividend which has never declined and has risen from $0.19 to $0.53 in that time frame.

Vodafone Group PLC is a major global telecommunications company, headquartered in the United Kingdom, with approximately 370 million customers. The dividend stream in VOD shares going back to 1989 looks like the company generally pays twice-yearly dividends — with exceptions of 1 or 3 payouts in the years of 2006, 1999, 1994, 1993 and 1991. It normally has a larger payout go ex-dividend in the spring then a smaller ex-dividend in the fall of each year. Check with your broker for more details on this company's US dividend stream.

SKM Telecom is another telecommunications giant, this time in South Korea. SKM has strategic alliances with some other big global telecom firms, including Orange, Telecom Italia, and T-Mobile International. Some financial data on this company is missing from normal sources, so do your research. Current and historical dividend info on SKM is also spotty, although it looks generally to pay twice-yearly dividends since 1996 that have ranged between under $0.01 to $1.33 per share. If you're counting on the dividends, make sure to do your due diligence.

Statoil is a large Norwegian energy/oil exploration and production firm. Among other assets, STO has nearly 2,300 gas stations in regions such as Scandinavia, Poland, Latvia, Lithuania, Estonia, and Russia. STO pays an annual dividend, which goes ex-dividend in May each year. The payout since 2002 has risen from $0.33 to $1.10 per share, but it does go up and down (range $0.33 to $1.69).

Eli Lilly rounds out the 9 big-name, high-yielding screen. This American pharmaceutical giant was founded in 1876, and makes such major drugs as Cialis, Prozac, and Darvocet. Going back to 1982, LLY has paid a dividend every quarter. The dividend cash amount has never lowered in this time frame, rising overall from $0.04/share to $0.49. However, it does look as if it's been stuck at the same $0.49/share quarterly payout since 2009.

Once again, this group as a whole has low PE ratios, but there's usually a reason for that. In this case the current sales growth and future expected earnings growth is middling for most of these 9 stocks. They certainly could be considered "value" stocks, but sometimes one man's value is another man's trash.

However, if you're looking for relatively safe yields to beat the piddling amounts paid in money markets and from most government bonds, stocks such as these, yielding 3%, 4%, or even 5% to 10% (or more) can be a good place to start.

Source: 9 Dividend-Paying Large Cap Values