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Many investors trust dividend-paying securities because that they pay you directly. These investors prefer depending on dividend policies subject to board approval over depending on “greater fool” investors to buy their stocks in the future for a capital gain.

How long would it take for a dividend-paying stock to pay back the stocks original price? The time it takes for an investment’s cash outflows to sum to the original outlay is called the payback period, and it is considered a simplistic and crude measure of risk. (Notice that the payback period does not account for how dividend distributions in earlier years are worth more than the same dollar value paid out later in the future. You would be able to reinvest the earlier distribution and earn a return on it, making it worth more.)

Payback period estimates depend on earnings growth and dividend payout ratios. Payout ratios were assumed constant, and dividend was projected by taking the minimum of the following:

  • Earnings growth over the past five years
  • Analyst estimates for earnings growth for the next five years
  • Return on equity times the earnings reinvestment rate

The minimum of these measures was then used to estimate dividend growth for the next three years. Abnormal growth will not last forever, and analyst estimates, as informed as they are, are not predictive indefinitely. To address this limitation, a terminal 3% dividend growth rate was applied for every stock in the list after three years of projected growth rates. (Predicting economic growth many years out is impossible, and 3% seems like a reasonable value.)

Payback Periods for Large Cap, High-Dividend Securities

Ticker
Company

Dividend Yield

Payout Ratio

EPS growth, past 5 years

EPS growth next 5 years

ROE x Reinve-stment

Return on Equity

Payback Period

Annaly Capital Mgmt, Inc.

14.13%
72.77%
44.15%
0.75%
4.71%
17.30%

6

STD

Banco Santander,
S.A.

9.59%
36.44%
-0.11%
12.40%
6.86%
10.80%

9

YPF S.A.

9.14%
81.53%
-1.84%
15.30%
5.18%
28.06%

10

FTE

France Telecom

10.22%
117.34%
-6.14%
3.30%
-1.87%
10.76%

10

CenturyLink, Inc.

8.06%
143.57%
4.75%
4.64%
-2.14%
4.91%

11

Banco Bilbao Vizcaya Argentaria, S.A.

6.17%
22.87%
5.71%
7.30%
10.10%
13.09%

12

Lockheed Martin Corporation

5.30%
38.08%
11.89%
9.36%
47.34%
76.45%

12

Westpac Banking Corporation

6.38%
58.45%
6.58%
3.00%
7.68%
18.48%

12

Southern Copper Corp.

6.75%
82.58%
2.90%
18.34%
8.88%
50.95%

12

Yanzhou Coal Mining Co. Ltd.

3.35%
24.70%
26.36%
25.14%
33.39%

13

National Grid plc

5.83%
49.28%
8.94%
4.40%
16.52%
32.57%

13

AstraZeneca PLC

5.48%
44.17%
13.87%
2.37%
20.01%
35.84%

14

Canadian Imperial Bank of Commerce

4.60%
52.73%
169.36%
9.03%
9.39%
19.86%

14

Reynolds American Inc.

5.42%
86.56%
6.37%
8.00%
2.76%
20.56%

14

AT&T, Inc.

5.78%
86.96%
17.77%
4.42%
1.35%
10.33%

14

Chunghwa Telecom Co. Ltd.

5.68%
88.89%
14.31%
2.10%
1.40%
12.61%

14

Nokia Corporation

7.96%
227.11%
-9.64%
4.29%
-6.34%
4.99%

14

Perusahaan Perseroan (Persero)

4.42%
4.59%
8.47%
8.70%
26.04%
27.29%

15

Philip Morris International, Inc.

4.27%
54.05%
8.06%
11.54%
116.03%
252.51%

15

Total SA

5.93%
66.40%
-2.67%
3.00%
6.33%
18.85%

15

British American Tobacco plc

4.05%
73.60%
11.53%
10.40%
9.97%
37.77%

15

BCE, Inc.

5.24%
82.53%
4.32%
5.86%
2.42%
13.88%

15

CPFL Energia S.A.

5.63%
85.17%
5.90%
-1.30%
3.23%
21.75%

15

Raytheon Co.

3.95%
30.51%
19.29%
8.65%
13.57%
19.53%

16

Sun Life Financial Inc.

5.76%
45.49%
-4.63%
9.78%
6.48%
11.89%

16

Entergy Corporation

4.81%
46.76%
8.64%
2.50%
7.88%
14.80%

16

Taiwan Semiconductor Manuf.

4.07%
48.60%
17.38%
8.60%
15.55%
30.26%

16

Rogers Communications Inc.

3.89%
52.15%
26.89%
9.26%
16.95%
35.43%

16

Exelon Corp.

4.71%
52.47%
22.41%
1.65%
9.25%
19.47%

16

Royal Bank of Canada

4.38%
54.47%
4.12%
11.54%
7.05%
15.49%

16

Bank of Montreal

4.69%
55.21%
2.70%
9.52%
5.51%
12.30%

16

PPL Corporation

4.71%
57.99%
4.06%
2.98%
5.53%
13.17%

16

Eni SpA

6.04%
59.64%
-5.67%
8.05%
4.70%
11.64%

16

TELUS Corporation

4.36%
60.28%
12.28%
8.23%
5.75%
14.48%

16

ONEOK Partners, L.P.

4.66%
62.36%
3.66%
9.18%
5.61%
14.90%

16

Duke Energy Corporation

4.89%
64.75%
1.91%
4.10%
3.29%
9.33%

16

PGN

Progress Energy Inc.

4.73%
85.92%
6.91%
4.03%
1.21%
8.56%

16

Williams Partners L.P.

4.91%
97.95%
35.26%
6.63%
0.39%
19.15%

16

SI

Siemens AG

3.33%
18.43%
11.54%
19.70%
14.14%
17.34%

17

Prudential plc

3.73%
34.70%
13.88%
9.00%
15.42%
23.62%

17

Empresa Nacional de Electricidad S.A.

4.26%
39.47%
39.12%
2.50%
12.69%
20.97%

17

Novartis AG

4.06%
45.23%
11.18%
5.68%
8.84%
16.14%

17

NextEra Energy, Inc.

3.86%
48.28%
15.19%
5.78%
6.66%
12.88%

17

ConAgra Foods, Inc.

3.80%
50.36%
16.39%
7.14%
7.93%
15.98%

17

Credit Suisse Group

4.79%
51.21%
-0.37%
5.80%
4.27%
8.76%

17

American Electric Power Co., Inc.

4.67%
58.91%
-0.80%
4.51%
4.44%
10.81%

17

Kimberly-Clark Corporation

3.98%
63.64%
6.08%
7.50%
11.82%
32.52%

17

PG & E Corp.

4.24%
67.95%
4.40%
5.17%
3.00%
9.36%

17

Southern Company

4.36%
77.99%
2.12%
5.86%
2.70%
12.28%

17

Paychex Inc.

4.36%
84.33%
3.13%
11.06%
5.61%
35.77%

17

FirstEnergy Corp.

4.84%
122.78%
-0.71%
4.00%
-1.25%
5.47%

17

China Petroleum & Chemical Corp.

3.65%
25.73%
11.46%
7.60%
13.47%
18.14%

18

Northrop Grumman Corporation

3.45%
29.29%
11.98%
7.94%
10.62%
15.02%

18

Enersis S.A.

3.86%
36.67%
31.25%
4.00%
8.18%
12.91%

18

Unilever plc

3.59%
40.33%
6.22%
8.25%
19.14%
32.08%

18

Public Service Enterprise Group Inc.

4.03%
42.80%
12.39%
3.33%
9.63%
16.83%

18

China Mobile Limited

4.26%
43.06%
17.07%
1.85%
12.22%
21.46%

18

EI DuPont de Nemours & Co.

3.32%
44.94%
9.64%
9.00%
18.28%
33.20%

18

Sysco Corp.

3.72%
52.35%
7.78%
6.65%
12.87%
27.00%

18

Vodafone Group plc

5.12%
57.71%
4.12%
-5.50%
3.79%
8.96%

18

Xcel Energy Inc.

4.01%
60.54%
6.17%
5.26%
4.08%
10.33%

18

HJ Heinz Co.

3.56%
60.72%
18.76%
6.78%
14.89%
37.90%

18

Dominion Resources, Inc.

3.83%
64.58%
27.34%
4.20%
5.04%
14.24%

18

Consolidated Edison Inc.

4.14%
65.25%
2.65%
3.88%
3.40%
9.79%

18

Reed Elsevier plc

3.77%
66.48%
8.44%
6.40%
13.23%
39.46%

18

Bristol-Myers Squibb Company

4.11%
67.93%
4.38%
1.33%
6.64%
20.69%

18

Thomson Reuters Corporation

4.10%
77.42%
1.12%
12.45%
1.52%
6.72%

18

HCP, Inc.

4.78%
159.78%
12.47%
6.76%
-3.41%
5.71%

18

Enterprise Products Partners LP

5.46%
180.20%
4.57%
7.41%
-7.87%
9.81%

18

Intel Corporation

3.36%
30.52%
7.49%
10.65%
18.91%
27.21%

19

Sasol Ltd.

3.76%
33.41%
14.75%
1.90%
13.03%
19.56%

19

Unilever NV

3.50%
40.33%
7.04%
6.40%
19.14%
32.08%

19

The Toronto-Dominion Bank

3.40%
43.59%
13.53%
10.62%
7.45%
13.20%

19

The Bank Of Nova Scotia

3.78%
44.40%
3.70%
9.30%
10.78%
19.38%

19

Procter & Gamble Co.

3.24%
47.47%
9.95%
8.77%
9.62%
18.32%

19

McDonald's Corp.

3.00%
47.51%
17.75%
10.47%
19.63%
37.39%

19

Pepsico, Inc.

3.26%
49.27%
10.37%
8.90%
14.81%
29.20%

19

Pfizer Inc.

4.04%
70.41%
-0.04%
3.46%
2.90%
9.79%

19

Banco Santander-Chile

4.20%
108.16%
15.30%
12.53%
-2.20%
27.01%

19

Kinder Morgan Energy Partners LP

6.08%
2289.11%
-2.30%
8.15%
-13.35%
0.61%

19

BP plc

3.69%
13.17%
0.00%
4.23%
18.08%
20.82%

20

International Paper Co.

3.64%
24.88%
1.16%
4.97%
13.79%
18.36%

20

CNOOC Ltd.

3.12%
27.61%
14.73%
7.70%
22.46%
31.02%

20

General Mills, Inc.

3.12%
43.05%
13.27%
7.74%
16.97%
29.80%

20

Campbell Soup Co.

3.47%
47.74%
6.83%
4.38%
41.31%
79.05%

20

Kellogg Company

3.14%
48.06%
6.94%
8.29%
26.44%
50.90%

20

Statoil ASA

4.31%
60.11%
-3.35%
7.65%
11.97%
30.02%

20

Waste Management, Inc.

4.03%
65.61%
-1.13%
9.67%
5.26%
15.30%

20

Altria Group Inc.

5.95%
92.78%
-13.70%
7.67%
5.40%
74.79%

20

Vornado Realty Trust

3.32%
68.86%
2.06%
4.93%
3.99%
12.80%

21

Pearson plc

3.40%
79.69%
11.98%
5.10%
2.19%
10.79%

21

ABB Ltd.

3.42%
89.01%
21.67%
15.18%
2.20%
20.06%

21

Edison International

3.14%
39.39%
2.51%
2.97%
6.12%
10.10%

22

Diageo plc

3.11%
53.05%
2.58%
10.70%
19.28%
41.07%

22

Manulife Financial Corporation

3.84%
99.04%
-3.70%
8.67%
0.04%
3.78%

22

Ventas, Inc.

4.10%
215.32%
2.18%
5.84%
-6.67%
5.78%

22

ConocoPhillips
3.68%
30.57%
-4.57%
9.28%
11.82%
17.02%

23

Sempra Energy

3.55%
35.42%
-3.82%
6.58%
8.12%
12.57%

23

Time Warner Cable Inc.

3.07%
41.56%
0.95%
15.47%
10.10%
17.28%

23

Republic Services, Inc.

3.04%
62.61%
2.43%
12.65%
2.37%
6.34%

23

Verizon Communications Inc.

5.31%
78.58%
-16.07%
8.85%
3.93%
18.36%

23

TransCanada Corp.

3.77%
81.51%
-6.25%
7.40%
1.67%
9.01%

23

Spectra Energy Corp.

3.57%
57.81%
-6.38%
7.23%
6.21%
14.72%

24

KFT

Kraft Foods Inc.

3.28%
61.62%
-3.49%
9.32%
3.26%
8.49%

24

HBC

HSBC Holdings plc

3.96%
29.39%
-11.72%
21.95%
7.17%
10.16%

25

General Electric Co.

3.48%
42.54%
-6.74%
14.12%
6.52%
11.34%

25

GlaxoSmithKline plc

4.83%
105.20%
-17.22%
12.68%
-1.92%
37.01%

25

Canon Inc.

3.29%
66.00%
-7.08%
6.30%
2.94%
8.66%

26

The Allstate Corporation

3.09%
77.01%
-8.35%
9.20%
0.70%
3.05%

28

CRH plc

4.53%
90.73%
-19.86%
25.30%
0.45%
4.89%

28

Encana Corporation

3.56%
150.38%
-12.53%
15.35%
-1.17%
2.32%

28

The Dow Chemical Company

3.42%
31.29%
-17.99%
6.75%
9.46%
13.77%

30

Arcelor Mittal

3.39%
35.83%
-15.79%
25.03%
3.45%
5.38%

30

Nucor Corporation

3.69%
98.13%
-36.83%
60.98%
0.12%
6.38%

30

Merck & Co. Inc.

4.33%
109.21%
-33.42%
4.40%
-0.71%
7.75%

30

Companhia Siderurgica Nacional

6.44%
183.39%
18.77%
19.20%
-42.15%
50.55%

30

Since many dividend investors are attracted to high-paying dividend companies on the premise that they can ignore what the markets do and simply focus on their dividend income, the payback period provides a reality-check for what income investments will likely feel like. If you want to ignore what prices your securities fetch in the markets, you could be waiting a very long time to get paid back.

Disclaimer: This article was written to provide investor information and education, and should not be construed as investment advice. I have no idea what your individual risk, time horizon, and tax circumstances are. Please seek the personal advice of a financial planner. This article uses third-party data and may contain approximations and errors. Please check estimates and data for yourself before investing.

Source: Large Cap, High-Dividend Stocks: Waiting For Payback