As interest rates on bonds remain low, and are likely to stay there for some time, investors are looking for other ways to generate income. In cases like this, dividend stocks seem to be a consistent answer. Below are the five stocks that are currently trading with a dividend yield at or above 5% that may be worth looking further into. While many stocks offer ample dividends, I chose these stocks because they are selling at a discount to their competitors and have sufficient cash for dividend payout increases.
Altria Group, Inc. (NYSE:MO) – Although some investors may not approve of Altria’s product or business, it’s hard to argue with results. One of the biggest aspects of Altria that attracts investors is the company’s dividend. The company is currently offering an annual dividend of $1.64, which is a yield of 5.70%. In addition to the dividend, Altria has an extremely low beta of 0.34, showing that the stock has low volatility. Currently, the company has earnings per share of $1.67, giving the stock a price to earnings ratio of 17.2. This is right in line with the industry average of 17.0 but a little less than the S&P 500 ratio of 24.7. Although the price to earnings ratio of Altria is level with the industry average, the company dominates the industry in terms of net income. Altria currently reports a profit of $3.46 billion, which is more than competitors Lorillard, Inc. (NYSE:LO) and Reynolds American Inc. (NYSE:RAI) combined with respective net incomes of $1.06 billion and $1.33 billion. With interest rates low and unlikely to move much higher with the current state of the U.S. economy and Europe, many more investors are looking towards dividend paying stocks. With Altria’s current dividend and its proven track record, it could be a great addition to any portfolio. Further research is advised.
AT&T, Inc. (NYSE:T) – This telecommunications giant is another stock that offers great income potential for investors. With an annual dividend of $1.72, AT&T has an extremely attractive yield of 6.60%. Adding low volatility with a beta of only 0.55, this company can be a good play for investors looking for a stable investment with guaranteed income. With earnings per share of $1.97, the AT&T has a price to earnings ratio of 14.6; slightly lower than the industry ratio of 16.3. The price to book value of AT&T of 1.50 is also lower than the industry ratio of 2.13, giving the impression that this stock could be undervalued at the current price. As Sprint Nextel Corp. (NYSE:S) continues to struggle, Verizon Communications Inc. (NYSE:VZ) is AT&T’s biggest competitor. As you compare the three companies based on net income, AT&T is the leader with $11.72, while Verizon comes in second with $7.07 billion, and Sprint posts a loss of $2.52 billion. With Verizon’s expected gain next year a measly 2%, AT&T can expect to stay on top of this maturing industry.
Exelon Corp. (NYSE:EXC) – With an annual dividend of $2.10, Exelon has the highest dividend on this list; although the yield itself is right at 5.0%. The stock has a beta of 0.5 making it half as volatile as the market. With the company boasting a healthy earnings per share of $3.63, the stock has a price to earnings ratio of 11.8; slightly lower than the industry ratio of 13.0. The closest competitor of Exelon in regard would be PPL Corporation (NYSE:PPL) with a reported net income of $1.37 billion. Exelon however, has this beat with a net income of $2.41 billion. PPL Corporation does however have the lower price to earnings ratio of 10.9. With the approved merger between Exelon and Constellation Energy Group Inc. (NYSE:CEG), Exelon will look to increase its customer base and profits.
Federated Investors, Inc. (NYSE:FII) – Although this stock’s price took a hit over the last few months, dropping from the mid $20’s down to its current level and near low of around $15, the company may actually be a bargain at these prices. Although the company has one of the higher betas on the list with 0.79, it is still less volatile than the market. In addition to a low beta, the stock has an annual dividend of $0.96, which gives it a yield of 6.50%. With earnings per share of $1.56, this stock has a price to earnings ratio under 10, lower than the industry at 12.4. Although the company is trailing competitor BlackRock, Inc. (NYSE:BLK) in net income at $155.94 million compared to $2.41 billion respectively, Federated Investors Inc. does have the lower price to earnings as BlackRock’s ratio is 13.44. When comparing margin, however, Federated has the advantage with a gross margin of 73.09% compared to 59.81%. One concern for the company is that the yield is as high as it is due to the significant drop it recently experienced. The stock is down 40% year-to-date and 16% in just the last month. Although, at the current price, an investor would not only get a nice yield, but once the stock moves upward towards its previous prices, they can see a sizeable gain.
RadioShack Corporation (NYSE:RSH) – The final stock on the list is another one that has seen a price decline as of late. Currently the company is trading near its 52-week low at a level just under $10 per share. It can be noted that with a higher beta of 1.74, RadioShack will experience higher volatility than other stocks. With this decline however, it creates a unique opportunity for investors. The current dividend yield for RadioShack is $0.50, which is a yield of 5.20%. The company’s earnings per share is $1.07, giving it a price to earnings ratio of 9.7. Even with the declined price, this ratio is still slightly higher than the industry ratio of 8.4. Some investors may prefer the competitor Best Buy Co. Inc. (NYSE:BBY) with a higher net income of $14.68 billion compared to $123.70 million and a lower price to earnings ratio of 8.0. However, Best Buy does not have the same dividend opportunity that RadioShack currently has. There is also some concern as RadioShack severed its relationship with T-Mobile, however, the company has replaced that relationship with one with Verizon. Now that RadioShack offers phones for the three big mobile phone companies, RadioShack is looking to boost its sales and creates a unique opportunity for investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.