Considering the importance of high dividend yields these days, I have filtered my five best stock picks with high dividend yields, strong industry positioning and a future outlook that will allow them to keep paying the dividends on a consistent basis. It's the sustainability of the dividend payments that should be given focus when choosing dividend stocks in one's portfolio. Investors should use this analysis as a starting point in their own research.
Mobile TeleSystems (MBT) is a provider of telecommunications services. Its shares are currently trading at $16.8 per share. It has a payout ratio of 0.85%. Over the last 52 weeks, its shares have traded between $11.41 and $21.86 per share. The company's beta of 1.33 indicates that the stock is volatile in nature. Mobile TeleSystems reported a large dividend yield of 6.3%. It managed to generate a return-on-equity of 32%, and a profit margin of 9.8%. It also reported a gross margin of 70% and an operating margin of 22%, both of which were higher than the industry averages at 42% and 9% respectively. With consistent growth in its operating margin, and an expansion away from its core business, Mobile TeleSystems is expected to continue paying dividends.
Southern Copper Corporation (SCCO) is a mining firm that produces copper and molybdenum concentrates. Shares of the company are currently trading at $35.5 per share. Over the last 52 weeks, its shares have traded between $22.58 and $47.63 per share. The company has a high beta of 1.7, indicative of stock volatility. It has a high dividend yield of 8.4%, making it a "dividend king" in our opinion. Southern Copper generated a return-on-equity of 57%, and a profit margin of 34%. Its operating margin of 54% was significantly higher than the industry average at a negative 422.5%. According to one source, Southern Copper is an inflation-proof stock that is worthwhile for investors looking for high dividends. Also, Southern Copper has been considered a safe investment according to the Altman Z-score (which identifies whether stocks are expected to face bankruptcy). Its earnings per share are expected to grow by 13% over the next five years.
DCT Industrial Trust, Inc. (DCT) is a real estate investment trust (REIT). Shares of the company are currently trading at $5.50 per share and have traded within a very narrow range of $3.88 and $5.89 over the last 52 weeks. The company reported a dividend yield of 5.1%. Its beta of 1.56 indicates that the stock is quite volatile in nature. DCT Industrial generated a negative return-on-equity and it also generated a negative profit margin. The company's gross margin of 72% was slightly higher than the industry average at 69%. It also reported an operating margin of 10.6%. According to one source, five analysts recommend buying the stock while seven recommend holding the stock, with none recommending selling the stock.
iShares iBoxx $ HY Corporation Bond Fu (HYG) is an investment fund that trades high-yield corporate bonds in the US. It is based on the iBoxxÂ® $ Liquid High Yield Index. It also invests in futures, options, and bonds that are not included in the index. Shares of the company are currently trading around $89.5 per share. Over the last 52 weeks, its shares have traded between $77.9 and $92.85 per share. It reported a dividend yield of 7.69%, and a 3-year total return of 15.47%. With more than $11.7 billion worth of assets, the company holds over 450 high-yield US dollar denominated corporate debt notes. It has a highly diversified portfolio that is attractive to investors, and it is also expected to perform well in 2012. The company was also among the top 10 for inflows to long fixed-income ETFs.
PEPCO Holdings, Inc. (POM) is an electricity and natural gas supplier. Shares of the company are currently trading at $20 per share. Over the last 52 weeks, its shares have traded within a very narrow range of $16.57 and $20.64 per share. Also, it has a significantly low beta of 0.33, indicating that the stock is not volatile. PEPCO reported a dividend yield of 5.4%. The company generated a return-on-equity of 5.8%, and a profit margin of 4.4%. It also reported an operating margin of 9.9%, and a gross margin of 22.7%. The company is looking to make improvements in its Buzzard Point Substation, and also increasing the capacity of underground transmission circuits, which is certainly positive news for the company. It was recently given an $11 million contract to carry out energy saving initiatives. According to one source, PEPCO Holdings holds is one of the top 15 dividend yielding stocks in the S&P 500 Index, as of December 31, 2011. An analysis of PEPCO's dividends revealed that the company's dividend policy has been doing quite well, and its competitors are not even close to the high yield offered by PEPCO.