15 High-Dividend, Low-Risk Large Cap Stocks

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 |  Includes: BMY, DUK, ED, FE, KMP, LO, MO, NLY, OKS, PAA, PCG, PEG, PPL, SO
by: Insider Monkey

Over last summer, the financial markets were hit by the European debt crisis. This is just one of the crises that crashed the market in the past few years. As a result, many people were bearish about the economy, and central banks all over the world have been applying expansionary monetary policies. However, the economy is more resilient than most people thought. The S&P 500 index was up nearly 17% since the end of the third quarter of 2011.

We do not like the Fed's inflationary monetary policies, and we are concerned that the Fed will be late to respond to inflation. Therefore, we have been encouraging investors to purchase dividend stocks rather than fixed income securities. We think investors should play defensively by investing in dividend stocks, especially those with low risks, under the current market condition.

Below we compiled a list of 15 high-dividend, low-risk large cap stocks. All companies have at least $10 billion market cap and dividend yield higher than 4%. We picked the top 15 stocks with the lowest beta. The market data is sourced from Finviz.

Ticker

Company

Dividend Yield

Beta

ED

Consolidated Edison Inc.

4.42%

0.25

PCG

PG&E Corp.

4.51%

0.28

SO

Southern Company

4.17%

0.29

PGN

Progress Energy Inc.

4.57%

0.3

NLY

Annaly Capital Management, Inc.

13.78%

0.31

KMP

Kinder Morgan Energy Partners LP

5.34%

0.37

LO

Lorillard, Inc.

4.74%

0.37

DUK

Duke Energy Corporation

4.69%

0.37

PPL

PPL Corporation

5.09%

0.4

MO

Altria Group Inc.

5.71%

0.41

OKS

ONEOK Partners, L.P.

4.37%

0.42

PEG

Public Service Enterprise Group Inc.

4.54%

0.45

FE

FirstEnergy Corp.

5.30%

0.45

BMY

Bristol-Myers Squibb Company

4.17%

0.48

PAA

Plains All American Pipeline, L.P.

5.44%

0.49

Click to enlarge

Consolidated Edison Inc seems to be the stock with the lowest risk among the large-cap dividend stocks listed above. It has a low beta of only 0.25 and a dividend yield of 4.42%. Consolidated Edison is an electric utilities company. It reported annual net income of $1.06 billion for 2011, up from $1.00 billion for 2010. ED has a market cap of $17B and a P/E ratio of 16.51. As of September 30, 2011, Jim Simons' Renaissance Technologies had nearly $100 million invested in ED. The stock was also bought by many insiders during the past month. At the end of December, 10 insiders of the company purchased about 500 shares of the stock at $59.47 per share. ED is now trading at $58.66 per share, lower than the price at which the insiders purchased. So it seems that investors can still make profits by purchasing ED now.

Annaly Capital Management Inc has the highest dividend yield among the stocks on the list above. It has a double-digit dividend yield of 13.78%. NLY also has a low beta of 0.31. Annaly Capital Management owns, manages and finances a portfolio of real estate related investments. As of September 30, 2011, there are 27 hedge funds reported to own NLY in their 13F portfolios. For example, Bill Miller's Legg Mason Capital Management had $117 million invested in NLY at the end of the third quarter last year. NLY has a market cap of $16B and a low P/E ratio of 8.61.

Another large-cap dividend stock with low risk is Southern Company. It is also an electric utilities company. For the third quarter of 2011, Southern Company reported net income of $933 million, up from $833 million for the same quarter of 2010. SO has a dividend yield of 4.17% and a beta of 0.29. It has a market cap of $39B and a P/E ratio of 18.64. As of September 30, 2011, twenty hedge funds disclosed owning SO in their 13F portfolios. Jim Simons is bullish about SO as well. His Renaissance Technologies invested $89 million in SO. Louis Bacon is also in favor of SO. His Moore Global Investments reported to own $32 million worth of SO shares at the end of September.

High dividend stocks will be able to deliver better returns than long-term Treasury bonds by paying fat dividends regularly and protecting investors from the potential inflationary risks. Stocks with low beta can also help investors to avoid other risks in the market and prevent them from potential large losses. We strongly encourage investors to focus on the dividend stocks with low risk and do some careful research on these stocks for their portfolios.

Disclosure: I am long FE, PEG.