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Defensive investors love stocks with high-dividend yields as dividend stocks can protect them from inflationary risks. They also love stocks that pay sustainable high dividends and increase their dividend payouts regularly. David Fish has a list of U.S. Dividend Champions. The list consists of all U.S. stocks that have increased their dividend payouts for at least 25 consecutive years. Fish also created two other sub-lists: Dividend Contenders and Dividend Challengers. Stocks in the former list have increased their dividend payouts for 10-24 consecutive years, and stocks in the latter list have increased their payouts for 5-9 years. The whole list can be found here.

Below we compiled a list of stocks with dividend yields of at least 4% and EPS growth higher than 10% per year over the past five years. All companies have market cap of at least $10 billion and are on David Fish's list, which means that they have increased their payouts for at least 5 years. The market data obtained from Finviz.


Ticker

Company

Dividend Yield

EPS growth

Class

HCP

HCP, Inc.

4.68%

12.47%

Champion

T

AT&T, Inc.

5.85%

17.77%

Champion

NVS

Novartis AG

4.23%

11.18%

Contender

AZN

AstraZeneca PLC

5.67%

13.87%

Challenger

CHL

China Mobile Limited

4.11%

17.07%

Challenger

EOC

Empresa Nacional de Electricidad S.A.

4.24%

39.12%

Challenger

LMT

Lockheed Martin Corporation

4.86%

11.89%

Challenger

WPZ

Williams Partners L.P.

4.61%

35.26%

Challenger

There are two Dividend Champions on the list above: HCP Inc and AT&T Inc . HCP is a real estate investment trust. The company reported net income of $172 million for the third quarter of 2011, up from $23 million for the same quarter a year earlier. HCP has a dividend yield of 4.68% and its EPS grew at 12.47% per year on average over the past five years. The company has been increasing its dividend payouts for 26 consecutive years. It recently announced an increase in its quarterly dividend from $0.465 per share to $0.48 per share. HCP has a market cap of $17B and a P/E ratio of 26.79.

AT&T is a provider of telecommunication services. It has a dividend yield of 5.85% and its EPS grew at 17.77% annually over the past five years. AT&T has been increasing its dividend payouts by 92 consecutive years. Recently, the company announced that it will increase its quarterly dividend from $0.43 per share to $0.44 per share. The dividend will be paid at the beginning of February. T has a market cap of $178B and a P/E ratio of 15.27.

Another large-cap dividend stock with strong fundamentals is Novartis AG . It is classified as Dividend Contender by Fish. Novartis is a provider of healthcare solutions. It reported net income of $2.5 billion for the third quarter of 2011, up from $2.3 billion for the same quarter of 2010. Novartis has been increasing its dividend payouts by 10 consecutive years. It recently announced an increase in its quarterly dividend from $1.9870 per share to $2.3527 per share. The dividend is going to be paid to shareholders in early April. NVS has a dividend yield of 4.23% and its EPS grew at 11.18% per year over the past five years. It has a market cap of $128B and a P/E ratio of 13.12.

Other dividend stocks with strong fundamentals include AstraZeneca PLC , China Mobile Limited , Empresa Nacional de Electricidad SA , Lockheed Martin Corporation , and Williams Partners LP . They are all classified as Dividend Challengers by Fish. Their P/E ratios are all lower than 20. The Federal Reserve keeps extending its ridiculously low interest rate policy. Interest rates will stay low for another three years. We think high dividend stocks are the best alternatives to income investors who are being punished by Bernanke's policies. We urge investors to focus on the dividend stocks with strong fundamentals and perhaps add some of these stocks to their own portfolios.

Source: 8 High-Dividend Stocks With Strong Fundamentals