In part one of this article, I listed 5 of what I consider to be among the best dividend paying stocks in the stock market. In part two here, I list 5 more of my top dividend stock picks. There are many more great dividend paying stocks than just 10, and I will list more of them as time goes on. (All data sourced from Dividend.com.)
Verizon (VZ) 2/10/11 pps: $37.69. Dividend yield: 5.31% Dividend type: Cash annualized dividend: $2.00 per share, $0.50 last quarter. Next Ex-dividend date: Not announced, expected in April. The company has roughly $13.95 billion in cash on hand, and an operating Cash Flow of $29.78 billion.
Verizon Communications provides communication services. The company operates through two segments, Domestic Wireless and Wireline.
Verizon has been paying a consistent quarterly dividend dating back to 1987. Lately there has been some speculation that Verizon might cut their dividend % yield, or stop paying it entirely, I disagree. The dividend here is paid as a % of their free cash flow rather than by earnings, and the cash flow for VZ is huge.
From their recent January 24, 2012 Earnings call transcript, Francis J Shammo remarked:
Thanks, John, and good morning, everyone and happy new year. Before we get into the details, let me start with a few summary comments. We finished the year very strong, creating value for our shareholders in 2011 by generating a total return of 18.2% through a combination of stock price appreciation of 12.1% and our dividend payments. Our stock price appreciation outpaced our peers, as well as the S&P, Dow Jones and broader indices. For the fifth consecutive year, our Board of Directors approved a dividend increase, indicating their confidence in the sustainability of our business model, cash flows and our improving earnings profile into 2012 and beyond.
I believe investors need to focus on Verizon's recent investments in their longer term growth as a continuing and future cash flow generating venture, not as fear of a Verizon decreasing cash flow, resulting in cutting their dividend. Verizon is both an income generating and strong growth potential company in my opinion. Verizon has a very low beta of 0.42, making for a stable stock price.
Because of these factors, Verizon makes this list as one of the best dividend paying stocks.
AT&T (T) 2/10/11 pps: $29.84. Dividend yield: 5.90% Dividend type: Cash annualized dividend: $1.76 per share, $0.44 last quarter. Next Ex-dividend date: Not announced, expected end of April. The company has roughly 3.18 billion in cash on hand, and an operating Cash Flow of 34.65 billion dollars.
AT&T together with its subsidiaries, provides telecommunication services to consumers, businesses, and other service providers worldwide.
AT&T will incur a $4.2 billion charge over its failed bid for T-Mobile. This leaves 34.8 billion dollars in cash minus the 4.2 billion that would have otherwise been levered to buy T-Mobile, so they have plenty of free cash to continue paying their dividend, which has been paid out since 1984. The dividend yield is decent at over 6.3%, and the stock price is low enough for many investors to leverage play this stock at the ex-dividend cut off date.
The company has seen its smartphone sales remain solid, particularly the sale of iPhone and Android models. Q4 2011 earnings were in line with expectations, and its total wireless subscriber base rose by 2.5 million. AT&T is in solid position moving forward in the quarters ahead. The AT&T beta is 0.45, which gives AT&T a stable stock price. The lower and stable stock price, potential stock appreciation, and higher dividend yield lands AT&T on my list.
GlaxoSmithKline (GSK) 2/10/11 pps: $44.75. Dividend yield: 5.04% Dividend type: Cash annualized dividend: $2.25 per share, $0.66339 dividend this quarter plus an extra pay-out of $0.15795. Next Ex-dividend date: 2/15/2012. Record Date: 2/17/2012. Pay Date: 4/12/2012.
The company has roughly $9.29 billion in cash on hand, and an operating Cash Flow of $9.85 billion. GSK engages in the discovery, development, manufacturing, and marketing of pharmaceutical products, over the counter (OTC) medicines, and health-related consumer products worldwide.
Q4 2011 earnings missed estimates on revenues and earnings per share. Gross margins dropped, operating margins shrunk, but net margins improved. Compared to the prior-year quarter, revenue shrunk, but GAAP earnings per share grew. Notwithstanding the less than stellar earnings, The GSK pps remained stable and did not see a sell-off. The GSK beta is 0.61, which reflects the overall price stability of GSK.
GSK has a solid R&D drug pipeline and strong OTC market presence, so the company will remain strong moving forward. I see the entire Healthcare sector doing very well in 2012, so I expect GSK to beat estimates for this quarter.
I remarked in a prior article that GSK was poised to break a 52 week high, and I still maintain this view. The earnings miss did not spark a sell-off, and the stock is still trading close to the 52 week high of $46.50, set on Jan. 3rd, 2012.
The company has been paying out dividends every quarter since 1987 and has plenty of cash on hand to continue to do so. The ex-dividend date for this quarter is this Wednesday, so expect a pps drop on that day as the $0.66 + $0.15 cents will be taken out of the pps. You must buy the stock no later than Tuesday 2/14 before market close, to qualify to receive the quarterly dividend and the extra 0.15 cent dividend add-on.
Considering the stock pps stability, mega cash flow, reasonable price, and future appreciation, GSK makes my list as one of the best dividend paying stocks in the market.
Merck (MRK) 2/10/11 pps: $37.91. Dividend yield: 4.43% Dividend type: Cash annualized dividend: $1.68 per share, $0.42 last quarter. Next Ex-dividend date: Not announced, expected in Late Feb, early March. The company has roughly 15.58 Billion dollars in cash on hand.
Merck provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products.
Merck has a very strong OTC presence, as its OTC product line includes non-drowsy antihistamines; treatment for occasional constipation; decongestant-free cold/flu medicine for people with high blood pressure; nasal decongestant spray; and treatment for frequent heartburn.
Merck has an insomnia drug named Suvorexant, in later phase three trials which should see an FDA filing this year. Suvorexant uses a new mechanism designed to help people sleep, while potentially mitigating the side effects associated with existing sleep aides. It is estimated sales of the drug could top $500 million within several years. Not only is Merck a top dividend paying stock, but with new drugs like Suvorexant, Merck also has potential to grow substantially larger than they already are in the future. In my opinion, this should equate to higher dividend payouts moving forward.
Merck has a low beta of 0.52, making for a stable stock price.
Merck has been paying out dividends consistently since 1970.
NY Community Bancorp (NYB) 2/10/11 pps: $12.48. Dividend yield: 8.01% Dividend type: Cash annualized dividend: $1.00 per share, $0.25 last quarter. Next Ex-dividend date: Not announced, expected in May. The company has 2 billion dollars cash on hand.
New York Community Bancorp operates as a multi-bank holding company for New York Community Bank and New York Commercial Bank, which offer banking products and services in New York, New Jersey, Ohio, Florida, and Arizona.
While a riskier dividend play, NYB makes my list here because of the lower stock price and consistent long term dividend pay-outs.
Many investors might balk at the idea of buying a financial stock at this time, but consider the following;
the bulk of NYB's loans are not on over-levered single-family homes like in The Las Vegas area, that were given to minimum-wage earners. Instead, much of NYB's loan book consists of conservative loans on low-rent apartment buildings in New York City whose value is based on the actual cash flows that the buildings generate. Translation, NYB does not engage in risky loans.
NYB has been paying the same $0.25 quarterly since 2004.
At $12.48 a share, many investors can leverage in a ton of shares in order to get a nice dividend payout at ex-dividend date. Engaging in a leverage play here does bring considerably higher risk into the equation, so consider this factor for NYB fully before making any decision. The beta of 1.14 reflects the higher risk in stock price stability, so consider this as well.
I recommend more risk orientated traders and investors put NYB on their dividend stock paying watch list.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: This article is intended for informational and entertainment use only and should not be construed as professional investment advice. Always do you own complete due diligence before buying and selling any stock.