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AllianceBernstein LP (NYSE:AB) is a U.S. based global asset management firm owned by AXA, a French insurance conglomerate. It has over $400 billion assets under management. The following is a list of top dividend stocks AllianceBernstein is holding according to its most recent 13F filing.

Stock

Symbol

Shares Held as on 12/31/2011

Yield

Payout Ratio

Johnson & Johnson

JNJ

22,516,147

3.50%

64%

General Electric Co.

GE

51,336,685

3.60%

50%

CenturyLink Inc.

CTL

19,074,014

7.60%

271%(*)

Procter & Gamble Co.

PG

10,319,825

3.30%

60%

AT&T Inc.

T

22,491,934

5.90%

261%(*)

(*) Payout ratio in the above table is based on GAAP EPS. If we take adjusted EPS for CenturyLink and AT&T payout ratio comes to 108% and 78%, respectively.

CenturyLink, Inc. is the highest yielding stock in the above list and also my favorite. CenturyLink operates as an integrated communications company. It is the largest rural exchange provider by access lines (15 million), providing local telephone service across 37 states. The company also provides a range of communications services, including voice, Internet, data, and video services in the United States. In 2011 CenturyLink acquired Qwest and Savvis Communications.

CenturyLink remains the best buy among Rural Local Exchange Carriers for its high dividend yield of 7.6% and improving top line trends. CTL expects its access lines losses to improve from Q4 2011 driven by regional focus and increasing penetration of video and data. Further, CTL is expected to generate strong cash flows as Qwest acquisition turns accretive.

On valuation front CTL is trading at a discount to its peers. With double digit growth at Savvis, improving business trends in broadband and video and strong cash flow generation capability, I believe CTL is attractive to income oriented investors and offers the best risk-reward tradeoff in rural telecom space.

Please note that although CTL's payout looks high on GAAP EPS, it is ~60% of its FCF and is well covered.

Johnson & Johnson engages in the research and development, manufacture and sale of various healthcare products worldwide. It operates in three segments: Consumer, Pharmaceutical and Medical Devices and Diagnostics.

J&J's recent earnings results and guidance for 2012 show signs of improving fundamentals across its businesses. On the pharmaceutical front, in 2011, J&J received key product approvals for several of its drugs including Incivo, Zytiga, Edurant and Xarelto. These launches are expected to drive solid growth and improve margins through 2012. There is also sequential improvement on McNeil's situation as J&J works through its Consent Decree with FDA. Looking at its MD&D business, volume trends seem to be improving as physician office visits are stabilizing.

Despite FX pressures and a tough environment, J&J has posted good top line growth in Q4 and is expected to continue to outperform its peers, driven by a robust pipeline of drugs in the near term. I recommend a buy.

Procter and Gamble is a worldwide manufacturer and marketer of consumer and personal care products. Its well known brands include Pampers, Gillette, Pantene, Duracell, Clairol, Charmin and Bounty. It largely is a mature market player, with only 30% of revenues coming from emerging markets.

Recently, P&G reported disappointing FYQ2 results and lowered its 2012 guidance. With its business heavily levered towards developed markets, I expect P&G will continue to struggle with top-line growth as consumer spending weakens. P&G is losing its market share in mature markets, and it needs more innovation in its products to drive the growth. Even in emerging markets, I believe that margins will be under pressure, due to investment spending, along with Forex headwinds.

With the macro headwinds in the form of input costs and currency drags, and continued softening of developed market growth rates, I don't like risk-reward profile of P&G, and expect a near term downside.

I also don't like General Electric and AT&T. GE is likely to see headwinds from weak pricing, a difficult European environment and decelerating growth in emerging markets. Hence I recommend a sell on the stock. I am also not too positive on AT&T. Although its break-up with T-Mobile came somewhat along expected lines, the failure of this deal is a net negative for AT&T as it will now have to look elsewhere for the spectrum. Further, fall off of this deal is not good from a competitive point of view for AT&T. AT&T would have been a more powerful competitor with the merger. Without the deal, both Verizon (NYSE:VZ) and Sprint (NYSE:S) should be better able to compete.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: AllianceBernstein's Top High Yield Stocks: 2 To Buy, 3 To Avoid