With 10-year Treasuries hovering below 2.5% and stocks hovering around all-time highs, it's getting harder and harder to maintain a decent average yield in your dividend portfolio. So what is a long-term dividend investor to do?
Obviously, you could add more high-yielding real estate investment trusts ("REITs") and master limited partnerships ("MLPs") to your portfolio to juice your income...but these securities are inherently more risky than the average stock (hence the high dividend/distribution yield). Don't get us wrong, REITs and MLPs are a great addition to any DIY Dividend Portfolio, but we recommend that you limit your exposure to these asset classes to 25% of your total portfolio. There's no such thing as a free lunch...and don't forget that high-yield securities offer a high yield for a reason.
Non-REIT, Non MLP Stocks Yielding Over 3%
There are plenty of non-REIT, non-MLP, high-quality dividend stocks out there with yields over 3%. That said, we recently ran a screen through our rating system and came up with our "3% Club." This Club is made up of 20 Non-REIT, Non-MLP Dividend stocks that meet the criteria below.
- Dividend Yield > 3.0%
- Dividend Rating > 70
- Dividend/Safety/Value (DSV) Blend Rating > 60
Note: The DSV blend is a blend of our individual Dividend, Safety, and Value ratings for each stock using the following weightings: Dividend (50% weight), Safety (25%), Value (25%).
We will highlight each of these stocks over the course of a 5-part series. Below is a schedule of the entire series. Please make sure to "follow" us so that you will be notified when each new article is published.
- Part 1: Secretaries (stocks #17-20)
- Part 2: Treasurers (stocks #13-16)
- Part 3: Vice Presidents (stocks #9-12)
- Part 4: Presidents (stocks #5-8)
- Part 5: Chairmen/Chairwomen (stocks #1-4)
The 3% Club: Presidents
There are hundreds of stocks out there yielding over 3%. In fact, our coverage universe currently has 132 stocks with a yield over 3%.
That said, we only picked the best of the best for our 3% Club. This article highlights the 4 Presidents (stocks #5-8). The tables below summarize some of the key data points that we analyze when ranking our dividend stocks.
#8 Principal Financial Group Inc. (NYSE:PFG)
Founded in 1879, Principal Financial Group, Inc. offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies. The company generates a robust 3.0% dividend yield with a modest payout ratio of 35.8%.
#7 Eversource Energy (NYSE:ES)
Founded in 1927, Eversource Energy is a utility company that provides energy services to 3.6 million electric and natural gas customers. The company serves residential, commercial, and industrial customers in Connecticut, Massachusetts, and New Hampshire. The company generates a very healthy dividend yield of 3.4% with a payout ratio of less than 60%. The company has increased its dividend for 17 consecutive years. Many utilities have underperformed in 2015 after a very strong 2014, which is highlighted in the low Parsimony Momentum ranking of 32.
#6 Wisconsin Energy Corp. (NYSE:WEC)
Wisconsin Energy Corporation provides electrical energy to customers over 2 million customers in Wisconsin and the Upper Peninsula of Michigan. Similar to the other utilities in our screen - the company generates a strong dividend yield (3.5%) with a modest payout ratio (60%) for a utility. In addition, the company has increased its dividend to shareholders at a compound annual rate of 14% over the past 10 ye
#5 McDonald's Corp. (NYSE:MCD)
Founded in 1940, McDonald's Corporation operates and franchises McDonald's restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America. The company's restaurants offer various food products, soft drinks, coffee, and other beverages. The company operates 36,258 restaurants, including 29,544 franchised restaurants. The company has increased its dividend for over 39 consecutive years - and generates a 3.5% dividend yield.
If you are looking to generate stable income, dividend growth investing is a great way to accomplish this goal and any one of these 3% yielders would make a nice addition to your portfolio. Note that identifying good stocks is only the starting point of building a dividend portfolio and investors should pay close attention to valuation as well when deciding whether or not to buy a stock as many stocks right now are overvalued (i.e., good stocks can often trade at bad prices).
Disclosure: The author is long MCD, WEC.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.