5 Safe And Cheap Dividend Stocks To Invest (March 2019)

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Includes: ABBV, BBY, CMA, DAL, ITW, LRCX, MMP, MS, T, VLO
by: Financially Free Investor
Summary

The markets have been on a steady upward move since the beginning of this year. Yet, it is still 4% below its all-time high.

Irrespective of market direction or sentiment, it's always a good idea to keep your wish list ready by separating the wheat from the chaff.

This is part of our monthly series, where we highlight five companies that are large-cap, relatively safe, dividend-paying companies and also offer large discounts to their historical norms.

We go over the filtering process to select just five such stocks from more than 7,500 companies that are traded on the U.S. exchanges, including OTC networks. The selected five companies, as a group, would offer an average of 36% more dividends compared to the beginning of last year.

The markets have continued their steady move upwards since the beginning of this year, as visible from the chart below. Stocks are no longer cheap as the market is only about 4% below its all-time high. However, it has yet to make a new high. Most market participants believe that bulls are back in control while some still believe it to be a bear market bounce rally. Only time will tell.

S&P 500 ETF ( SPY) 6-months chart, courtesy Yahoo Finance.

Irrespective of the market's day-to-day gyrations, we remain on the constant lookout for companies that may be trading cheap on a relative basis to the overall market as well as to their respective 52-week highs. We also look at the sustainable dividend payout. We believe in keeping a buy-list handy and dry-powder ready so that we are able to use the opportunity when the time is right.

This article is part of our monthly series where we scan the entire universe of roughly 7,500 stocks that are listed and traded on the US exchanges, including over-the-counter (OTC) networks. We usually highlight five stocks that may have temporary difficulties and/or lost favor with the market and offering deep discounts on a relative basis. However, that is not the only criteria that we apply. While offering relatively cheap valuation, we also demand that the stocks we select have a solid dividend history and manageable debt and investment grade credit rating. Please note that these are not recommendations to buy, but should be considered as a starting point for further research.

We start with a fairly simple goal. We want to shortlist five companies that are large-cap, relatively safe, and dividend-paying companies trading at relatively cheaper valuations in comparison to the broader market. The objective here is to highlight and bring to the notice of the value-oriented readers some of the dividend paying and dividend-growing companies that may be offering juicy dividends due to a temporary decline in their share prices. The excess decline may be due to industry-wide decline or some kind of one-time setback like missing quarterly earnings expectations. We adopt a methodical approach to filter down the 7,500-plus companies into a small subset. Also, to select five stocks, we will choose at least two stocks that have high current yields and the remaining ones that have had high dividend growth.

Note: Please notice that when we use the term "safe" regarding stocks, it should be interpreted as "relatively safe" because nothing is absolutely safe in investing. Also, in our opinion, for a well-diversified portfolio, one should have 15-20 stocks at a minimum.

Goals For The Selection Process

We want to emphasize our goals before we get to the actual selection process. Our primary goal is income, and the secondary goal is to grow capital. These goals are by and large in alignment with most retirees and income investors as well as DGI investors. A balanced DGI portfolio should keep a mix of high-yield, low-growth stocks along with some high-growth but low-yield stocks. That said, how you mix the two will depend upon your personal situation, including income needs, time horizon, and risk tolerance.

A well-diversified portfolio would normally consist of many more than just five stocks and preferably a few stocks from each sector of the economy. However, in this periodic series, we try to shortlist and highlight just five stocks that may fit most income and DGI investors, but at the same time are trading at attractive valuations. However, as always, we recommend you do your due diligence before making any decision on them.

Selection Process

The S&P 500 (NYSEARCA: SPY) yields less than 2%. If we are the dividend and income investors, we should logically look for companies which pay yields that are at least better than the S&P 500. Of course, the higher, the better, but at the same time, we should not try to chase high yield. If we try to filter for dividend stocks paying 2% plus dividend yield, there are nearly 2000 such companies trading on US exchanges including OTC networks. If we further limit our choices to companies which have a market cap of at least $10 billion and daily trading volume in excess of 100,000 shares, the number comes down to about 350 companies.

We also want stocks that are trading at relatively cheaper valuations, so we will apply an additional filter with a forward P/E of no more than 20. However, a P/E of 20 is not really that cheap, so, in our quest for not paying too high a price, we add one more criterion that the close price is at least 15% below the 52-week high. After applying these additional criteria, we get a smaller set of 77 companies, compared to last month since the markets have moved higher and boosted prices for most companies.

Criteria to Shortlist

  • Market-cap >=10 billion
  • Dividend yield >= 2.0%
  • Dividend growth past 5-years >= 0%
  • Forward P/E <= 20
  • Distance from 52-Week High < -15%.

Below is the complete list of 77 companies that we got by using the above criteria, sorted on the ticker/symbol.

Company Name

Ticker

Market Cap (Billions)

Div. Yield %

5 Yr Hist. Div. Growth %

P/E

Close price (03/15 /2019)

52 Week High

Distance from 52-Wk High

AbbVie Inc.

ABBV

119.98

5.26

18.92

9.37

81.34

119.75

-32.08%

AmerisourceBergen Corp

ABC

16.93

2

11.51

11.87

80.18

100.6

-20.30%

Archer Daniels Midland Co

ADM

24.18

3.24

8.01

12.19

43.18

51.79

-16.62%

Aegon NV

AEG

14.21

5.2

5.72

6.71

5.3

7.41

-28.48%

American International Group, Inc.

AIG

38.29

2.91

27.42

10.02

44.04

56.31

-21.79%

Ameriprise Financial, Inc.

AMP

17.49

2.79

11.91

8.22

129.05

158.91

-18.79%

Bayer Aktiengesellschaft

BAYRY

71.24

2.98

3.52

9.9

19.1

31.67

-39.69%

Best Buy Co., Inc.

BBY

18.74

2.59

23.97

12.4

69.63

82.6

-15.70%

BlackRock, Inc.

BLK

68.51

3.04

10.43

16.5

433.55

564.16

-23.15%

Bristol-Myers Squibb Co.

BMY

81.57

3.28

2.42

12.01

49.96

66.68

-25.07%

Cardinal Health, Inc.

CAH

14.98

3.79

9.58

9.94

50.27

72.27

-30.44%

Caterpillar Inc.

CAT

76.36

2.59

5.61

10.85

132.67

158.92

-16.52%

Carnival Corporation

CCL

29.83

3.53

14.53

11.96

56.61

67.85

-16.57%

Citizens Financial Group, Inc.

CFG

16.51

3.57

46.92

9.25

35.87

45.73

-21.56%

Comerica Incorporated

CMA

12.99

3.26

21.11

10.07

82.27

100.31

-17.98%

CNA Financial Corporation

CNA

11.83

3.21

6.48

10.94

43.56

52.72

-17.37%

Canadian Natural Resources Limited

CNQ

33.33

3.64

6.31

19.96

27.72

37.5

-26.08%

Campbell Soup Company

CPB

10.84

3.89

3.48

14.54

36.01

44.2

-18.53%

Carnival Corporation

CUK

11.56

3.59

14.88

11.99

55.77

67.44

-17.30%

CVS Health Corporation

CVS

72.12

3.6

16.11

8.1

55.6

80.8

-31.19%

Delta Air Lines, Inc.

DAL

34.76

2.73

47.20

7.88

51.19

60.71

-15.68%

Quest Diagnostics Inc.

DGX

11.88

2.4

10.82

13.72

88.45

114.99

-23.08%

Dow Chemical Company

DWDP

128.75

2.75

0.12

13.64

55.28

71.44

-22.62%

Eastman Chemical Co.

EMN

10.99

3.15

12.34

8.99

78.64

109.97

-28.49%

Energy Transfer LP

ET

17.44

8.1

11.68

12.2

15.06

18.97

-20.61%

Ford Motor Co.

F

33.50

7.12

8.45

6.99

8.43

12.11

-30.39%

Fifth Third Bancorp

FITB

18.37

3.11

9.41

10.26

28.32

34.35

-17.55%

FMC Corporation

FMC

10.17

2.07

7.14

13.63

77.24

92.4

-16.41%

General Dynamics Corp.

GD

48.94

2.19

10.71

14.49

169.79

225.96

-24.86%

Gilead Sciences, Inc.

GILD

83.71

3.84

13.50

9.87

65.63

81.72

-19.69%

General Motors Co.

GM

53.66

4.00

5.84

5.87

38.07

44.85

-15.12%

Halliburton Company

HAL

24.41

2.57

2.84

19.96

27.97

54.4

-48.58%

Hasbro, Inc.

HAS

10.91

2.91

10.06

19.66

86.72

108.99

-20.43%

Huntington Bancshares Incorporated

HBAN

14.45

4.07

23.10

10.23

13.75

16.4

-16.16%

Honda Motor Co., Ltd.

HMC

48.81

2.92

0.21

7.13

27.45

35.37

-22.39%

International Flavors & Fragrances, Inc.

IFF

13.29

2.34

13.85

19.52

124.59

148.69

-16.21%

Imperial Oil Limited

IMO

21.28

2.09

5.12

15.99

27.31

34.16

-20.05%

ING Group, N.V.

ING

48.99

3.52

28.11

8.23

12.59

17.62

-28.55%

International Paper Co.

IP

18.21

4.39

7.29

8.74

45.51

59.01

-22.88%

Illinois Tool Works Inc.

ITW

46.98

2.79

18.60

17.98

143.18

170.96

-16.25%

Kellogg Company

K

18.66

4.13

3.79

13.61

54.27

74.84

-27.49%

KeyCorp

KEY

17.53

3.91

20.96

9.38

17.38

21.74

-20.06%

The Kroger Co.

KR

19.43

2.3

10.71

10.88

24.36

32.56

-25.18%

Kohl's Corporation

KSS

11.23

3.59

11.83

11.34

67.98

82.05

-17.15%

Lockheed Martin Corp.

LMT

83.68

2.97

10.57

15.22

296.15

358.6

-17.41%

Lincoln National Corp.

LNC

12.81

2.36

19.14

6.84

62.72

77.84

-19.42%

Lam Research Corp.

LRCX

27.83

2.41

57.25

13.13

182.39

224.28

-18.68%

Las Vegas Sands Corp.

LVS

46.32

5.02

16.47

18.68

59.76

81.27

-26.47%

LyondellBasell Industries N.V.

LYB

32.29

4.6

9.94

8.48

87

118.54

-26.61%

Magna International Inc.

MGA

15.89

2.99

13.63

7.03

48.85

66.68

-26.74%

Magellan Midstream Partners, L.P.

MMP

13.69

6.66

11.88

14.57

59.95

71.97

-16.70%

Marathon Petroleum Corp.

MPC

40.72

3.51

18.55

9.62

60.45

86.39

-30.03%

Morgan Stanley

MS

74.04

2.77

40.63

8.98

43.33

58.03

-25.33%

Mitsubishi UFJ Financial Group, Inc.

MUFG

67.83

3.08

2.13

7.49

5.17

6.86

-24.64%

NetApp, Inc.

NTAP

16.81

2.35

14.63

14.96

68.06

87.92

-22.59%

Principal Financial Group, Inc.

PFG

14.52

4.14

15.74

9.54

52.17

62.68

-16.77%

Philip Morris International Inc.

PM

141.23

5.02

3.50

16.92

90.85

107.24

-15.28%

The PNC Financial Services, Inc

PNC

58.91

2.93

15.64

11.48

129.86

160.49

-19.09%

Phillips 66

PSX

44.82

3.25

13.22

11.74

98.52

123.34

-20.12%

QUALCOMM Inc.

QCOM

68.50

4.38

12.12

14.65

56.6

75.09

-24.62%

Regions Financial Corp.

RF

16.02

3.56

35.69

9.94

15.74

19.93

-21.02%

Southern Copper Corp.

SCCO

29.08

4.25

27.20

16.77

37.62

57.34

-34.39%

Societe Generale Group

SCGLY

24.80

6.76

27.49

6.53

6.14

11.32

-45.76%

The J. M. Smucker Co.

SJM

12.01

3.22

7.79

12.93

105.58

131.53

-19.73%

Sumitomo Mitsui Financial Group Inc

SMFG

50.48

3.35

0.87

7.68

7.14

8.69

-17.84%

State Street Corp.

STT

26.54

2.68

11.33

10.3

70.1

107.33

-34.69%

Seagate Technology PLC

STX

13.31

5.29

10.64

10.23

47.68

62.11

-23.23%

Suncor Energy Inc.

SU

53.51

3.78

4.98

18.25

33.76

42.27

-20.13%

Stanley Black & Decker, Inc.

SWK

19.90

2.01

6.22

15.41

131.51

160.24

-17.93%

AT&T Inc.

T

188.28

6.65

2.03

8.56

30.67

37.39

-17.97%

Molson Coors Brewing Co.

TAP

13.15

2.7

2.00

13.04

60.82

81.41

-25.29%

TE Connectivity Ltd.

TEL

28.36

2.1

11.37

15.36

83.7

104.68

-20.04%

Tiffany & Co.

TIF

11.77

2.28

10.23

19.82

96.56

139.5

-30.78%

T. Rowe Price Group, Inc.

TROW

24.20

2.97

10.32

16.12

102.44

126.24

-18.85%

Valero Energy Corp.

VLO

35.53

4.23

30.52

11.59

85.08

124.44

-31.63%

Walgreens Boots Alliance, Inc.

WBA

59.09

2.81

6.47

9.75

62.63

85.69

-26.91%

Western Digital Corp.

WDC

13.99

4.16

14.87

8.67

48.1

106.45

-54.81%

Narrowing Down To A Few Dozen

While narrowing down the list to a few dozen names, we will follow a two-step process. We would like to have a few companies with an emphasis on high current-yield as well as some others with a high dividend growth potential. As you would see below, for the process of narrowing down out of the above list ( of 77 names) to about 30-40 names, is mostly methodical and has almost no subjectivity. However, we may have to eliminate some companies where we cannot get all the data reliably, especially some foreign companies.

Two-Step process:

High Current Yield:

We first sort this list on current yield. We select up to 20 companies that have the current yield at least higher 4% or higher. We may have to discard some companies if we do not have sufficient data available.

We select the first 20 companies, in the first round, presented below in the order of yield (descending).

Ticker

Market Cap (Billions)

Div. Yield %

5 Yr Hist. Div. Growth %

P/E

Last Close

52 Week High

Distance from 52-Wk High

(ET)

17.44

8.1

11.68

12.2

15.06

18.97

-20.61%

(F)

33.50

7.12

8.45

6.99

8.43

12.11

-30.39%

(OTCPK:SCGLY)

24.80

6.76

27.49

6.53

6.14

11.32

-45.76%

(MMP)

13.69

6.66

11.88

14.57

59.95

71.97

-16.70%

(T)

188.28

6.65

2.03

8.56

30.67

37.39

-17.97%

(STX)

13.31

5.29

10.64

10.23

47.68

62.11

-23.23%

(ABBV)

119.98

5.26

18.92

9.37

81.34

119.75

-32.08%

(AEG)

14.21

5.2

5.72

6.71

5.3

7.41

-28.48%

(LVS)

46.32

5.02

16.47

18.68

59.76

81.27

-26.47%

(PM)

141.23

5.02

3.50

16.92

90.85

107.24

-15.28%

(LYB)

32.29

4.6

9.94

8.48

87

118.54

-26.61%

(IP)

18.21

4.39

7.29

8.74

45.51

59.01

-22.88%

(QCOM)

68.50

4.38

12.12

14.65

56.6

75.09

-24.62%

(SCCO)

29.08

4.25

27.20

16.77

37.62

57.34

-34.39%

(VLO)

35.53

4.23

30.52

11.59

85.08

124.44

-31.63%

(WDC)

13.99

4.16

14.87

8.67

48.1

106.45

-54.81%

(PFG)

14.52

4.14

15.74

9.54

52.17

62.68

-16.77%

(K)

18.66

4.13

3.79

13.61

54.27

74.84

-27.49%

(HBAN)

14.45

4.07

23.10

10.23

13.75

16.4

-16.16%

(GM)

53.66

4.00

5.84

5.87

38.07

44.85

-15.12%

High Dividend Growth:

We sort our extended list once again, but this time on "five-year dividend growth rate." Again, we select the top 20 companies based on this criterion. So, why are we selecting 20 companies? Basically, we are going for a wider selection and will narrow the list down by applying more rigorous screening in the next step. Moreover, there appears to be a large number of financial companies and foreign banks, and we will be eliminating some of them to avoid sector duplication in the next step.

Selected companies sorted 5-Yr-Dividend-Growth-Rate.

These 20 companies are listed below with relevant data:

Ticker

Market Cap (Billions)

Div. Yield %

5 Yr Hist. Div. Growth %

P/E

Last Close

52 Week High

Distance from 52-Wk High

(LRCX)

27.83

2.41

57.25

13.13

182.39

224.28

-18.68%

(DAL)

34.76

2.73

47.20

7.88

51.19

60.71

-15.68%

(CFG)

16.51

3.57

46.92

9.25

35.87

45.73

-21.56%

(MS)

74.04

2.77

40.63

8.98

43.33

58.03

-25.33%

(RF)

16.02

3.56

35.69

9.94

15.74

19.93

-21.02%

(VLO)

35.53

4.23

30.52

11.59

85.08

124.44

-31.63%

(ING)

48.99

3.52

28.11

8.23

12.59

17.62

-28.55%

(OTCPK:SCGLY)

24.80

6.76

27.49

6.53

6.14

11.32

-45.76%

(AIG)

38.29

2.91

27.42

10.02

44.04

56.31

-21.79%

(SCCO)

29.08

4.25

27.20

16.77

37.62

57.34

-34.39%

(BBY)

18.74

2.59

23.97

12.4

69.63

82.6

-15.70%

(HBAN)

14.45

4.07

23.10

10.23

13.75

16.4

-16.16%

(CMA)

12.99

3.26

21.11

10.07

82.27

100.31

-17.98%

(KEY)

17.53

3.91

20.96

9.38

17.38

21.74

-20.06%

(LNC)

12.81

2.36

19.14

6.84

62.72

77.84

-19.42%

(ABBV)

119.98

5.26

18.92

9.37

81.34

119.75

-32.08%

(ITW)

46.98

2.79

18.60

17.98

143.18

170.96

-16.25%

(MPC)

40.72

3.51

18.55

9.62

60.45

86.39

-30.03%

(LVS)

46.32

5.02

16.47

18.68

59.76

81.27

-26.47%

(CVS)

72.12

3.6

16.11

8.1

55.6

80.8

-31.19%

We have 5 duplicates among the two sets of lists (high yield list and high growth list). We are also removing one company due to insufficient data. We will be left with 34 companies.

Narrowing Down to 10 Companies

We still have a fairly large set of 34 companies that we need to narrow down to only 10 companies. Again, we want to remove the subjectivity as much as possible from this exercise, so we use our process to assign weights to each company based on five criteria. The weights are from 0-10, 10 being best and 0 being the worst:

  • No of years of dividend growth: Longer the history, better it is. This indicates the commitment of the company towards dividends.
  • Payout Ratio: This will indicate how comfortably a company can pay its dividends. Lower the ratio, better it is.
  • 5-year dividend growth rate. We will consider 3-year growth when 5-year growth is not available. Higher the rate, better it is.
  • Debt/Asset Ratio: This will indicate how much debt a company has in comparison to its assets. Lower the ratio, better it is.
  • Credit Rating: We get the credit rating from S&P and assign numerical weights. For example 10 for AA or A+, 6 for BBB+, 4 for BBB- etc.

Our list of 34 is presented again with the weights assigned and sorted on the “combined total weight” (based on 5 criteria). The combined weight is out of maximum 50:

Ticker Div. Yield % Distance from 52-Wk High Div-Growth, No of yrs Payout Ratio 5-Yr Growth Rate Debt/Asset Credit Rating Combined Weight No of Yrs Div Grth Wt Payout RatioWt 5-YR Growth Wt Debt/ Asset Wt Credit rating weight
LRCX 2.41 -18.68% 4 27.15% 57.25% 0.19 BBB+ 38.0 4 9 8 9 8
MS 2.77 -25.33% 5 27.05% 40.63% 0.22 A+ 38.0 4 9 7 8 10
LNC 2.36 -19.42% 9 16.81% 22.42% 0.02 A- 37.5 5 10 5 9 8.5
CFG 3.57 -21.56% 4 31.33% 46.92% 0.09 BBB+ 36.0 4 8 7 9 8
BBY 2.59 -15.70% 16 37.01% 23.97% 0.11 BBB 36.0 7 8 5 9 7
DAL 2.73 -15.68% 5 24.85% 47.20% 0.16 BBB- 35.0 4 9 7 9 6
SCGLY 6.76 -45.76% 3 12.76% 27.49% 0.10 A 35.0 2 10 5 9 9
CMA 3.26 -17.98% 9 32.07% 21.11% 0.09 BBB+ 35.0 5 8 5 9 8
KEY 3.91 -20.06% 8 36.74% 20.96% 0.10 BBB+ 35.0 5 8 5 9 8
ITW 2.79 -16.25% 43 50.22% 18.60% 0.50 A+ 35.0 10 6 4 5 10
AIG 2.91 -21.79% 0 42.98% 27.42% 0.07 BBB+ 35.0 5 8 5 9 8
PFG 4.14 -16.77% 10 37.35% 15.74% 0.01 A- 34.5 5 8 4 9 8.5
RF 3.56 -21.02% 6 36.81% 35.69% 0.11 BBB+ 34.0 5 7 5 9 8
HBAN 4.07 -16.16% 8 43.70% 23.10% 0.08 BBB+ 34.0 5 7 5 9 8
VLO 4.23 -31.63% 8 55.20% 30.52% 0.18 BBB 33.0 5 6 6 9 7
MPC 3.51 -30.03% 7 32.80% 18.55% 0.30 BBB 31.0 5 8 4 7 7
LYB 4.6 -26.61% 8 37.55% 14.87% 0.33 BBB+ 31.0 5 8 3 7 8
T 6.65 -17.97% 34 57.1 2.03% 0.33 BBB 30.0 10 5 1 7 7
QCOM 4.38 -24.62% 16 74.32% 12.12% 0.48 A- 29.5 7 5 3 6 8.5
IP 4.39 -22.88% 9 38.17% 7.29% 0.32 BBB 29.0 5 8 2 7 7
WDC 4.16 -54.81% 0 17.61% 14.87% 0.38 BB+ 28.0 0 10 3 7 8
ABBV 5.26 -32.08% 6 52.70% 18.92% 0.68 A- 27.5 5 6 4 4 8.5
CVS 3.6 -31.19% 0 29.42% 16.11% 0.37 BBB 27.0 0 9 4 7 7
AEG 5.2 -28.48% 3 125.67% 5.72% 0.04 A- 26.5 2 5 2 9 8.5
SCCO 4.25 -34.39% 3 73.21% 27.20% 0.41 BBB+ 25.0 2 4 5 6 8
MMP 6.66 -16.70% 17 91.38% 11.88% 0.55 BBB+ 25.0 7 2 3 5 8
F 7.12 -30.39% 7 46.05% 8.45% 0.60 BBB 25.0 5 7 2 4 7
K 4.13 -27.49% 14 54.43% 3.79% 0.50 BBB 25.0 6 6 1 5 7
LVS 5.02 -26.47% 6 92.01% 16.47% 0.53 BBB- 25.0 5 5 4 5 6
STX 5.29 -23.23% 0 45.05% 10.64% 0.49 BB+ 24.0 0 7 3 6 8
GM 4 -15.12% 0 27.50% 5.84% 0.46 BBB 24.0 0 9 2 6 7
ING 3.52 -28.55% 3 53.37% 28.11% 0.15 NA 22.0 2 6 5 9 0
PM 5.02 -15.28% 10 100.01% 3.50% 0.80 A 22.0 5 5 1 2 9
ET 8.1 -20.61% 0 139.00% 11.68% 0.52 BBB- 14.0 0 0 3 5 6

From this list of 34, we select the top 10 companies. However, we only choose one company from the same industry segment and a maximum of two from any one sector. In the current list, we have several companies that are appearing from the financial sector near the top. We will just keep Morgan Stanley and Comerica and ignore the rest. We have VLO and MPC from the same industry-segment, so we keep VLO. We ignore companies that have had zero dividend growth recently. We also try to keep some high yielding stocks like AT&T and MMP, to boost the overall yield.

Our list of ten will look like this:

LRCX, MS, CMA, BBY, DAL, ITW, VLO, ABBV, T, MMP

Final Step: Narrowing Down to Just 5 Companies

This final step is not really all that important. The reason is this step will be a subjective one and based solely on our perception. The readers could select any of the 10 names according to their own choosing or as many as they like. However, if we only had 5 spots to fill and that was our goal, we would select the following. One overriding factor was to select at least two companies with a high current yield. The readers could differ with the selections, and they may come up with their own set of five companies. Here's what we selected:

Final List: LRCX, DAL, ITW, T, MMP

It goes without saying that each company comes with certain risks and concerns. Sometimes these risks are real, but other times, they may be a bit overblown and temporary. We think these companies would form a solid group of dividend companies that would be appealing to income-seeking investors, including retirees and near-retirees. Our final list of 5 has at least five years of dividend history, investment grade debt-rating (BBB- or higher), and trading on an average of-18.5% discount from their 52-week highs. Their average dividend/income (as a group) is very attractive at 4.21%, which is nearly 36% higher than what it was nearly a year ago at the beginning of the last year. Though we selected only five stocks based on several criteria, however, there are many other stocks on our extended list that may be equally appealing.

Below is a snapshot of five companies showing their current discount and dividend yield compared to the beginning of last year, i.e., January 2018.

Ticker

Company name

Industry Segment

Close Price on 03/20/2019

52-Week High

Difference/ Discount

LRCX

Lam Research Corporation

Technology/ Semiconductor

175.74

227.82

-22.86%

DAL

Delta Air Lines, Inc.

Airlines

49.87

61.32

-18.67%

ITW

Illinois Tool Works Inc.

Industrial

145.66

170.1

-14.37%

T

AT&T Inc.

Communications/ Media

30.51

36.82

-17.14%

MMP

Magellan Midstream Partners, L.P.

Energy/ Pipelines Partnership

61.56

72.90

-15.56%

Average

-18.56%

Ticker

S&P Credit Rating

Dividend Yield on 03/20/2019

Dividend Yield, Last year (Jan. 2018)

Difference in Yield

LRCX

BBB+

2.33%

1.06%

54.7%

DAL

BBB-

2.81%

2.15%

23.4%

ITW

A+

2.75%

1.89%

31.3%

T

BBB

6.69%

5.19%

22.4%

MMP

BBB+

6.48%

5.18%

20.1%

Average

4.21%

3.09%

36.15%

Conclusion

At the beginning of the last year in January 2018, the average dividend yield of these five stocks was 3.09%. During the course of last year, all five of these companies have raised their dividend payouts. Also, their stock prices have fallen an average of-13%, meaning their current yields are much higher. If you were to buy these five companies today and invest equal amounts, you would get roughly a 4.21% dividend, which is about 36% higher over what it was at the beginning of last year. Price wise, they are on an average-18% below their 52-week highs and-13% below prices in January last year. We believe, not much has changed with regard to the fundamentals or the quality of these companies, yet we are being offered a much higher dividend payout. So we think that this group makes an excellent watch list for further research.

Disclaimer: The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. The author is not a financial advisor. Please always do further research and do your own due diligence before making any investments. Every effort has been made to present the data/information accurately; however, the author does not claim 100% accuracy. The stock portfolios presented here are model portfolios for demonstration purposes.

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Disclosure: I am/we are long ABT, ABBV, JNJ, PFE, NVS, NVO, CL, CLX, GIS, UL, NSRGY, PG, KHC, ADM, MO, PM, BUD, KO, PEP, D, DEA, DEO, ENB, MCD, BAC, UPS, WMT, WBA, CVS, LOW, AAPL, IBM, CSCO, MSFT, INTC, T, VZ, VOD, CVX, XOM, VLO, ABB, ITW, MMM, LYB, HCP, HTA, O, OHI, VTR, NNN, STAG, WPC, MAIN, NLY, ARCC, DNP, GOF, PCI, PDI, PFF, RFI, RNP, STK, UTF, EVT, FFC, HQH, KYN, NMZ, NBB, JPS, JPC, JRI, TLT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. The author is not a financial advisor. Please always do further research and do your own due diligence before making any investments. Every effort has been made to present the data/information accurately; however, the author does not claim 100% accuracy. The stock portfolios presented here are model portfolios for demonstration purposes.