Dividends have long been an excellent indicator of growth and fundamental strength, and are one of the oldest ways for a company to communicate that it is healthy.
Dividend stocks can be found in every sector, but the best way to take advantage of them is to pick the ones with the strongest fundamental and quantitative grades in my Portfolio Grader. That way, every quarter you get not only the boost in the company’s share price following its outstanding earnings report, but also the company-paid dividend.
So let’s look at 10 high-paying dividend stocks with outstanding fundamentals that you should consider adding to your portfolio if you’re looking for stocks with a good payoff.
American Capital Agency Corp. (AGNC)Yield: 19.6%
American Capital Agency Corp. (NASDAQ: AGNC) breaks all the common conceptions of what a dividend stock should be. Most people expect that dividend stocks are just big companies that are slow growers and good for little old ladies with a very low threshold for risk.
One look at AGNC’s chart and you’ll see that this is far from the case. This stock moves fast and can swing 14% — in either direction — in a heartbeat. But the company has excellent fundamentals, is an A-rated stock and pays a 19.6% dividend. If you can handle this dividend stock’s volatility, I’d consider it for your portfolio.
MFA Financial (MFA)Yield: 12.1%
Mortgage real estate investment trust (REIT) MFA Financial Inc. (NYSE: MFA) had an interesting couple of years given the mess in the mortgage market, but it is clear that it has now emerged as a survivor.
MFA Financial primarily invests in mortgage-backed securities (MBS) that include hybrid and adjustable-rate MBS. The Federal Reserve has been a big player in that market, supporting MBS prices, which has helped companies like MFA make more money. The REIT distributes at least 90% of its taxable income to its stockholders.
AT&T (T)Yield: 5.6%
This great American brand name is very different from the old AT&T (NYSE: T) that was broken up by the government in order to increase competition. The company now competes with its former divisions and has turned wireless communications into one of the main drivers of growth.
It was the first carrier to offer Apple’s (NASDAQ: AAPL) iPhone, which carries higher data carrier fees due to the increased use of broadband Internet. The dividend is sustainable with a payout ratio of 50%.
Verizon Communications (VZ)Yield: 5.2%
Verizon Communications Inc. (NYSE: VZ) has been working extra hard to catch up with AT&T and has recently also begun to offer iPhone service. Smartphones are likely to surpass PCs in sales in 2011, and they typically use much more broadband than regular phones. Phone companies like Verizon see this as a major avenue for growth and are offering numerous plans in order to capture that growth.
Verizon also offers TV service and optical Internet, which is very popular with consumers.
Pfizer (PFE)Yield: 3.9%
Like most major pharmaceuticals, Pfizer Inc. (NYSE: PFE) has been keenly involved in the political debate about reforming health care.
So far, major drug companies have not been negatively affected by health care reform, and with a stable dividend and cash flow, Pfizer is in position to benefit from the graying of America for many years.
DuPont (DD)Yield: 3%
In addition to being a major chemical company, DuPont (NYSE: DD) is also a major player in fertilizer and seed markets, which have been a big driver of growth due to record global food prices.
The company is a leader in many of the markets that it operates in, assuring growth for many years.
Coca-Cola (KO)Yield: 2.8%
A true American icon, The Coca-Cola Company (NYSE: KO) is one of the most popular global brands dominating the carbonated drink business. Major avenues for growth have been water, juices and sports drinks, which tend to grow much faster than the old carbonated business.
Coke is seeing higher volume gains in emerging markets as its products are seen as “affordable luxury” in many developing economies.
Chevron (CVX)Yield: 2.7%
As one of the largest global energy companies, Chevron Corp. (NYSE: CVX) offers a way to play the surge in energy prices driven by rising demand from emerging markets.
The company has a very low payout ratio of 30%, giving management ample room to increase the dividend.
Travelers Companies (TRV)Yield: 2.4%
I am sure Travelers Companies (NYSE: TRV) is glad to have been spun off from Citigroup in 2002, due to the realization that earnings for insurance companies are erratic and seasonal. The insurance company has made a lot of money over the years with proper risk management and prudent investment management.
I like Travelers, because it is one of the most established companies in the insurance field, with some of the best growth prospects for the future.
Exxon Mobil (XOM)Yield: 2.1%
As the largest U.S. energy company, Exxon Mobil Corp. (NYSE: XOM) is a major consolidator in the industry embarking on an acquisition spree to increase reserves.
The company has been criticized for paying too small of a dividend, since it has a payout ratio of only 28% and a cash pile that can afford much bigger one. Management’s defense has been to state that they need the money for expansion, which is credible and I think makes the stock a good one to play the surge in energy prices.
No comments:
Post a Comment