13 Dividend Stocks With At Least 7% Earnings Yield

Dividend investors usually don’t consider stocks that yield less than 3%. This makes sense if you are retired and need the income. We believe younger investors should consider stocks that are below the radar of dividend investors but have huge potential to increase their dividend payments over the long-term.

Below we compiled a list of 14 large cap stocks that have at least 7% earnings yield. The current dividend yield of these companies would be more than 7% if they had a 100% payout ratio. Currently these companies in this list have annualized dividend yields between 2% and 3%. However, these companies are likely to increase their dividends significantly over the next 10 years because their earnings are growing and their debt/equity ratios are very low, too.

Ticker	Company	Dividend Yield	Total Debt/Equity	P/E
XOM	ExxonMobil	2.19%	0.11	10.33
MSFT	Microsoft Corporation	2.89%	0.2	10.07
CVX	Chevron Corporation	2.97%	0.08	8.09
MMM	3M Co.	2.63%	0.36	14.25
FCX	Freeport-McMoRan	2.54%	0.23	6.87
NEM	Newmont Mining Corp.	2.25%	0.31	13.16
WAG	Walgreen Co.	2.75%	0.16	11.09
TRV	The Travelers Cos	2.76%	0.26	15.7
GD	General Dynamics Corp.	2.79%	0.3	9.39
ITW	Illinois Tool Works Inc.	2.98%	0.46	12.22
JCI	Johnson Controls Inc.	2.19%	0.47	13.94
AFL	AFLAC Inc.	2.94%	0.26	11.36
GLW	Corning Inc.	2.26%	0.11	6.29

The best performing stock on the list above is Chevron Corporation (CVX), which was up 23.08% during the past 52 weeks. In the same period, the S&P 500 index returned 2.42%. CVX had a dividend yield of 2.97% and an extremely low total debt-to-equity ratio of 0.08. It has a market cap of $217 billion and a P/E ratio of 8.09. Bill Miller’s Legg Mason Capital Management and Cliff Asness’ AQR Capital Management both had $100+ million invested in CVX at the end of the third quarter.

Another energy stock with high earnings yield is ExxonMobil Corporation (XOM). It also generated a double-digit return of 17.53% during the past 52 weeks. The stock has a dividend yield of 2.19% and a total debt-to-equity ratio of 0.11. It has a market cap of $411B and a P/E ratio of 10.33. At the end of September, there are 46 hedge funds with XOM positions in their portfolios. Among them, Ken Fisher’s Fisher Asset Management had the largest position of XOM. The fund reported to own $519 million of XOM shares at the end of the third quarter.

Microsoft Corporation (MSFT) is also a mega-cap stock with a 10% earnings yield. It has a market cap of $233B and a P/E ratio of 10.07. During the past 52 weeks, MSFT returned 1.47%, slightly lower than the market. It has a dividend yield of 2.89% and a total debt-to-equity ratio of 0.2. As of September 30, there are 94 hedge funds disclosed to own MSFT in their 13F portfolios. Boykin Curry’s Eagle Capital Management, Jean-Marie Eveillard’s First Eagle Investment Management and Ken Fisher’s Fisher Asset Management all had $400+ million invested in MSFT.

Other large cap stocks with high earning yields include 3M Co (MMM), Freeport-McMoRan Copper & Gold Inc (FCX), Lowe's Companies Inc (LOW), Newmont Mining Corp (NEM), Walgreen Co (WAG), The Travelers Companies, Inc (TRV), General Dynamics Corp (GD), Illinois Tool Works Inc (ITW), Johnson Controls Inc (JCI), AFLAC Inc (AFL), and Corning Inc (GLW). All of these stocks yield more than the 10-year Treasuries and they are very likely to boost their dividend payments significantly over the next 10 years. We encourage long-term dividend investors to do some in-depth research on the stocks listed above for their portfolio.

Disclosure: I am long MSFT.