(Written by Rebecca Lipman. Data sourced from Finviz)
“Safety Through Dividends” – That’s the theme Bloomberg focused on in a morning television segment.
Bloomberg’s Dominic Chu reports on investing tips from leading strategists Paul Hickey over at Bespoke Investment Group. He compiled a list of about 15-20 dividend-paying companies across different sectors.
The companies made the list “not just because they yield a lot, also because their technicals and charts are also improving.”
Stocks on the list include the following, grouped by industry:
Staples: Altria (MO), Reynolds America (RAI)
Utilities: Duke Energy (DUK), Entergy (ETR)
Financials: Cincinnati Financial (CINF), People’s United (PBCT)
A Word to the Wise: Understanding Dividend Yields
Dividends are not future guarantees. Although companies try very hard to avoid cutting their dividends because of the bad publicity, a history of paying a dividend does not mean the company will necessarily continue to do so – a dip in profitability, and the dividend can be first to go.
Another important note: higher dividend yields come with their fair share of issues. Of course shareholders prefer larger dividends, but higher dividend yields (i.e. dividend/share price) can indicate that the company is paying unsustainably high dividends, or it can indicate a beaten down share price. The latter is referred to as a “value trap,” where the appearance of value covers up the fact that investors are exiting the stock.
As an investor going into a dividend stock investment, it’s vital to perform due diligence first if you want to rely on the dividend income in the future.
Looking for other dividend ideas?
We ran a screen by starting with a universe of high-yield (between 5-7% for sustainability) stocks that have payout ratios under 50%. Furthermore, all the names below have a quarterly performance greater than 10%.
If you’re an income investor, this list might offer a useful starting point.
Analyze These Ideas (Tools Will Open In A New Window)
1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned
1. SeaCube Container Leasing Ltd. (BOX): Operates as a container leasing company worldwide. Market cap of $288.29M. Dividend yield at 6.71%. Payout ratio at 47.6%. Quarterly performance at 22.64%.
2. Meredith Corp. (MDP): Engages in magazine publishing and related brand licensing, television broadcasting, integrated marketing, interactive media, and video production businesses in the United States. Market cap of $1.38B. Dividend yield at 5.07%. Payout ratio at 35.58%. Quarterly performance at 25.43%.
3. OneBeacon Insurance Group, Ltd. (OB): Provides specialty insurance products and services in the United States. Market cap of $1.41B. Dividend yield at 5.65%. Payout ratio at 27.59%. Quarterly performance at 14.37%.
4. Textainer Group Holdings Limited (TGH): Engages in the purchase, ownership, management, leasing, and disposal of intermodal containers worldwide. Market cap of $1.25B. Dividend yield at 5.48%. Payout ratio at 35.73%. Quarterly performance at 15.04%.