When it comes to sleepy, low-beta dividend stocks, investors
have plenty of options. Nearly all of the members of the consumer
staples, telecommunications and utilities sectors can be
considered "low beta" and those three sectors combine for nearly
18 percent of the S&P 500's weight.
Add the fact that many constituents of the health care sector
are viewed as low beta and that that sector represents over 12
percent of the S&P 500's weight and it is safe to say
low-beta fare accounts for at least of third of the benchmark
index's total weight.
What about stocks with higher betas that compensate investors
for the added risk and volatility? The perception may be that
taking on a higher beta means a significant reduction, if not all
out elimination, of dividends. The reality is that there are
plenty of stocks out there that simultaneously wear the titles of
"dividend stock" and "high beta." Just look at the following
list.
Deere & Company (NYSE:
DE
)
The agriculture equipment giant is not quite yet a dividend
champion along the lines of a PepsiCo (NYSE:
PEP
) or Chevron (NYSE:
CVX
), but it is getting there. Deere has raised its payout for nine
consecutive years. Over that time, Deere's dividend growth has
been stellar. In 2003, the annual payout was just 44 cents a
share. This year, that number will be $1.84 a share.
Deere's dividend growth bodes well for long-term investors and
that might be one reason
Warren Buffett likes the stock
. Buffett's Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) bought
3.98 million Deere shares during the third quarter. There is more
room for dividend growth as well as Deere management has pledged
to keep a
payout ratio of 25 percent to 35 percent
. The current payout ratio is 24 percent. Deere's beta against
the S&P 500 is 1.56.
BHP Billiton (NYSE:
BHP
)
The world's largest mining company certainly qualifies as "high
beta" with a beta of 1.49. It is not a bad dividend stock with a
yield north of 3.1 percent. In the words of the company itself,
"We have a progressive dividend policy that seeks to steadily
increase, or at least maintain the dividend in US dollars at each
half-yearly payment."
That should assuage skittish investors that BHP is committed
to rewarding shareholders despite its capital-intensive
businesses. The prove is in the pudding as BHP's dividend in U.S.
dollar terms has
risen eightfold since 2001
.
However, there are risks. BHP's share price fluctuations are
intimately tied to emerging markets commodities demand and the
global economic cycle. One of those themes falters, the other
usually is not far behind. Additionally, the company has over
over $25 billion in debt, but less than $4.4
billion in cash
.
SeaDrill (NYSE:
SDRL
)
As an oil services stock, SeaDrill's beta of nearly two is no
surprise. However, as an oil services name, SeaDrill's dividend
yield of 8.8 percent is a pleasant surprise. Transocean (NYSE:
RIG
), one of SeaDrill's most direct rivals, pays no divided. Adding
up the yields of Schlumberger (NYSE:
SLB
), Halliburton (NYSE:
HAL
) and National Oilwell Varco (NYSE:
NOV
) and then multiplying that number by two garners a yield that is
still nowhere close to SeaDrill's.
Fourteen of SeaDrill's 22 new rigs have already been
contracted
and the company had a backlog of $21.3 billion as
of late November
.
One thing to keep in mind about SeaDrill: It makes for valid
fiscal cliff play because it is not a U.S.-based company. Even if
the the fiscal cliff comes to pass and the dividend tax rate in
the U.S. increases, that is likely to have little impact on
SeaDrill's payout because of the company's international
shareholder base.
Plus, the dividend growth is impressive. The company paid a
dividend of about $3.14 a share last year, but that number will
be in the $3.40 range this year.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.