The Top 10 S&P 500 Dividend Stocks for July

Advertisement

There was little change among the top dividend stocks in the S&P 500 this month. The same steady names continued to throw off  the highest dividend yields, even as those dividend yields continued to trend down.

dividend stocksIndeed, for the first time since we started tracking these dividend stocks, the top dividend yield among stocks in the S&P 500 fell below 10%. True, that’s still a gusher of a dividend yield, but the decline underscores the effect of rising stock prices on dividend stocks.

Markets keep notching all-time highs — the Dow Jones Industrial Average just crossed 17,000 for the first time in history — and that weighs on dividend yields. (As with bonds, prices and yields on dividend stocks move in opposite directions.)

The dividend yield on the S&P 500 now stands at 1.91%, down from 1.93% a month ago and 2.1% at this time last year. The decline among the hottest dividend stocks has been even steeper.

The utilities sector — this year’ market darling — is a fountain of dividends. But share-price appreciation has dented the sector’s dividend yield for new money. Around this time last year, the dividend yield on the Dow Jones Utility Average was 3.02%. Today, that dividend yield is down to 2.71%.

The dividend stocks in the S&P 500 with the highest dividend yields still offer plenty of income for new money, but not nearly as much as they did just a few months ago.

To get a sense of the best dividend yields to be found among dividend stocks, here are the top 10 S&P 500 dividend stocks for July. (Note: Dividend yields are as of July 14.)

Top S&P 500 Dividend Stocks #10 — Kinder Morgan (KMI)

dividend stocks, kinder morgan stockKMI Dividend Yield: 4.7%

Like many names in the energy industry, Kinder Morgan (KMI) operates oil and gas pipelines — stagnant-to-falling prices are weighing on the company’s shares. KMI stock is flat for the year-to-date, but it has turned up recently. Indeed, in late June, KMI stock briefly turned positive for the first time this year.

Some analysts believe KMI stock has finally bottomed out, and although a rising share price lowers the yield for new money, KMI hiked its dividend three months ago to maintain its generous payouts.

What Kinder Morgan really needs is for demand for energy to pick up. In the meantime, though, shareholders will have to make do with the hefty dividend.

Top S&P 500 Dividend Stocks #9 — Teco Energy (TE)

dividend stocks, teco energyTE Dividend Yield: 4.9%

Teco Energy (TE) first broke into the top 10 S&P 500 dividend stocks in February, and it has stayed there with its generous yield … but the share price has been very fickle.

TE stock is up less than 4% YTD, giving up gains of as much as 7.2% in late June. TE stock also was off by as much as 6% back in February, so the ride has been a bit bumpy for investors.

The utility sector is having a tremendous year, but TE stock hasn’t been participating. For the most recent quarter, TE missed earnings and revenue forecasts. That said, TE is a low-beta stock that jumped when the Dow crashed 180 points last week, so it has proven good for defense.

For longer-term price performance, TE stocks needs some beat-and-raise quarters to get moving again. Until then, the dividend yield will have to do the heavy lifting for total return.

Top S&P 500 Dividend Stocks #8 — Health Care REIT (HCN)

dividend stocks, healthcare reitHCN Dividend Yield: 5%

Real estate investment trusts (REITs) are required to pay out most of their earnings as dividends in exchange for certain tax benefits, which is why so many of them make lists of top dividend stocks.

And with a consistently high dividend yield, Health Care REIT (HCN) has become a staple of this monthly list of dividend stocks.

Even better, HCN stock has been delivering on price appreciation, too. HCN stock is up more than 17% for the year-to-date.

HCN took advantage of a string of solid quarterly results — and a high share price — to sell more stock this spring. The company garnered $1 billion from a secondary offering that not only bolstered the balance sheet, but also proved how popular HCN stock is these days.

Top S&P 500 Dividend Stocks #7 — AT&T (T)

dividend stocks, t stockT Dividend Yield: 5.1%

Telecommunications are another sector to look at for generous dividend stocks, even if telcos are making the headlines recently for industry consolidation.

The big news this year for AT&T (T) is its offer to buy DirecTV (DTV), which should go through, pending regulatory approval. The deal was necessary to fend off competition from Comcast’s (CMCSA) plan to acquire Time Warner Cable (TWC).

A gusher of free cash flow makes is easy for T to make a nearly $50 billion acquisition and pay out very high dividends. Indeed, the blue chip always makes the list of top payers in the S&P 500.

T stock also proved itself able to play defense during the recent Dow intraday crash, putting up gains even as the overall average was in the gutter.

Top S&P 500 Dividend Stocks #6 — HCP (HCP)

dividend stocks, hcp stockHCP Dividend Yield: 5.3%

HCP (HCP) is another healthcare REIT with high dividends and proven defensive characteristics. Indeed, as a U.S. healthcare REIT, HCP stock is insulated from geopolitical troubles or European credit worries, helping it to zig when the market zags.

At the same time, HCP’s fundamentals have been propelling shares higher. HCP stock is up 14% so far this year.

A beat-and-raise first quarter — helped by higher revenue, not cost cuts — has given HCP stock a nice tailwind. An improving outlook for all healthcare REITs bode well for further gains this year.

Top S&P 500 Dividend Stocks #5 — Ensco (ESV)

dividend stocks, enscoESV Dividend Yield: 5.5%

Another sector getting hurt by energy prices is the offshore drillers. Prices don’t support more exploration, which means rates paid for rigs are under pressure.

Those weak industry fundamentals have shares in Ensco (ESV) down more than 5% so far this year. That said, ESV did manage to surpass analysts’ quarterly earnings forecast even as profits fell year-over year.

Offshore drilling stocks seem to have put the worst of the selling behind them, but there aren’t exactly screaming catalysts to get them moving again.

With a dividend yield of more than 5%, at least ESV shareholders are getting paid well while they wait for energy demand to bounce back.

Top S&P 500 Dividend Stocks #4 — CenturyLink (CTL)

dividend stocks, centurylinkCTL Dividend Yield: 5.9%

Here’s where we get to the most amusing part of our list. CenturyLink (CTL) is the one of three telecom stocks that always hit the top spots for dividend stocks with their crazy-high dividend yields and poor long-term price performance. (Gushers of free cash flow make the payouts possible.)

That said, things have been going great up for CTL stock lately. Shares are up 16% for the year-to-date, easily outpacing the S&P 500.

The upside in price has dropped the yield on CTL below 6%, but given that the stock is a market lagger for any time frame of 52 weeks and longer, shareholders probably aren’t complaining.

Top S&P 500 Dividend Stocks #3 — Transocean (RIG)

dividend stocks, transoceanRIG Dividend Yield: 6.9%

Offshore driller Transocean (RIG) makes the top 10 dividend stocks for a fifth consecutive month. Unfortunately for anyone holding Transocean stock, the dividend yield propelled it into the top 10 only because the stock has fallen so far.

RIG stock is down a painful 12% for the year-to-date, hurt by a large number of rigs coming off contract and the same pressure on rates paid that’s weighing on Ensco.

If nothing else, at least RIG stock appears to have found a bottom. Quarterly earnings beat Wall Street forecasts, and the market also likes the RIG restructuring plan, which will spin off eight rigs into a new, publicly traded company.

The hefty 6.9% dividend yield can’t pull the total return into positive territory, but it does offer investors some compensation while they wait for this turnaround to turn.

Top S&P 500 Dividend Stocks #2 – Frontier Communications (FTR)

dividend stocks, frontier communicationsFTR Dividend Yield: 7%

With a spit-take dividend yield of 7%, Frontier Communications (FTR) grabs the No. 2 spot for the top S&P 500 dividend stocks.

Happily for long-suffering shareholders, FTR stock is having a incredible year. Indeed, it’s up 24% so far in 2014. That performance comes in spite of a mixed first-quarter performance in which both earnings and revenue missed Wall Street projections.

FTR is focusing on retaining customers and cutting costs. Analysts think FTR will post profit increases in both 2014 and 2015. Either way, as a telecom, FTR enjoys a river of free cash flow, which helps ensure the fat dividends will keep coming.

Top S&P 500 Dividend Stocks #1 — Windstream Holdings (WIN)

dividend stocks, windstreamWIN Dividend Yield: 9.9%

Windstream Holdings (WIN) always takes the top spot for S&P 500 dividends stocks, but that dividend yield sure has come down. Sure, at 9.9%, WIN stock still yields more than your average junk bond, but that yield was above 12% when the year started.

Investors have to happy with the reason for the decline in yield, however. WIN stock is up 27% for the year-to-date. This long-suffering stock now has a positive five-year chart, having bounced back from lows not seen since the financial crisis.

Any time a dividend stock sports a dividend yield this high, you have to respect the risk. Windstream is highly leveraged and pays out more in dividends than it makes in earnings. However, it does generate more than ample free cash flow, and that should keep the dividends coming.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/07/dividend-stocks-june/.

©2024 InvestorPlace Media, LLC