Help secure your retirement with these safe, high-yield stocks
Richard Young, Editor, Intelligence Report
Aug 31, 2010, 1:49 am EDT
Safe Stocks for a Choppy Market
Let me tell you about a group of high-yield dividend stocks called “retirement compounders.” These companies are dividend-paying domestic and international stocks that offer high yield but also boast strong balance sheets and a consistent record of annual dividend payments. I favor companies that operate in industries with high barriers to entry, those that possess durable competitive advantages and businesses that are less prone to the volatility of the business cycle.
These picks are powerful because in addition to big paydays each quarter, these retirement compounders also are elite companies with a secure position in their industry. That means they aren’t going anywhere. That marriage of high yield and low risk is crucial in a choppy market like this one, and will ensure your nest egg continues to grow no matter what happens on Wall Street.
Here are seven top low-risk, high-yield dividend stocks to buy now.
Atmos Energy (NYSE: ATO) is the nation’s largest all-gas utility. Atmos isn’t exactly a sexy business, but the reliable cash flow provides some great dividends — a yield of 4.7% at current valuations and payouts since 1984. My price charts indicate that Atmos has been consolidating between $26 and $30 for most of 2010. As of this writing, ATO shares are right smack in the middle of that range, and that means it’s a good buying opportunity before the next leg up. With a solid business and great balance sheet, Atmos is a very wise long-term dividend investment right now.
I am very bullish on our resource rich neighbors to the north, and particularly impressed with the Bank of Nova Scotia (NYSE: BNS). Known as Scotiabank, BNS recently purchased the Colombian operations of the Royal Bank of Scotland (NYSE: RBS), expanding its considerable presence in South America. Prudent management at BNS has been good for shareholders, while the reckless risk-taking at RBS had predictable results. Scotiabank has outperformed the market handily, including a 4% gain year-to-date compared with a slide of about 4% for the broader market. Top it off with a 3.8% dividend yield, and you have yourself a good low-risk buy.
You should always focus on generating steady cash flow through dividends for your portfolio. Minimize risk, even if it seems boring. That’s why I like Black Hills Corp. (NYSE: BKH). The 4.8% dividend yield and 13% gain year-to-date should be enough to entice anyone — but top that off with a history of dividends since 1942, and you have an income investment that’s a lock.BKH may not be very sexy as a utility operator with a market cap of around $1 billion. But leave the sexy semiconductor and biotech trades to aggressive, high-risk traders and bank on some steady appreciation and a big dividend from this great utility stock.
Diageo (NYSE: DEO) is an alcoholic beverage manufacturer and distributor that is booming, in part to its footprint in emerging markets. Whisky consumption has exploded in South America thanks to booming economic conditions. In Brazil and other South American countries today, whisky is seen as a status symbol by the growing middle class. As the middle class grows in more countries, the newly affluent consumers will demand premium alcohols like Scotch whisky. Diageo is the world’s leading distiller of whisky and even recently opened the first new Scotch distillery in 30 years near Elgin, Scotland. With an 8% annualized five-year return, a current dividend yield of 2.7% and a record of dividends since 1988, DEO is a great low-risk dividend investment.
To help feed the East Coast with domestic natural gas, Energy Transfer Partners (NYSE: ETP) wants to build a pipeline from Panola County, Texas to Richland Parish, Louisiana. Called the Tiger Pipeline, it will intersect with numerous larger pipelines heading from the southern U.S. towards the energy-hungry northeast and midwest regions. The 42-inch-wide pipeline will move two billion cubic feet of gas per day using four compressor stations. That should allow ETP to tap into big profits. A breakout above both the 50- and 200-day moving averages on my price chart shows ETP’s strength. Oh, and by the way, ETP yields over 7.8% at current pricing. Buy now.
A globally diversified conglomerate with interest in aerospace and building systems, United Technologies (NYSE: UTX) is one of my favorite low-risk investments right now. The F135 engine is the newest reason to hang your hat on UTX stock, and it will power the Lockheed Martin (NYSE: LMT) F-35 Lightning II fighter. That’s a great future revenue stream — but the long-term trends of United Technologies are what really matter to buy-and-hold investors. My relative-strength calculations show that United Technologies has performed 45% better than the S&P 500 over the past five years — with an average annualized return of 10% across that period. Since United Technologies builds jet engines, elevators and HVAC systems, it has a stable core business and isn’t going anywhere. Top it off with a hefty dividend history of payouts since 1936 — with a current yield of 2.6% — and you have a long-term investment you can believe in.
Wind power has one big problem: inconsistency. If the wind stops blowing, power generation stops dead. This volatility makes it difficult for power regulators and energy producers to plan electricity purchases. But Xcel Energy (NYSE: XEL), the nation’s largest wind energy distributor, has finished tests on using batteries to store wind energy for use at times of peak demand. That’s a huge development. But don’t think that Xcel is a green energy start-up with no revenue to speak of. Primarily a utility company with a market cap of $10 billion, Xcel isn’t going anywhere — and its wind power potential gives it a chance for future growth. The stock’s current yield of 4.5%, with dividends paid for over 100 years, also makes XEL a wise long-term pick.