Safe Dividend Stock Picks for a Volatile Market
As the Federal Reserve continues to keep rates at historically low levels, income investors have few places to turn other than high-yielding dividend stock investments. And despite the best September for the market since 1939, many individual investors remain jittery as the market approaches the holidays amid weak consumer spending and what looks to be a sluggish (or even waning) recovery. To keep your portfolio stocked with investments that are sure to pay you, here then are 10 high-yield dividend stocks as recommended by our InvestorPlace experts. |
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#1 – McDonald’s
Recommended by: Louis Navellier, Editor, Blue Chip Growth On Sept. 23 fast-food giant McDonald’s (NYSE: MCD) announced another dividend increase making it the only U.S. company to increase its dividend payout every year since it went public some 34 years ago. The 11% dividend hike from 55 cents per share to 61 cents gives MCD a new dividend yield of about 3.3%. As I’ve said on many occasions, the rest of the world is leading the economic recovery, and companies with international operations are going to be the first to benefit. MCD remains up against a 52-week high, but I believe the stock is a strong buy anywhere below $80. |
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#2 – Terra Nitrogen
Recommended by: Bryan Perry, Editor, Cash Machine The hunt for high yield in the agriculture sector only turns up a few names that fit my appetite for fat dividends and the potential for serious upside capital appreciation. That said, I am very bullish long-term on shares of Terra Nitrogen Co. L.P. (NYSE: TNH). With a current yield of around 10.1%, even the recent rally in the shares of this master limited partnership (MLP) should stick given the relative strength for the commodity sector of late. I’m looking for the stock to trade north of $120 in the next year as scheduled increase in corn plantings for the winter season this year and early 2011 make for a strong condition for higher nitrogen prices going forward. |
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#3 – American Capital Agency
Recommended by: Bryan Perry, Editor, Cash Machine American Capital Agency (NASDAQ: AGNC) is a real estate investment trust (REIT) that mainly deals with collateralized mortgage obligations. Though those instruments got a bad rap after the financial crisis of 2008, American Capital is doing quite well. At about $27 per share are flirting with new 52-week and all-time highs. Dividend investors reap the rewards of this success with AGNC dividends running at a quarterly payday of $1.40 per share (paid for at least five quarters running) and a yield of about 20%. Yes, you read that right — 20% yield. |
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#4 – Heinz
Recommended by: Richard Young, Editor, Intelligence Report With a dividend since 1911, H.J. Heinz (NYSE: HNZ) is a long-term income investment you can believe in. In May, Heinz was making an expansion into baby formula in China to boost its bottom line, and just recently HNZ continued to expand in the People’s Republic by buying Foodstar, a soy sauce producer. The acquisition makes good sense for Heinz, which already owns soy sauce manufacturing in Indonesia. My charting shows HNZ is trading below its long-term trend and it is clearly in growth mode. Buy Heinz today, before it reverts to trend value. |
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#5 – Penn Virginia Resource Partners
Recommended by: Bryan Perry, Editor, Cash Machine Coal producers are capturing an attractive dividend yield and participating in a powerful global trend for this hugely in-demand mineral. Enter Penn Virginia Resource Partners, L.P. (NYSE: PVR), a master limited partnership (MLP) that manages coal and natural resource properties. As of the beginning of this year, the partnership owned or controlled approximately 830 million tons of proven and probable coal reserves across the U.S. That’s a revenue stream to believe in and the reason for a reliable 7.5% yield. Since its $12 IPO back in late 2001, PVR has demonstrated an outstanding track record of steadily rising share prices and increased distributions. Today, the stock trades around $25 per share and has paid out cumulative distributions of $13.96 per share, or north of $37 when capital appreciation and distributions are combined. |
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#6 – Microsoft
Recommended by: Richard Band, Editor, Profitable Investing Microsoft (NASDAQ: MSFT) may have disappointed a few investors by not delivering quite the dividend hike they were expecting a few weeks ago, but it’s worth noting that this tech giant is a dividend heavyweight at all. Meanwhile, MSFT looks remarkably cheap from a long-term point of view. In an effort to be ultraconservative, I calculated what the stock would return, over the next decade, if (1) the current depressed P/E ratio (a little over 10X year-ahead earnings estimates) remained unchanged and (2) Microsoft’s earnings growth rate slowed 20% from what the company accomplished in the past decade. Result: The stock would log a total return of 9.4% annually, about 45% more than the Standard & Poor’s 500 index. |
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#7 – Kinder Morgan
Recommended by: Richard Young, Editor, Intelligence Report Kinder Morgan Energy Partners (NYSE: KMP) has significantly outperformed the S&P 500 by 21% since the beginning of the recession in December of 2007. KMP is the nation’s largest independent refined-petroleum transporter, terminal operator, CO2 transporter and petroleum coke handler. Industry leadership, especially in an industry with high barriers to entry, makes Kinder Morgan attractive. It also means that Kinder’s cash flow is secure and its dividend payouts will remain robust and consistent. KMP has paid out a dividend since 1992. |
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#8 – Unilever
Recommended by: Richard Band, Editor, Profitable Investing Unilever (NYSE: UL) is the big brand behind products that include Breyers and Ben & Jerry’s ice cream, Hellmann’s mayonnaise, Knorr soups, Lipton tea, Pepsodent toothpaste and Vaseline. UL’s top 13 brands generate $29 billion in annual sales. As a multinational maker and marketer of consumer staples, UL is the kind of business that grows quietly, almost inevitably, over time. Emerging markets, with their dynamic prospects, now account for 50% sales, up from 35% only six years ago. At 12X this year’s estimated net, you’re paying a very modest price for one of the world’s most deeply entrenched megacap franchises. The nearly 4% dividend yield also makes UL an attractive buy. |
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#9 – Coca-Cola
Recommended by: Richard Young, Editor, Intelligence Report Coca-Cola (NYSE: KO) is up 17% in the last three months, as international growth is powering America’s multinationals. With the world’s most valuable brand in hand, Coke is seeking to dominate local tastes as well. Coke had its latest innovation in India’s one-billion person market. A new drink called Maaza Milky Delite is a mix of mango and milk that was developed in Coke’s Gurgaon Research & Development Laboratory. Coke’s commitment to brand building is what has sustained it for over 100 years. |
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#10 – Atmos Energy
Recommended by: Richard Young, Editor, Intelligence Report Atmos Energy (NYSE: ATO), with a customer base of 3.2 million, is the nation’s largest natural-gas-only distributor. In utility businesses, success or failure often lies in efficiency. Atmos was able to serve 9% more customers per employee than its average competitor in 2009. In the same year, Atmos was able to serve each of its customers for 48% less than the cost incurred by its average competitor. Atmos has paid a dividend since 1984 and should continue to be a great income investment. |
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