Stock dividend advice is a crucial part of any investing portfolio. And high yield dividend stocks are especially important in times of trouble. As in, right now.
There’s a lot of uncertainty whether the market’s 25% run since July is flagging or if the bulls are picking up momentum once more. But as volume remains fairly weak on Wall Street amid continued geopolitical unrest, government debt fears at home and abroad and overall economic uncertainty, it’s hard even for the most sophisticated trader to tell how things will shake out.
So what’s a regular investor to do? Well, if your investment goal is simply to steadily grow (and protect) your retirement savings, now is the time to take a serious look at dividend stocks.
For stock pickers constantly seeking the next Netflix (NASDAQ: NFLX) in order to double their cash quickly, getting a few pennies on the dollar in dividends sounds like a waste of time. But many of us aren’t trying to turn $10,000 into $100,000 by the end of the year – to us, a “sleepy” stock that provides 10% annual returns like clockwork is a solid investment, and one we’re happy to own.
If this describes your strategy, then high-paying dividend stocks should be a key part of your portfolio. If you can get a stock that returns 7% of your investment via dividends each year, you could beat the market handily even if shares don’t pop impressively.
By way of example, here are 7 solid dividend stocks to consider for your portfolio. This diverse list covers everything from tobacco to big pharma to telecom to oil, and averages a dividend yield of over 7% per pick:
Astra Zeneca – 5.5% Dividend Yield
While Big Pharma is indeed underperforming the market over the last year or so due to fears over expiring patents and generic competition, there is still some long-term potential in the sector’s low valuations and some of the highest dividend stocks on Wall Street. Take Astra Zeneca (NYSE: AZN), trading with a forward P/E of just 7.3, the lowest among pharmaceutical majors. Though AZN dividends are tricky to track, with a big payment and March and a smaller payment in September, based on the last two payouts the yield is a plump 5.5%.
Lorillard – 5.7% Dividend Yield
Now that a ban on menthol cigarettes is “unlikely” following an FDA study, tobacco giant Lorillard is cruising near a new 52-week high. But even after a nearly 25% surge in shares over the last two weeks, the company still trades at the lowest forward P/E of its peers, at just 11.7 times future earnings. Add in projected revenue growth of over 13% this year and a profit forecast over 10% above 2010 totals and this tobacco giant is a very safe bet. More importantly for income investors, this steady growth means the 5.7% dividend yield is safe – even after two significant increases to the payout since August.
AT&T – 5.8% Dividend Yield
On March 28, after the T-Mobile deal was announced, Robert W. Baird upped its rating on AT&T (NYSE: T) from “neutral” to “outperform” and boosted its price target from $30 to $34 a share. That gives shares the possibility of a 13% upside above current valuations. Throw in a dividend yield of 5.8% — the best out of all 30 Dow Jones components – and you have a compelling case to dial up AT&T. Even if the merger runs into a snag, there’s no denying that both T-Mobile and the consistently unprofitable Sprint (NYSE: S) will never pose a serious threat to this telecom stock.
BP Prudhoe Bay Trust – 7.5% Dividend Yield
As I mentioned in a recent story about 7 big demographic trends to buy, the current crude oil price surge is showing no signs of abating. And to me, oil “depletion” trusts like the BP Prudhoe Bay Royalty Trust (NYSE: BPT) are the best income play for this trend. BPT essentially pumps out crude from its field, and allows stockholders to share in the profits via a hefty dividend until the well runs dry. With the end of royalties predicted about 13 years from now, your shares will actually pay for themselves by the time the oil runs out at the current dividend of 7.5%. Add in the fact that the Prudhoe Bay Trust has appreciated over 20% in share price over the last 12 months and you have a solid investment on your hands.
Frontline – 7.7% Dividend Yield
Yes, tanker stocks are seen as toxic by some investors. After the flop from 2008 peaks and a lot of sideways movement for the last two years, it’s no surprise why. But income investors shouldn’t overlook Frontline Ltd. (NYSE: FRO). Unlike peers like Teekay Corp. (NYSE: TK) and Nordic American Tanker Shipping (NYSE: NAT) that have had trouble consistently keeping their heads above water in recent years, Frontline has been soundly profitable for the last year – with only a single quarter in the red since the sector’s flop in 2008. Even if the sector doesn’t rotate back into favor for a while and largely moves sideways, the 7.7% yield is a decent money maker for income investors.
Dow 30 Premium Income Fund – 9.0% Dividend Yield
For those looking for income investments beyond just stocks, one way to capture a fat dividend yield via a diverse basket of companies is to own the Dow 30 Enhanced Premium & Income Fund (NYSE: DPO). This unique investment vehicle is a closed-end fund that invests in all 30 of the stock components of the Dow Jones Industrial Average while applying aggressive swaps and covered call options strategies. The result is a creative way to super-size your dividends as the fund returns a massive 9.0% yield to owners. But a word of warning: this is not an index fund pegged to the Dow. While it moves similarly to the Dow Jones Industrial Average, the unique strategy can cause big divergence in the long term. For instance, year-to-date the DPO fund is up almost 9% to the Dow’s 5% gains. But over the last 12 months the income fund is lagging at 6% gains to 12% gains for the DJIA. Be aware of this disparity in this fund if you are thinking of investing.
A.F.P. Provida – 9.3% Dividend Yield
Chile privatized its social security system in 1981, and A.F.P. Provida (NYSE: PVD) has become the largest player in this arena over the last few decades. With approximately $35 billion in assets under management, A.F.P. Provida controls nearly a third of the pension fund market in Chile. Calculating a yield on AFP Provida is tricky, since dividends are paid twice a year and can fluctuate significantly. But based on the $6.55 in total dividends paid out in 2010, the current yield on this stock is about 9.3% at current valuations. While PVD stock has slumped in 2011, the 12 month return on shares is a stunning 70%. This stock could be a great dividend play and a great emerging market investment to boot. Read about 3 emerging market ETFs surging now on InvestorPlace.com.
Jeff Reeves is editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks or funds named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.