The bull is graying but only so gradually that the beast’s ultimate demise will almost certainly catch most investors off guard. To keep yourself from being lulled into potentially fatal sleep, I suggest focusing your new buying on stocks with above-average dividend yields and solid prospects for dividend growth.
Should the market slip on a banana peel, you can count on dividend stocks to stay afloat far more effectively than low-dividend or no-dividend names.
Furthermore, even if the headline indexes keep churning upward, I look for higher-yielding dividend stocks to lead the parade as wary investors gravitate to safe havens.
In the universe of dividend stocks, I’ve selected five outfits that hand you dividend yields that are at least 50% higher than that of the S&P 500.
Let’s take a look at these five dividend stocks to buy now:
Exxon Mobil Corporation (XOM)
I love Exxon Mobil Corporation (NYSE:XOM).
Oil prices have clearly bottomed (even the Saudi oil minister, who has a tendency to talk the price down, admits it). Yet, Wall Street analysts, still shocked by last year’s collapse, keep nitpicking various oil stocks, especially the biggest of them all, XOM stock.
During the first quarter, Exxon Mobil mounted a brilliant performance in its downstream (refining and marketing) operations, racking up a $1.7 billion profit — more than double the year-ago result. If there was ever a perfect demonstration of the staying power of Exxon Mobil’s integrated business model, this is it. Unbroken!
XOM stock has fattened its dividend 65.9% (cumulatively) over the past five years. What’s more — Exxon Mobil has increased its payout 33 years in a row. XOM stock’s current yield is 3.4%.
OGE Energy Corp. (OGE)
My subscribers sometimes ask, “How will utility stocks react to rising interest rates in the years ahead?” No doubt, the share prices of some slower-footed utility stocks will suffer. Their dividends won’t grow fast enough to offset higher bond yields (if bond yields climb, income investors will demand higher dividend yields on utility stocks).
However, Oklahoma City-based OGE Energy Corp. (NYSE:OGE) enjoys a leg up over the pack. As Oklahoma’s oil-and-gas industry rebounds, OGE will ring up hefty profits by delivering electricity to the oil patch and providing midstream services to the natural-gas industry.
Over the past five years, OGE’s dividend has jumped a hefty 37.7%, and I expect even faster growth over the next five. OGE stock’s current yield is 3.1%.
Procter & Gamble Co (PG)
Wall Streeters, notorious for their short attention spans, aren’t willing to sit still while CEO A.G. Lafley (and his likely successor, David Taylor) turn around Procter & Gamble Co (NYSE:PG). I’m in no rush, though.
During my 42-year investing career, I’ve seen Procter & Gamble, which owns brands such as Tide, Pampers and Gillette, reinvent itself three times — and steam onward to greater glory after each makeover.
Once PG completes the disposal of its low-margin businesses, probably by the end of the third quarter, profits will accelerate into a multi-year uptrend. If I had to name just one stock that could defy even a major bear market for the Dow Jones Industrial Average, it would be PG.
Procter & Gamble’s current yield is 3.3%. PG stock’s dividends have been sweetened every year since 1957.
South Jersey Industries Inc (SJI)
Like AGL Resources, South Jersey Industries Inc (NYSE:SJI) isn’t getting the credit it should for robust long-term growth prospects.
SJI is aggressively expanding its customer rolls in southern New Jersey by converting former users of oil and electric heat to lower-cost natural gas.
South Jersey Industries also operates a wholesale pipeline as well as a bundle of energy-related businesses from solar-panel installation and HVAC services to cogeneration and energy marketing. Management foresees long-term earnings-per-share growth of 6%-7% a year, which is well above my projection for gas utilities as a group and consistent with SJI’s historical record.
Buy South Jersey Industries now as SJI stock’s current yield is 3.8%.
AGL Resources Inc (GAS)
Parent of Atlanta Gas Light and Illinois-based NICOR, AGL Resources Inc (NYSE:GAS) seems perennially underrated by the Wall Street analyst crowd.
Yet, AGL Resources continues to deliver: Q1 profits topped estimates, and GAS raised its 2015 guidance.
With management targeting a compound annual earnings growth rate of 6%-9% over the next five years, GAS looks set to become one of the top-performing gas-distribution stocks through the end of the decade.
Buy GAS stock for its 4% dividend yield.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.