Yield chasers have been moving money around at a unusually rapid pace over the last 12 months. When the 10 year treasury rate went below 2% there was a flight to yield in dividend-paying stocks. And who can blame those that made the move? It’s one that was long overdue and most of these investors were late to the party.
It’s normal for a new dividend investor to be attracted to the highest yielding dividend stocks. Stocks fit into this category for a variety of reasons. For example many of these stocks are REITs which are required to pay out 90% of their income to shareholders. The yield is high on those stocks because the market doesn’t expect much income growth from them or because the market is concerned that the yields could drop. Some of the highest yielding stocks are companies that are performing badly and are about to cut their dividend or have had a major drop in share price which pushes up the yield until the dividend is cut. This is a common occurrence among the ultra high yielders.
For a non REIT, non MLP standard dividend stock a yield in this current market above 6% is a red flag. That can change depending on market conditions. Each sector is different as well so its important to do your homework. For example telecoms traditionally have a higher yield than consumer staple stocks.
The best way to filter out the solid high yielding stocks from the rest is dividend growth and acceptable payout ratios. A company must have solid cash flow and income growth to increase its dividend year after year. That is why this list has been reduced to the highest yielding stock that have increased their dividend for 7 years or more. Any company that was able to increase its dividend before, during and after the great recession has a strong chance of doing the same over the next 10 years. There are over 400 dividend stocks that fit into this category which is pretty amazing all by itself. I filtered out stocks that have a payout ratio over 90%. If a company is paying out more than they are taking in that dividend cannot last. I also removed any REITs, MLPs, Closed End Fund and Trusts.
What we are left with is real companies that are paying real dividends with solid dividend history to back up the current yield. Because of the importance of this list I expanded it out out to cover the top 15 highest yielding stocks. Don’t forget that you can use the dividend history tool to see the dividend history and charts for each of these stocks.
15 Highest Yielders with Real Dividends
|Yrs of Div
|IT & Comm
|IT & Comm
|NWest Nat Gas
|IT & Comm
There are a few companies out there that have 7+ years of consecutive dividend growth and high yields but did not make this list because Earnings Per Share is lower than Dividend Per Share giving the stock a payout ratio over 100%.
Going further down the yield list the utilities really dominate the 3.5% to 4% yield space. A few non utility standouts that fit into that range are Intel (3.7%), Thomson Reuters (4%), Legget & Platt (3.7%) and Hasbro (3.6%).
A little disclaimer – This is not to say that any of these stocks are a buy. Each stock should be evaluated for future growth potential and current valuation before investing.