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The 6 Highest Yield Stocks From The Dividend Aristocrats List

By on November 18, 2012     

Each year Standard & Poor’s updates its list of Dividend Aristocrat stocks. The Dividend Aristocrats are blue chip companies from the S&P 500 with a long term history of dividend increases. To make the list a company must have increased the regular dividend paid for at least 25 consecutive years. For 2012, 51 stocks made the cut. The median yield for the group is 2.67 percent and the average or mean yield is 3.52 percent. All yield numbers are based on share prices and dividend rates in effect the second week of March 2012. It make sense that a high yield stock which also has a history of dividend increases would be a nice additional to any income investor’s portfolio.

Pitney Bowes (PBI): Current yield: 8.5 percent. In spite of its status as a Dividend Aristocrat, Pitney Bowes is exhibiting danger signals which should be heeded by income investors. The company’s main business of providing mail sorting and postage equipment. Not a growth industry. As the company works to diversify its business offerings, revenue and profits have been declining slowly for the last four years. The current $1.50 is adequately covered by the projected $2.11 of earnings for 2012. However, investors who pick up shares of Pitney Bowes should check every quarterly earnings statement for stability of earnings and, hopefully, a turn to positive growth.

AT&T (T): Current yield: 5.7 percent. AT&T was added to the Dividend Aristocrats for 2012, putting the stock right at 25 years of increasing pay outs. Investors can feel pretty secure AT&T will continue to maintain or increase the dividend. When evaluating the dividend coverage, dig into annual financials for the cash from operating activities and subtract the amount spent on construction and capital improvements, then compare to the total in dividends paid. For 2011, the company produced $14.3 billion in net cash flow and paid out $10.2 billion in dividends. Plenty of dividend coverage. Stock repurchase payments are a bonus here, reducing the amount to be paid with future dividend payments. Expect the dividend to increase by 2 to 3 percent per year.

HCP Inc. (HCP): Yield: 5.1 percent. HCP is also an new Dividend Aristocrat constituent in 2012. This company is a real estate investment trust – REIT – specializing in the healthcare sector. The REIT healthcare sector provides very attractive long term growth prospects. HCP investors have realized total returns of over 40 percent for the last two years. HCP is actively adding new properties to its portfolio. Add 4 to 5 percent growth of the dividend plus share price growth and investors can expect double digit annual returns from this stock.

Leggett & Platt (LEG): Current yield: 5.0 percent. Leggett & Platt provides a nice piece of diversity in this list as a manufacturing company, producing home and business furnishings. The company has increased the dividend rate for 40 consecutive years. In the last few years, earnings have barely covered the dividend. Leggett & Platt expects profits to increase at a strong pace when the economy starts to grow. Management is pursuing acquisition prospects to help fuel the growth.

Cincinnati Financial Corp. (CINF): Current yield: 4.7 percent. Cincinnati is a property and casualty insurance company offering both commercial and consumer insurance products. The company is one of the better managed in the sector. Property and casualty insurance companies have been hampered in recent years by low interest rates from their investment portfolios and overly competitive pricing on policies. It appears the company can now start to increase prices and the company maintains one of the better managed insurance company portfolios.  CINF is a very attractive investment value if the share price drops to provide a 5 percent dividend yield.

Consolidated Edison, Inc. (ED): Current yield: 4.1 percent. Utility companies are a staple for dividend income investors. Con Edison provides gas, electric power and steam to New York City and the surrounding area. The company has been increasing the quarterly dividend slowly in recent years: increases of one-half cent on the quarterly distribution. This stock is not the most exciting stock on this list, but the dividend is probably the most stable.

Six high yield stocks from six different industries. Looks like a nice mini-portfolio for an investor looking forward to a growing stream of income.


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About the author

Tim Plaehn

Tim Plaehn has led a self-described vagabond work career before reaching his current work as a freelance investment and trading writer. Besides a 9-year stint as a U.S. Air Force fighter pilot and another 10 years working in commercial truck sales, Tim spent a decade as a licensed, Series 7 stock broker and Certified Financial Planner – CFP. A 30-year interest in markets and trading plus background working for both industrial and sales companies allows him to bring a unique perspective to investment analysis. Tim keeps up with the futures and forex trading markets as well as daily work analyzing individual stocks and funds.

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