Category Archives: yield

Top Dividend Stocks Based on Dividend History, Yield and Payout – Seeking Alpha

Top Dividend Stocks Based on Dividend History, Yield and Payout – Seeking Alpha

I write extensively on the U.S. Dividend Champion list maintained and updated by DRIP Investing. The list is comprised of stocks that have increased their dividend payout for at least 25 consecutive years.
My initial Dividend Champion articles focused on just the Dividend Champions. However, DRIP Investing also maintains a Dividend Contenders list which is comprised of stocks with a history of raising dividends for the past 10-24 years.
Combining April’s Dividend Champions and Dividend Contenders into one list gives us a strong starting point of 242 stocks with long histories of raising dividends. Historical tests have also shown that stocks with higher yields and lower payout ratios have tended to outperform other stocks.
With this information in tow, I ranked the yields and payout ratios of the 242 stocks with histories of 10+ years of dividend increases. The yield and payout ratio ranks were added to create an average overall rank for each stock.
We are left with a list of stocks for further research. The top 15 stocks based on yield and payout rank are listed below. In addition, the bottom five stocks (those with the lowest combined yield and payout rank) are listed.
This list is valuable to investors seeking companies with a commitment to paying dividends, high yield, and dividend sustainability/margin of safety. Universal (UVV) tops the list with its healthy 4.59% yield and low payout ratio of 32%. UVV is also currently trading below its book value at a price/book ratio of 0.84. However, earnings growth is projected to decline next year and the stock is currently being sold by institutions and has a relatively high short float of 11.98%.
For those interested in creating a system of their own for free usingFinviz and Excel, Open Office, or Google Docs, please see a recent articleproviding in-depth step-by-step instructions.
Note: Data Source DRIP Investing, MSN, and Finviz. Always conduct your own research as statistical anomalies can exist, especially in instances of short-term earnings fluctuations skewing payout ratio.
Top 15 4/1/11 Champions & Contenders


Company Symbol Yield Payout Ratio Yield / Payout Rank
Universal Corp. UVV 4.59% 32% 1
Republic Bancorp KY RBCAA 2.95% 18% 2
Chesapeake Financial Shares CPKF 3.11% 21% 3
PartnerRe Limited PRE 2.80% 19% 4
ConocoPhillips COP 3.38% 28% 5
Sunoco Logistics Partners LP SXL 5.50% 48% 6
Chubb Corp. CB 2.58% 21% 7
ACE Limited ACE 2.05% 14% 8
Norwood Financial NWFL 4.33% 43% 9
Hudson City Bancorp HCBK 6.28% 55% 10
AT&T Inc. T 5.67% 52% 11
Citizens Financial Services CZFS 2.86% 27% 12
General Dynamics GD 2.65% 24% 13
Teche Holding Co. TSH 4.00% 41% 14
NextEra Energy NEE 4.01% 43% 15
Bottom 5
Alterra Capital Holdings Ltd. ALTE 2.22% 116% 238
Harsco Corp. HSC 2.43% 596% 239
RLI Corp. RLI 1.99% 134% 240
Royal Gold Inc. RGLD 0.78% 55% 241
EOG Resources Inc. EOG 0.58% 98% 242
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Step 2: Consider a Yield Target — Dividend Monk

Step 2: Consider a Yield Target — Dividend Monk

This is the second in a series of articles elaborating on the 9 Steps To Build and Manage a Dividend Portfolio.
The average dividend yield of a portfolio says a lot about the portfolio itself. To calculate the portfolio dividend yield, simply add up the annual dividends from all holdings, and divide by the total stock portfolio value.
Depending on the type of portfolio you have, it may be useful to divide it into sections. For instance, a given portfolio might consist of cash, treasuries, bonds, non-dividend-paying stocks, and dividend-paying stocks. In this case, to get a meaningful average yield, isolate the dividend stock component of the portfolio, and divide the dividend income from that component by the total worth of that component.
Average Yield = (Total Dividend Income) / (Total Dividend Stock Worth)

Dividend Growth Portfolio

An average yield between approximately 2.5% and 5% is suitable for those who aren’t planning on living off of their dividend income any time soon. Most importantly, the focus is on total returns, which implies a combination of the current dividend and growth of EPS and the dividend. Some companies with low yields will be the best investments for total return, while some companies that pay large dividends will also qualify as companies providing significant total returns.
Those with more time have more options. Slightly riskier investments, such as cyclical or deep value investments that provide more upside along with more risk may have a solid place in this sort of portfolio.

Current Income Dividend Portfolio

An average yield between approximately 4% and 6% is more suitable for those who are planning on living off of their dividend income now or in the near future. The yield target will depend to some extent on how much wealth you’ve amassed. If you don’t have quite enough, you’ll have to seek out the highest safe yields you can get, while if you have an abundance of wealth, you can focus on moderate yields with higher levels of safety and growth.
The three two things to look for are:
-A level of income that allows you to realistically meet your goals
-Income that grows at least with the level of inflation without touching your principle if possible
-Dividend Safety (don’t chase unsustainable high yields)
MLPs and REITs may be of use in a current income portfolio, along with utility companies, telecoms, and several of the dividend aristocrats and achievers.
Disclaimer: These are approximations for the purpose of providing examples. Consult a financial planner and/or make your own decisions regarding your specific portfolio arrangement. It’s important to combine a dividend portfolio with other asset classes for reasonable diversification.
{ 9 comments… read them below or add one }
Doug March 8, 2011 at 8:39 am

So many firms that I have interviewed have told me that living off of dividends simply cannot and should not be done. We need a bit over 4% to pay our bills now. They all say we need dividend stocks and growth to insure that the money lasts. I don’t believe them.
Think Dividends March 8, 2011 at 3:31 pm
What’s your portfolio’s current yield?
Matt March 8, 2011 at 5:55 pm
Doug, Whether one can live off dividends or not depends, of course, on the expenses of the person, their portfolio size, and their sustainable dividend yield. Focusing on dividends that grow gives investors the best of both worlds. Combining the portfolio with bonds and other asset classes is important too.
Matt March 8, 2011 at 6:07 pm
Think Dividends, The average yield of my portfolio of dividend stocks is a bit over 3.6%. A few of my companies like CHD, TXN, CVS, and BDX drive the yield down a bit.
My goal has been to boost my overall portfolio yield a bit this year. Capital appreciation from the oil segment hasn’t been helping.
What about yours?
Think Dividends March 8, 2011 at 9:07 pm
I don’t pay attention to current yield, I keep track of my yield-on-cost which is 5.9%. I have a good mix of low-yielders (Visa) and high-yielders (REITs and pipelines bought in 2008-09).
My Own Advisor March 10, 2011 at 2:51 pm
My unregistered portfolio of about 10 Canadian stocks yields around 4%. That includes TransAlta, which Think Dividends has nicely warned me about a few times 🙂
I try not to chase yield. It’s not the only driver for me.
Whether one can live off dividends really depends on your expenses; agreed. It’s income after all. If you spend more than you earn, well, you know the rest of the story.
Great post Matt. I look forward to the rest of your series!
Daniel Newell March 10, 2011 at 9:11 pm
Matt,
I always love reading your posts; another good one. Thanks again for the advice on my own blog. I appreciate it and look forward to maintaining correspondence,
DivPartisan
JT McGee March 11, 2011 at 3:10 pm
Yield is nice, but I still think investors tend to accept far too much risk in REIT holdings than they’re compensated for in cash flow. There are a lot of high-flying, high-yielding REITs out there that are involved in the very dangerous game of buying long-term debt instruments (MBS) with short-term, low-interest credit. Obviously you can see how that will work out in the long haul when rates inevitably rise.
Jason March 11, 2011 at 5:58 pm
Great article Matt! I agree that a 2.5%-5% initial yield is right in the wheelhouse for most dividend growth investors. Given even a modest dividend growth rate and you’ll have an excellent YOC after a decade.

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