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6 Market-Beating US Income Stocks


There are some stocks in the US that have been able to stand up to the worst of the perfect storms of Wall Street.

When it comes to US-listed stocks, very few have managed not only not to have lost value in the market over the disastrous last quarter, but also the quarter before, as well as the past 12 months of overall lousy US stock performance.

Even fewer are the stocks that managed to focus their attentions on benefiting shareholders by paying dividends that are yielding at more than at least twice the average dividend paid by the members of the S&P 500 Index (^GSPC).

But perhaps there's a connection between paying higher dividends and positive stock performances. After all, investors can be a lot more patient with a good company, even if it has a stock that sags -- if the company keeps cutting reasonable checks quarter after quarter.

The key is to find these companies that not only pay reasonably, but also manage to keep their stocks positively performing -- not just for brief periods of success, but consistently, especially during the dire quarters of late.

In coming up with the stocks that are working, I looked at those that managed positive price performance for not just the last quarter, but the prior quarter and the trailing last four quarters. And to make it worthwhile, I then restricted the list to include only those successful companies that were paying dividends that yielded at least 5% -- more than double the current average yield of the S&P 500.

Would you be surprised that the number of US-listed stocks that met the test -- and are regular stocks and not bond or other income funds -- is very small? In fact, after going through the list and taking out a few for specific takeover or other market oddities, the list comes down to a meager nine stocks.

The nifty nine, interestingly enough, are in four distinct industries: utilities, energy, banking, and real estate. Six of the nine are featured below:

Utility Players

While utilities traditionally have been the go-to group during times of market and economic uncertainty over the past troubled recent quarters and trailing year, this industry group has been disappointing.

The number of stocks performing well has been fewer in number, and even worse, those that have been faring well have seen their dividend yields effectively plummet to unsatisfactory levels.

Two US utility companies have made the short list. First is St. Louis-based Ameren (AEE). Ameren is primarily a regulated power generator and provider for the markets of Missouri and Illinois.

Diversified in its generating capabilities, the company's plants run from coal-fired and gas to nuclear. Revenue has been expanding at an annual rate of over 7% -- good, given that that its core metropolitan region has been contracting in economic output and population over the past several years.

Moreover, the company continues to focus on its efficiencies to make the most of its stable marketplace. Operating margins continue to expand by more than 7%, making the most of its revenues from better use of its assets.

And while returns on overall assets and equity are fairly flat, shareholders continue to be rewarded by a dividend running at 5.2%. This, along with a stock that's generated an overall positive return for the trailing year, at near 6% -- including a positive return in excess of 4% for the last quarter.

Joining Ameren on this short list is UIL Holdings (UIL), formally known as United Illuminating Company. Like Ameren, UIL, based in New Haven, is a regional power generator and distributor with a reasonably stable (but not high-growth) local market.

Nevertheless, UIL -- like Ameren -- continues to make the best of its business, bolstering revenue at a growth rate even higher than Ameren, at an average annual rate of over 11%. And while that's impressive, the company's growing efficiencies are leading operating margins at an expanding rate of over 9%.

Dividends are running close to Ameren, also roughly 5.2%. The overall total return of UIL is proving a bit better than Ameren with the trailing year running at over 20% including the last quarter's positive return of over 3.1%.
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No positions in stocks mentioned.
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