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VIDEOLong Term Investor? Now's the Time to Consider High Dividend Paying Stocks
Here, some companies that are attractive because of record-low interest rates, potential profit growth, and a slowing economy.
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To do this, look no further than companies that pay dividends higher than the return in the credit markets; they're attractive because of record-low interest rates, potential profit growth of 36%, and a slowing economy. According to Bloomberg, US stocks paying dividends are exceeding bond yields more than any time in the last 15 years. In the S&P 500, 68 companies yield more than 3.78%, which happens to be the average rate in the credit markets going back to 1995.
Moreover, stocks seem cheap after companies raised payouts by 6.8% during the second quarter. Bloomberg goes on to report that the last time the number of S&P 500 companies paying dividends above the corporate bond rate approached this level was all the way back in March 2003, which happens to be around the time a new bull market started that saw more major equity averages double.
The contrarian might say this isn’t the best strategy. A quick check of performance this year shows that Bank of America Merrill Lynch Corporate Master Bond Index has returned 9.5% this year while the S&P 500 is basically unchanged. Also, dividend yields were pushed higher by a 9.3% drop in the S&P 500 since April 23.
Still, for the long-term investor, right now may be a great time to purchase a blue chip, a high-dividend-paying stock for the future. Using Finviz, I ran a screen for S&P 500 companies that pay a dividends yield of 3.78% and sell under 12 times earnings. The screen returned 25 companies. I hand-selected some of the names I thought could be attractive for investors (yields follow company names): Bristol-Myers (BMY) 4.82%, Excelon (EXC) 4.97% , Altria (MO) 6.63%, Reynolds American (RAI) 6.27%, AT&T (T) 6.12%, Verizon (VZ) 6.46%, and Xcel Energy (XEL) 4.43%.
Those are just a few names. For those who would like to see the full list, here's a link to the screen.
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