Investing in the stock market can sometimes be a test of investors' patience. Over the past 15 years, the broad-based S&P 500 has plunged by more than 50%, only to completely erase these losses within a matter of years twice (the dot-com bubble and the Great Recession).Long-term investors are well aware that the stock market tends to go up over the long-term, and has returned about 7% annually -- but that doesn't make it any easier holding onto stocks when the broad market indexes nosedive.
This is where dividend stocks come in. Dividend stocks offer a bounty of advantages over non-dividend stocks, which makes them attractive long-term holds.
The obvious difference is that dividends provide a hedge during a downturn. The average yield of the S&P 500 is just over 2%, and while that won't negate a stock market correction lower, it's better than nothing.
The two more important advantages of dividend stocks are that they usually imply a healthy business model and they can be reinvested to supercharge your long-term gains.
Companies typically won't pay a regular dividend to investors if they don't believe their business model is on solid footing.
By a similar token, being able to reinvest your dividends over the long run can allow you to buy more shares of dividend paying stocks, which yields bigger payouts, and even more shares. This compounding pattern is what lends to rapid wealth creation.
The thing about dividends is that investors can be lured solely based on yield, which isn't necessarily a good thing. As investors, we want the highest yield imaginable so we can boost our reinvestment potential.
But yields can rise because stock prices are falling. If investors aren't able to decipher whether a high yield is the result of a healthy shareholder return policy or a struggling business model, there could be problems.
With this in mind, I figured we'd take a brief look at four safe stocks with healthy dividend yields north of 5%. By "safe," I mean companies with below-average volatility and proven business models that won't leave you sleepless at night.
These are the results...
HCP -- Yield: 7.06%
HCP (NYSE:HCP) employs 187 people, generates revenue of $2,544.31 million and has a net income of $-557.84 million. The current market capitalization stands at $15.27 billion.HCP’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $1,833.92 million. The EBITDA margin is 72.08% (the operating margin is -4.25% and the net profit margin -21.92%).
Financials: The total debt represents 51.60% of HCP assets and the total debt in relation to the equity amounts to 118.47%. Due to the financial situation, a return on equity of -5.58% was realized by HCP.
Twelve trailing months earnings per share reached a value of $-0.44. Last fiscal year, HCP paid $2.26 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is not calculable, the P/S ratio is 5.98 and the P/B ratio is finally 1.62. The dividend yield amounts to 7.06%.
Stock Charts:
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| Long-Term Stock Price Chart of HCP (HCP) |
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| Long-Term Dividend Payment History of HCP (HCP) |
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| Long-Term Dividend Yield History of HCP (HCP) |
Corrections Corporation -- Yield: 6.53%
Corrections Corporation (NYSE:CXW) employs 14,055 people, generates revenue of $1,793.09 million and has a net income of $221.85 million. The current market capitalization stands at $3.95 billion.Corrections Corporation’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $433.02 million. The EBITDA margin is 24.15% (the operating margin is 15.61% and the net profit margin 12.37%).
Financials: The total debt represents 43.86% of Corrections Corporation assets and the total debt in relation to the equity amounts to 100.62%. Due to the financial situation, a return on equity of 15.07% was realized by Corrections Corporation.
Twelve trailing months earnings per share reached a value of $1.79. Last fiscal year, Corrections Corporation paid $2.16 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 18.71, the P/S ratio is 2.17 and the P/B ratio is finally 2.65. The dividend yield amounts to 6.53%.
Stock Charts:
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| Long-Term Stock Price Chart of Corrections Corporation (CXW) |
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| Long-Term Dividend Payment History of Corrections Corporation (CXW) |
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| Long-Term Dividend Yield History of Corrections Corporation (CXW) |
GlaxoSmithKline -- Yield: 5.42%
GlaxoSmithKline (NYSE:GSK) employs 101,192 people, generates revenue of $35,152.45 million and has a net income of $12,301.81 million. The current market capitalization stands at $104.52 billion.GlaxoSmithKline’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $11,261.48 million. The EBITDA margin is 32.04% (the operating margin is 46.67% and the net profit margin 35.00%).
Financials: The total debt represents 31.12% of GlaxoSmithKline assets and the total debt in relation to the equity amounts to 325.22%. Due to the financial situation, a return on equity of 179.63% was realized by GlaxoSmithKline.
Twelve trailing months earnings per share reached a value of $5.13. Last fiscal year, GlaxoSmithKline paid $2.35 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 8.40, the P/S ratio is 2.95 and the P/B ratio is finally 13.96. The dividend yield amounts to 5.42%.
Stock Charts:
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| Long-Term Stock Price Chart of GlaxoSmithKline (GSK) |
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| Long-Term Dividend Payment History of GlaxoSmithKline (GSK) |
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| Long-Term Dividend Yield History of GlaxoSmithKline (GSK) |
AT&T -- Yield: 4.97%
AT&T (NYSE:T) employs 280,870 people, generates revenue of $146,801.00 million and has a net income of $13,687.00 million. The current market capitalization stands at $239.80 billion.AT&T’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $49,599.00 million. The EBITDA margin is 33.79% (the operating margin is 16.88% and the net profit margin 9.32%).
Financials: The total debt represents 31.33% of AT&T assets and the total debt in relation to the equity amounts to 102.84%. Due to the financial situation, a return on equity of 12.57% was realized by AT&T.
Twelve trailing months earnings per share reached a value of $2.25. Last fiscal year, AT&T paid $1.89 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 17.24, the P/S ratio is 1.62 and the P/B ratio is finally 1.93. The dividend yield amounts to 4.97%.
Stock Charts:
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| Long-Term Stock Price Chart of AT&T (T) |
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| Long-Term Dividend Payment History of AT&T (T) |
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| Long-Term Dividend Yield History of AT&T (T) |