The 5 Highest Yield Dividend Aristocrats

This is a guest post by Ben Reynolds with Sure Dividend. Sure Dividend uses The 8 Rules of Dividend Investing to identify and rank high quality dividend stocks suitable for long-term investors.

The Dividend Aristocrats Index has outperformed the S&P 500 by 2.76 percentage points a year over the last decade, according to S&P. Simply put, the Dividend Aristocrats Index is an excellent place to look for high quality dividend stocks. 

This is because a company must increase its dividend payments for 25+ consecutive years to be eligible for inclusion in the exclusive Dividend Aristocrats Index. A business must have a strong competitive advantage to raise its dividend payments for 25+ consecutive years.

Of course, not all stocks in the Dividend Aristocrats Index are the same.  Some have better growth prospects and higher dividend yields than others.  This article takes a look at the 5 highest yielding stocks in the exclusive Dividend Aristocrats Index.

#5 – Cincinnati Financial (CINF)

Cincinnati Financial has a dividend yield of 3.5%. The company has paid increasing dividends for an amazing 55 consecutive years. Cincinnati Financial is a property and casualty insurer with an $8.6 billion market cap.

The company operates in 5 main segments:

·         Commercial Insurance

·         Personal Insurance

·         Excess & Surplus Insurance

·         Life Insurance

·         Investment operations

The insurance industry is highly competitive.  Cincinnati Financial has taken an underwriting loss on the sum of its insurance operations each year since 2008. The company has managed to raise its dividend payments year after year thanks to the investment income it earns on the insurance float the company invests.

Cincinnati Financial invests differently than most insurers. The company invests more of its float in blue chip stocks than most insurers. This helps the company realize higher earnings during bull markets, and lower earnings during bear markets. 

The strategy of losing money on underwriting to make it back in investments has not worked well for Cincinnati Financial over the last decade. The company has seen week revenue-per-share growth of under 2% a year.  Despite its high dividend yield and long history of dividend increases, Cincinnati Financial does not have solid growth prospects moving forward.

#4 – Chevron (CVX)

Chevron has a 4.1% dividend yield. The company has paid increasing dividends for 27 consecutive years. Chevron has a market cap of $197 billion, making it the 4^th largest publicly traded oil corporation in the world. 

The company’s stock has fallen 16.5% over the last 6 months due to the precipitous fall in oil prices. The decline in Chevron’s stock price gives investors an opportunity to pick up this high quality shareholder friendly business for cheap. Chevron is currently trading at a price-to-earnings ratio of just 10.3.  Additionally, the company has not traded for a dividend yield over 4% since the depths of the last bear market in 2009.

Some investors worry that Chevron is at risk of cutting its dividend due to low oil prices. The company’s dividend appears safe, however. Chevron currently has a payout ratio of just 41%. Additionally, the company has very little debt. Chevron has over $7 per share in cash and currently pays $4.28 per share per year in dividends. The company is expected to generate about $4.50 in earnings per share this year by analysts. Despite low oil prices, Chevron is still expected to generate enough cash to more than cover its dividend payments.

#3 – Consolidated Edison (ED)

Consolidated Edison has a 4.2% dividend yield and has increased its dividend payments for 40 consecutive years. The company provides electricity to over 3 million people in New York state, and gas to over 1 million people in New York state. 

Consolidated Edison is a utility, and has an exceptionally low stock price standard deviation. In fact, it has the second lowest stock price standard deviation in the Dividend Aristocrats Index, behind only Johnson & Johnson.

As a utility, Consolidated Edison is a slow grower. The company has actually seen its revenue per share decline by about 1.5% a year over the last decade. This slow decline is not a good sign for long-term investors.  Earnings-per-share and dividends-per-share have shown modest growth, but the company is relatively stagnant. Consolidated Edison is a good choice for income oriented investors who cannot stand stock price volatility but require little growth. 

#2 – HCP, Inc. (HCP)

HCP currently has a 5.4% dividend yield and has increased its dividend payments for 30 consecutive years.  HCP is the third largest publicly traded health care REIT; the company has a market cap of over $19 billion.

HCP specializes in senior housing and post acute care facilities. The company has grown its dividends per share at about 3.3% a year over the last decade.  If HCP can continue to grow at 3.3% a year, investors will see total returns of 8.7% a year from both growth and dividend income. 

I believe it is very likely that HCP continues to grow by at least its historical 10 year growth rate (if not faster).  Demand for the company’s senior housing facilities will pick up as ever-greater numbers of baby boomers retire and reach old age.  This combined with longer life expectancies will increase the need for HCP’s senior housing facilities, which will drive the company’s growth.

#1 – AT&T (T)

The highest yielding Dividend Aristocrat is AT&T. AT&T currently has a 5.5% dividend yield.  The company has increased its dividend payments for 31 consecutive years. AT&T is the 2^nd largest telecommunications company in the U.S.; AT&T has a market cap of more than $176 billion.

AT&T has managed to grow at about 4% a year over the last decade. The company has transitioned from a traditional telephone company (long ago) to becoming one of the two most dominant wireless carriers in the U.S.

AT&T may very well grow faster over the next several years than it has over the last decade. The company is acquiring DirecTV. The DirecTV acquisition could spur growth for the company as DirecTV has a strong presence in Latin America which AT&T could leverage. Additionally, AT&T stands to benefit from the trend of using ever greater amounts of wireless data. Smart phone data usage is quickly growing.  As data usage grows, so does the demand and necessity of AT&T’s services.

Final Thoughts

Of the 5 highest yielding Dividend Aristocrats, only Chevron and AT&T rank highly using The 8 Rules of Dividend Investing. Both AT&T and Chevron have low price-to-earnings ratios, high dividend yields, and solid-if-unspectacular growth prospects. 

11 Canadian Dividend Stocks You Should Consider For Your Dividend Growth Portfolio

I'm a big fan of dividend growth stocks because they delivered me solid returns and a growing passive income over the recent years.

My main focus was on U.S. stocks, which is generally good because the American capitalism works fine but outside the US are also good stocks with a predictable business and stable growing dividends.

This week, I look at companies in Canada that have had a history of growing dividends, but more important have the capacity to continue to grow these dividends in the future.

You may like: Top Dividend Picks From Europe

A key measure of this sustainability can be observed through the payout ratio, which is the ratio of dividends paid to either cash flows or earnings.

A company paying out too high of a percentage in dividends is likely unable to continue to do so in the future. Attached are 11 of my top picks from the results.

I hope you can find there some new ideas. Please share your thoughts about the results. Thank you.

Here are some of my results...

3 Dow Jones Stocks With Shareholder Yields Over 10%

This blog is mostly dedicated to dividend growth stocks and yield is an important issue but it tells investors only half of the truth.

Beside dividend payments to shareholders, the company can also spend money for share buybacks. If we combine buybacks and dividends, we got a new yield, a shareholder yield, which is normally higher than the current dividend yield.

Below is a list of stocks from the Dow Jones which shows the current shareholder yields of the index. The results are better than the dividend yields due to positive share buybacks. Only three stocks have a double-digit shareholder yield.

Here are the top results with a 10+ percent shareholder yield...

Warning: Top Dividend Picks From Europe

Europe has a better investing environment as the United States. The ECB currently runs a 60 billion monthly quantitative easing program for the next months and a rising dollar makes European companies much cheaper than years before.

The big risk is still an ongoing decreasing euro due to problems in the Ukraine and debt negotiations in Greece. If the country should leave the Euro zone, other countries could follow but in the end, I believe that makes the area stronger. A bigger risk is to keep overspending countries with high debt in the Euro zone.

Today I run a market screener about European dividend stocks with simple criteria:

- Positive Dividend Yield

- Over 2 Billion Market Cap

- EPS growth for the next half-decade above 5 percent yearly

- Low forward P/E

- Debt-to-equity under 1

13 stocks fulfilled the above mentioned criteria of which two stocks are High-Yields. Below are my 4 favorites with a detailed view on the fundamentals. I hope you have some fun by discovering my results and will leave a few comments. Thank you!

These are my favorites:

The Secret Guide to Stocks That Warren Buffett Targets

When you look for attractive investment opportunities, you might have taken a deeper look at the activities of the professionals like George Soros, Bill Ackman or Warren Buffett.

Warren Buffett is one of the most respected investors in the world and his investment criteria are simple: Buy a growing business with inimitable assets at a reasonable price. Here are his criteria from his annual letter in detail:

(1) Large purchases (at least $75 million of pre-tax earnings unless the business will fit into one of our existing units), 

(2) Demonstrated consistent earning power (future projections are of no interest to us, nor are “turnaround” situations), 

(3) Businesses earning good returns on equity while employing little or no debt, 

(4) Management in place (we can’t supply it), 

(5) Simple businesses (if there’s lots of technology, we won’t understand it), 

(6) An offering price (we don’t want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).

It sounds simple but often it is hard to find concrete stocks that could meet his restrictions.

Today I like to close this gap by introducing some stocks that would appear on Warren Buffett's investing radar.

These are the results....