With interest rates hovering near zero and unlikely to change soon, finding attractive investment yields is tough. But stocks have been surging, and many investors have locked on to those with appealing dividends. Getting a nice yield can combine income with upside market potential.
U.S. News worked with S&P Equity Research and MarketScope Advisor to find the best-yielding dividends among the small number of stocks—only 115—that carry S&P's highest "strong buy" analyst rating. But be mindful that "strong buy" doesn't translate into "slam-dunk" when it comes to returns. The highest-yielding stock on the S&P list, for example, is Calumet Specialty Products Partners (ticker: CLMT), the dividend yield of which was recently a princely 10.1 percent. But Calumet also carries a "high" investment risk rating from S&P because it's in the volatile oil industry, where fortunes can quickly shift.
Here, ranked by dividend yield, are S&P's top 10 recommended stocks as of the market's close on November 30. Listings include ticker symbols, S&P risk evaluations, and thumbnail descriptions provided by S&P MarketScope:
Calumet Specialty Products Partners (CLMT). Dividend yield: 10.1 percent. Risk: high
Calumet Specialty Products Partners is a Delaware limited partnership. The general partner is Calumet GP, LLC, a limited liability company. On Jan. 31, 2006, the partnership completed the initial public offering (IPO) of its common units, and on July 5, 2006, the partnership completed a follow-on public offering of common units. CLMT is engaged in the production and marketing of crude oil-based specialty lubricating oils, fuels, solvents, and waxes in North America. Its businesses are organized into two segments—specialty products (63 percent of 2008 sales; 74 percent of 2008 gross profit), and fuel products (37 percent; 26 percent).
Windstream Corp. (WIN). Dividend yield: 10.0 percent. Risk: medium
In July 2006, Alltel Corp. spun off its wired operations into a separate entity. Immediately after the consummation of the tax free spinoff, the entity merged with Valor Communications, and the resulting company was renamed Windstream Corp. As of September 2009, WIN had 2.9 million access lines, including lines that were previously part of CT Communications, which was acquired in August 2007. The company also had just under 2 million long-distance customers and 1.1 million broadband customers (36 percent of total access lines and 53 percent of primarily residential lines), up 9 percent from a year earlier. WIN operates primarily in rural markets in the southern United States, such as Lexington, Ky., and Lincoln, Neb., with an average of about 20 access lines per square mile.
New York Community Bancorp. (NYB). Dividend yield: 8.5 percent. Risk: medium
New York Community Bancorp. is the holding company for New York Community Bank, a leading financial institution in the New York metropolitan region, with assets of $32.5 billion as of Dec. 31, 2008. The bank is a leading producer of multifamily mortgage loans in New York, with a year-end 2008 balance of $15.7 billion, and one of the largest thrift depositories in the New York metropolitan region, with deposits of $14.3 billion.
Altria Group (MO). Dividend yield: 7.2 percent. Risk: medium
Altria Group (formerly Philip Morris) is a holding company for wholly owned and majority-owned subsidiaries that make and market various consumer products, now primarily cigarettes. Prior to the March 30, 2007, spinoff of Kraft Foods, Altria Group's reportable segments were domestic tobacco, international tobacco, North American food, international food, and financial services. The spinoff of Philip Morris International was completed on March 28, 2008, at a one-for-one exchange rate. Philip Morris U.S.A. (PM USA) is the largest U.S. tobacco company, with total U.S. cigarette shipments amounting to 169.4 billion units in 2008 (down 3.3 percent from 2007), accounting for 50.7 percent of U.S. cigarette market shipments (up from 50.6 percent in 2007).
Kinder Morgan Energy Partners (KMP). Dividend yield: 7.2 percent. Risk: low
Kinder Morgan Energy Partners L.P. is a publicly traded limited partnership formed in August 1992. The partnership is one of the largest publicly traded pipeline limited partnerships in the United States in terms of market capitalization. In total, it transports refined petroleum products and natural gas through 25,000 miles of pipeline. In addition, it operates approximately 170 terminals handling refined products, coal, and other materials.
Home Properties Inc. (HME). Dividend yield: 6.1 percent. Risk: low
Home Properties is a self-administered and self-managed real estate investment trust (REIT) that owns, operates, acquires, develops, and rehabilitates apartment communities. The trust's properties are regionally located in markets in the Northeast, mid-Atlantic, Midwest, and southeastern Florida. The trust conducts its business through Home Properties L.P.—a New York limited partnership—in which HME held a 71.7 percent partnership interest as of Dec. 31, 2008. As of that date, the trust operated 112 communities with 38,280 apartment units.
AT&T Inc. (T). Dividend yield: 6.0 percent. Risk: medium
AT&T combined SBC Communications with the acquired assets of AT&T Corp. following a November 2005 acquisition. At the end of 2006, AT&T closed on its acquisition of BellSouth (BLS) for $86 billion in stock. As of September 2009, the company had 28 million consumer voice connections (down 12 percent from a year earlier) and 13.5 million consumer broadband customers (up 6 percent). With the acquisition of BLS, AT&T took full control of Cingular Wireless, the second-largest U.S. carrier now with 81.6 million subscribers (up 9 percent from a year earlier), and expanded its wired presence into the southeastern United States. In early 2007, Cingular was renamed AT&T. In June 2006, AT&T launched its new fiber-based network, which offers video and faster broadband services. As of September 2009, the service, called U-verse, had been rolled out in part of AT&T's operating territory with 1.8 million customers, more than double from a year earlier. AT&T has deployed the service to about 17 million households and aims to deploy it to 30 million households by 2011, a slight delay from prior expectations. At the end of June 2007, AT&T became the exclusive provider of the iPhone, and by that December, over 2 million customers had signed up for the service. In June 2008, the company announced an upgraded 3G version of the handset that AT&T has been subsidizing to drive customer demand and revenue per user. AT&T activated 4.3 million iPhones in the second half of 2008 and more than 7 million in the first nine months of this year, with the June launch of a newer, faster iPhone.
Microchip Technology Inc. (MCHP). Dividend yield: 5.1 percent. Risk: medium
Microchip Technology develops and manufactures specialized chips used in a wide variety of embedded control applications. MCHP is a leading microcontroller company, having shipped over 7 billion microcontrollers since 1990. MCHP also offers a broad range of high-performance linear, mixed-signal, power management, thermal management, battery management, and interface devices, as well as serial EEPROMs. Microcontrollers are low-cost components that form the brains of the vast majority of electronic devices, except for PCs.
UDR Inc. (UDR). Dividend yield: 5.0 percent. Risk: low
UDR (formerly United Dominion Realty Trust) is a REIT that owns, manages, develops, acquires, renovates, and operates middle-market apartment communities nationwide. The trust conducts operations through its two operating subsidiaries: Heritage Communities LP and United Dominion Realty LP. UDR has a geographically diverse portfolio. At Dec. 31, 2008, the trust owned communities with 44,388 apartment homes spread across four different regions.
Dominion Resources Inc. (D). Dividend yield: 4.8 percent. Risk: medium
Dominion Resources is a fully integrated gas and electric holding company. The company operates in three primary segments: Virginia Power, energy, and generation. The Virginia Power segment (20.7 percent of 2008 operating segment revenue) operates regulated electric transmission and distribution businesses in Virginia and northeastern North Carolina. The energy segment (28.8 percent) operates a regulated natural gas distribution company in Ohio, regulated gas transmission pipeline and storage operations, regulated liquefied natural gas operations, and the natural gas exploration and production business, which supports the company's gas distribution business. The energy segment also includes a producer services business, which aggregates gas supply, provides gas transportation and storage market-based services, and engages in associated gas trading and marketing. The generation segment (52.8 percent) is involved in generation for electric utility and merchant power customers, along with energy marketing and risk management activities.
You can find other lists of attractive dividends. Barron's recently put together its own list, and it included none of the stocks in the S&P screen: Banco Santander (STD), Chevron (CVX), Intel (INTC), Johnson & Johnson (JNJ), McDonald's (MCD), Nestlé (NSRGY), Novartis (NVS), PepsiCo (PEP), Procter & Gamble (PG), and Verizon Communications (VZ).
CNBC's "Mad Money" host Jim Cramer has six high-yielding picks: Intel (INTC), Kimberly-Clarke (KMB), McDonald's (MCD), Clorox (CLX), Sanofi-Aventis (SNY), and Eaton (ETN).
Motley Fool scanned for companies that are highly rated by its users, have at least $1 billion in market capitalization, carry debt-equity ratios of less than 0.5 percent, and have dividend yields above 5 percent. Seven stocks made the list: BP (BP), Vodafone (VOD), Northstar Realty (NRF), Total SA (TOT), Penn West Energy Trust (PWE), Turkcell (TKC), and Terra Nitrogen (TNH).