With the recent run up in the stock market, it is becoming increasingly difficult to find solid dividend plays. Below is my list of some of the best high yielding stocks.
AT&T (T), Verizon (VZ) – These two telecommunications giants both yield over 6%. Verizon currently trades at $32 per share and has a robust dividend of $1.90 per share. AT&T trades at $27 per share and pays out $1.64 per share. Both companies are trading at 12 times next years earnings estimates. If I had my pick I would invest in Verizon and its growing subscriber base.
British Petroleum (BP) – BP has long been my favorite oil stock since it was priced in the low $30′s. The oil conglomerate was yielding over 10% back in March. BP now trades for just under $60 a share and still yields 5.7%. I have owned BP for a few years and will continue to own the stock for its healthy dividend.
Kraft (KFT) – Although the stock has done virtually nothing over the past five years, Kraft is more then just mac and cheese. Kraft does has a solid dividend yield of 4.3%. Kraft is priced at $26.85 and pays $1.16 to its shareholders.
Eli Lilly (LLY) & Bristol Meyers(BMY) – These 2 pharmaceutical generate large amounts of free cash flow and yield 5% and 5.3% respectively.
VZ and T are indeed generous with their dividends, but if you look closely at these companies, their dividend growth rates are 3% and 2.7% respectively. Also, it isn’t likely that these dividends will grow significantly over the years. also their payout ratios are between 85% and 90%, so how much more can their dividends rise?
Mark, I just want to point out that AT&T has increased its annual dividend 25 consecutive years. Also, AT&T is growing wireless subs faster that Verizon, despite Verizon being the No. 1 wireless provider. In 3Q09 alone, AT&T added 2 million wireless subs, while Verizon added 1.3 million.
@Larry
Larry, over the past 5 years earnings are expected to increase just below 5% per annum for AT&T and 4.3% for Verizon respectively. As Rolf stated AT&T has increased its dividends for 25 consecutive years. Meanwhile Verizon has not cut its dividend over the past 25 years. Even if the dividend remains unchanged the yield is still attractive.
@Rolf Gatlin
Excellent point Rolf. I do worry about growth in the subscription base when their exclusivity agreement with Apple expires next year.
Mark, Jay Yarow over at Seeking Alpha makes some good point (http://www.businessinsider.com/losing-iphone-exclusivity-to-verizon-is-not-going-to-kill-att-2009-11). I would also point out that AT&T is the leading provider of smartphones in the nation.