Tuesday June 05, 2012
by Stephen Quickel, editor US Investment Report
A recent study reveals that many of the S&P 100 stocks trading close to their 52-week highs also pay generous dividends.
With money market funds and certificates of deposit paying next to nothing, and growth stocks in a temporary stall, some investors might want to park idle cash in so-called “total return” stocks that offer both high dividend yields and average (or better) price appreciation potential.
To find such stocks, we cast our net farther than the usual blue chips, utility and bank stocks offering 2% to 4% dividend yields but slow earnings growth.
These stocks offer yields mostly in the 4% to 5% area. We also looked for those that had kept their yields in that range for the past five years.
And, of course, we examined their earnings growth expectations very closely to judge how their values might hold up in market downturns and might advance during market upturns.
As a further check, we studied how they performed in the six most recent up- and down-legs in
stock prices since the March 2009 market bottom.
These stocks have tended in most instances to hold their value better than average stocks in downturns, and in upturns to often do nearly as well as the overall market.
That diligence done, we do know they pay high dividend yields. What nobody can know for sure is how they will fare in terms of price appreciation and/or resistance to declines. Only time will tell.
Regarding those that made this list, oil & gas pipeliners such as Markwest Energy Partners (MWE), Plains All American Pipeline (PAA) and Western Gas Partners (WES) are generous dividend payers.
Utilities such as AT&T (T), Southern Company (SO) and Verizon Communications (VZ) offer plodding earnings growth, but are high-yielders and have substantial institutional support.
Drug makers Abbott Labs (ABT), GlaxoSmithKline (GSK) and Merck (MRK) are still dealing with patent expiration fallout, but also have solid institutional backing and the financial strength to maintain their dividend rates.
Two of the more interesting finds are Intel (INTC), which pays a 3.3% yield, and Regal Entertainment Group (RGC), the massive movie theater chain with a 5.9% current yield.
Learn more about this financial newsletter at Stephen Quickel's US Investment Report.