When the summer selling was reaching a first climax in August, 24/7 Wall St. released “The Great Dividend Portfolio” for dividend investors who search for both high-yield and some degree of safety through hard times. Many of these eleven stocks had pulled back in a manner in which they looked very attractive on a risk-reward basis and were paying far more in yields than what we saw from the 10-Year Treasury yields. What is so interesting about this group of stocks is that many of them never seem to get punished with a bad market.
Low (or no) interest rates are here to stay for at least another two years and investors are being pushed out of the safe debt markets to go find investment income elsewhere. You are being forced to take on risks for income. We just showed how the high-yield bond funds and ETFs may have finally hit a floor as spreads reached astronomic levels.
24/7 Wall St. tracks a myriad of dividend stocks and on August 11, 2011 our “Great Dividend Portfolio” was released. At the time, the 10-Year Treasury yield was about 2.14% and our average dividend yield in the ten-company portfolio was a whopping 5.5%. That yield is now about 5.3% due to price appreciation and the DJIA has risen about 4% since then.
The high-yield dividend winners are as follows: Altria Group Inc. (NYSE: MO); American Electric Power Co., Inc. (NYSE: AEP); American Water Works Company, Inc. (NYSE: AWK); AT&T, Inc. (NYSE: T); Digital Realty Trust Inc. (NYSE: DLR); Enterprise Products Partners LP (NYSE: EPD) or Kinder Morgan Energy Partners LP (NYSE: KMP); General Electric Co. (NYSE: GE); Government Properties Income Trust (NYSE: GOV); Kimberly-Clark Corporation (NYSE: KMB); Senior Housing Properties Trust (NYSE: SNH); and Wal-Mart Stores Inc. (NYSE: WMT).
All of these ten dividend leaders are trading higher than they were in August, and some are up well over 10% and still offer high implied dividend yields. We are actually approaching levels now where some of these portfolio positions may need to be reviewed. Our aim is to find dividends which are safe, but we have to also adjust for issues around projected upside to price targets, market performance, and the ability to continue dividend growth even in choppy times. If we have grown less enthusiastic or more cautious on these names, we have noted at the end of each summary.