Investors love dividends. Whether the market is up or down, many investors need those dividends to help pay income in retirement. Dividends also account for up to half of all shareholder returns through time. While high dividends are desirable for investors, savvy investors know that not all dividends are created equal.
24/7 Wall St. has conducted a review of the top dividends from America’s largest companies. Almost all the companies should be recognizable to most Americans. It turns out that there were 25 large companies paying a yield of 3.5% or more — and some much higher.
The reason that the 3.5% dividend yield matters so much to equity investors is that this is 1% higher than the average yields of the S&P and Dow. This was also more than 100 basis points higher than the average yield of the 10-year to 30-year Treasury. The volatile dividends for real estate investment trusts (REITs) were excluded, while the safer dividends from utilities and other sectors were included. Much of the retail segment’s high dividend yields may have a similar set of caveats, and they may feel driven by lower and lower share prices.
As of the last week of June 2017, the average S&P 500 Index yield was 2.37% and the average yield of the 30 Dow Jones Industrial Average stocks was 2.43%. The huge difference between the Dow and the S&P 500 is that all Dow stocks currently pay dividends — while there were close to 80 non–dividend payers in the S&P 500, and the index includes the higher-yielding REITs.
The yield of the 10-year Treasury note was last seen at just 2.13% and the yield on the 30-year Treasury bond was just 2.70%. The difference between the Treasury yields and equity yields is that the former are locked. Many of these major dividend paying companies should grow their revenue and earnings in the years ahead, and investors assume dividend and earnings growth in future years also will translate to higher share prices.
24/7 Wall St. used data from Thomson Reuters on financials and on target prices, and some extra color and commentary on what has driven these high yields also has been provided. The consensus analyst share price targets from Thomson Reuters have been used to show whether Wall Street thinks each company’s stock has room to appreciate or if they think there is already a fair value.
Here are 25 great American companies paying dividends that 3.5% yield or greater.
> Yield: 6.78%
> Price: $22.46
> Mean price target: $25.79
> 52-week range: $21.51 to $45.41
> Market cap: $6.8 billion
Macy’s Inc. (NYSE: M) has the highest dividend yield of major retailers at this time. Its stock also has been brutalized by the growth of Amazon, and Macy’s has been unable to turn its own omni-channel up enough to offset in-store sale erosion. Its yield was already high a year ago, but the big dividend yield growth for new investors has been due to the pain of a falling stock price for existing shareholders. Macy’s is also pursuing more store closures to focus on the most profitable locations. At the start of 2017, Macy’s had almost 150,000 employees and operated about 830 stores under the Macys, Bloomingdales, Bloomingdales The Outlet, Macys Backstage and Bluemercury banners.
> Yield: 5.94%
> Price: $37.38
> Mean price target: $40.52
> 52-week range: $35.16 to $59.67
> Market cap: $6.4 billion
Kohl’s Corp. (NYSE: KSS) has faced many of the same issues as Macy’s, including the rise of Amazon and e-commerce. As of January 28, 2017, Kohl’s operated 1,154 department stores, 12 FILA outlets and another three Off-Aisle clearance centers.
> Yield: 5.91%
> Price: $42.39
> Mean price target: $46.23
> 52-week range: $20.77 to $50.96
> Market cap: $12.6 billion
Seagate Technology PLC (NASDAQ: STX) is best known for its storage devices, and it is currently one of the dividend kings of the technology sector. It operates globally and dominates in storage devices, with a focus on hard drives, solid state drives and portable drives.
> Yield: 5.43%
> Price: $11.10
> Mean price target: $12.80
> 52-week range: $10.67 to $14.04
> Market cap: $44.2 billion
Ford Motor Co. (NYSE: F) has a better dividend than a stock performance of late. It has struggled to find direction in the post-Mulally years and is soon to have a new chief executive. At the same time, Ford has been experiencing a peak-auto trend in the United States as it seems hard to imagine the 2016 sales cycle being as robust in the year and years ahead.