The Highest-Yielding Dividends That Are Safe to Hold

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1. AT&T
> Dividend yield: 5.2%
> Annualized dividend: $1.84
> Share price: $35.49
> P/E ratio: 13.2

AT&T Inc. (NYSE: T) is one of the nation’s leading telecommunications companies. It is the highest yielding stock in the Dow Jones Industrial Average, with a dividend yield of 5.2%. AT&T recently agreed to acquire satellite television provider DirecTV for $48.5 billion. While this may seem like a large amount, the company had more than $18 billion in earnings last year alone. Many of AT&T’s businesses are cash cows, allowing the company to spend roughly $21 billion in cash last year on capital expenditures, while paying nearly $10 billion in dividends and spending more than $13 billion on share buybacks.

2. Southern Company
> Dividend yield: 4.9%
> Annualized dividend: $2.10
> Share price: $43.74
> P/E ratio: 15.7

Southern Company (NYSE: SO), based in Atlanta, is a utilities holding company operating in four southeastern states. It currently has a 4.9% dividend yield and a market cap of $38.9 billion, based on a share price of $43.74 as of May 30. Southern Company has a track record of consistently growing its dividend, which now pays out $2.10 on an annualized basis. Recently, the company has experienced delays and cost overruns in the construction of its Kemper County, Miss., coal facility. This, along with other issues, prompted investment bank UBS to issue a Sell rating on the stock. The Kemper plant is designed to produce energy from coal in a more environmentally friendly manner by implementing carbon capture and storage technology. Despite the cost, Moody’s maintained the company’s credit rating for its senior unsecured debt at an investment grade Baa1 with a stable outlook.

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3. Consolidated Edison
> Dividend yield: 4.6%
> Annualized dividend: $2.52
> Share price: $54.94
> P/E ratio: 14.7

ConEd is a utility company supplying electricity and gas to much of New York City and nearby Westchester County. Because ConEd is a regulated utility, it has to gain approval from the state to increase charges to customers for parts of their monthly bills. The company’s most recent efforts to increase rates were rejected by the state. Despite this, the company has long been considered relatively safe and stable. It currently offers a dividend yield of 4.6%. Consolidated Edison Inc. (NYSE: ED) also has a payout ratio of only about 67%, which is very safe for a utility.

4. Altria
> Dividend yield: 4.7%
> Annualized dividend: $1.92
> Share price: $41.46
> P/E ratio: 16.1

Altria Group Inc. (NYSE: MO) is one of the largest tobacco companies in the world, with a market capitalization of $82.5 billion. Currently, the company’s shares trade at $41.56, with a dividend yield of 4.7%. The company has been operating in a shrinking industry as national adult smoking rates have declined for decades, from 42.4% in 1965 to just 19% in 2011, according to the most recent data from the Centers for Disease Control and Prevention. Its closest competitor, Reynolds American, was excluded from the list this year despite offering a 4.6% dividend yield. This was largely because Reynolds is said to be in talks to acquire rival Lorillard. Until a deal is reached, it is not possible to determine what the company’s combined balance sheet would look like.