It’s a tricky world for income investors. There is currently around $15 trillion worth of government bonds trading at negative yields between Europe and Japan, and U.S. bond buyers have to invest for 30 years out to get a yield of better than 2.0%. With stocks now very volatile due to trade issues, many investors who have to generate income from the markets are wondering how they should be positioned.
One place in which investors can seek refuge during turbulent times is defensive stocks, or dividend stocks that have very sustainable dividends. Currently, many of the go-to defensive stocks with solid dividends are trading at nosebleed levels where valuations are redlining. That leaves companies that pay solid and sustainable dividends and have more than ample income to cover those dividends. This is where payout ratios come into play. The amount of income that is paid out as a dividend to shareholders.
If a company pays out too much of its income as dividends, it may be passing up on growth opportunities in the future. It also may have to borrow money to keep paying that dividend if earnings power is eaten into ahead. If a company pays out too little income as dividends, then it might not be enticing its shareholders to stand by the stock in a rough stock market.
The Credit Suisse equity strategy team has identified 50 sustainable dividend payers that it believes have high and sustainable dividend payouts. The firm believes that dividend stocks offer far better return potential over time with capital appreciation on top of the recent low dividend yields in Treasury notes and bonds. With the S&P 500’s dividend yield of 1.9% handily beating 10-year Treasury yields, the firm’s 50 companies are all shown to have high and sustainable dividend yields.
24/7 Wall St. took Credit Suisse’s review a step further. We excluded all companies that paid out roughly half or more of their income as dividends to shareholders. This automatically excluded companies like AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) with their 5.7% and 4.3% dividend yields, respectively. It also excluded many top energy companies, as their payouts and payout ratios may be dependent on the price of oil on top of the economy, and some retail/apparel names were screened out with earnings pressure that is too great to ignore.
All in all, these have a floor dividend yield of 3.5%, and some of the companies have dividend yields that are 5% and higher, all of which are paying out well under half of their income as dividends. These have been listed in descending order with the highest dividend yields first. Here are 30 sustainable dividends for income investors to consider in their portfolios.
|Company/Ticker||Dividend Yield||Payout Ratio|
|Ford Motor Co. (NYSE: F)||6.8%||45.5%|
|Newell Brands Inc. (NYSE: NWL)||5.5%||44.7%|
|Gap Inc. (NYSE: GPS)||5.4%||42.5%|
|WestRock Co. (NYSE: WRK)||5.4%||44.1%|
|International Paper Co. (NYSE: IP)||5.2%||36.2%|
|Host Hotels & Resorts Inc. (NYSE: HST)||5.0%||46.9%|
|Prudential Financial Inc. (NYSE: PRU)||4.9%||32.0%|
|Nordstrom Inc. (NYSE: JWN)||4.8%||46.1%|
|Ralph Lauren Corp. (NYSE: RL)||4.7%||34.0%|
|Marathon Petroleum Corp. (NYSE: MPC)||4.5%||33.5%|
|Comerica Inc. (NYSE: CMA)||4.4%||33.5%|
|SL Green Realty Corp. (NYSE: SLG)||4.3%||47.6%|
|Hanesbrands Inc. (NYSE: HBI)||4.2%||33.9%|
|NetApp Inc. (NTAP)||4.1%||41.0%|
|Citizens Financial Group Inc. (NYSE: CFG)||4.0%||31.9%|
|General Motors Co. (NYSE: GM)||4.0%||23.3%|
|Principal Financial Group Inc. (NASDAQ: PFG)||4.0%||37.4%|
|Wells Fargo & Co. (NYSE: WFC)||4.0%||37.8%|
|Regions Financial Corp. (NYSE: RF)||4.0%||35.2%|
|Gilead Sciences Inc. (NASDAQ: GILD)||3.9%||35.0%|
|Unum Group (NYSE: UNM)||3.9%||19.7%|
|Franklin Resources Inc. (NYSE: BEN)||3.8%||35.8%|
|H&R Block Inc. (NYSE: HRB)||3.8%||46.0%|
|Eastman Chemical Co. (NYSE: EMN)||3.8%||32.2%|
|MetLife Inc. (NYSE: MET)||3.8%||30.6%|
|Fifth Third Bancorp (NASDAQ: FITB)||3.7%||30.0%|
|Archer Daniels Midland Co. (NYSE: ADM)||3.7%||47.3%|
|Broadcom Inc. (NASDAQ: AVGO)||3.7%||42.6%|
|State Street Corp. (NYSE: STT)||3.7%||30.1%|
|Phillips 66 (NYSE: PSX)||3.7%||28.9%|