Special Report

10 Safest High-Yield Dividends

Kraft Foods
> Dividend yield: 3.70%
> Annualized dividend: $2.10
> Share price: $56.10
> P/E ratio: 17.88
> Industry: Food Processing

Kraft Foods Group Inc. (NASDAQ: KRFT) is home to a number of household name brands, including Kraft, Jell-O, Kool-Aid, Oscar Mayer, and Planters. Its 3.7% yield is more than a full point above its large peers, and its $33 billion market cap makes it a formidable food giant. Kraft reported 2013 net income of more than $2.7 billion, and it paid out about $1.2 billion in dividends last year. And its dividend can likely rise further. At $56.05 a share, the consensus price target of $59.65 and the dividend still imply a roughly 10% expected upside. Kraft is also a relatively defensive stock that can provide downside protection in times of market turmoil or volatility.

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> Dividend yield: 3.10%
> Annualized dividend: $3.36
> Share price: $106.83
> P/E ratio: 17.57
> Industry: Personal Care

Kimberly-Clark Corporation (NYSE: KMB) and rival Procter & Gamble are similar in many regards. However, one factor that may make Kimberly-Clark a safer choice is that the market now knows what to expect from its upcoming health care spinoff. The company increased the targeted size of its buyback plan to $2 billion for the year. With a $40 billion market cap, Kimberly-Clark’s 3.1% dividend yield is very safe. It also seems that the company is more than eager to keep up its streak of raising its dividend, after raising it in each of the last 42 consecutive years.

Kinder Morgan
> Dividend yield: 4.40%
> Annualized dividend: $1.72
> Share price: $38.80
> P/E ratio: 31.23
> Industry: Oil and Gas

Kinder Morgan, Inc. (NYSE: KMI) is soon to become one of America’s largest energy companies after it completes the rollup of its three master limited partnerships. To prove how much confidence it has in the plan, the oil and gas infrastructure giant significantly raised its dividend on the announcement, from $0.43 to $0.50 per quarter. More importantly, CEO Richard Kinder already telegraphed up front that he wants to grow this dividend by 10% each year from 2015 to 2020. While the consensus price target is above $42, versus a current share price of $38.80, Wells Fargo recently lifted its value range to $46 to $48, and another analyst sees it rising to $50. Kinder Morgan could be the premiere oil and gas infrastructure stock for investors going forward.

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Southern Company
> Dividend yield: 4.80%
> Annualized dividend: $2.10
> Share price: $44.07
> P/E ratio: 15.79
> Industry: Energy

Southern Company (NYSE: SO) is a utility holding company based in Atlanta. Southern’s current yield of about 4.8% is not the highest of all utilities, but it is far from the lowest. Southern’s $2.10 annual payout has ample earnings coverage, both compared to last year’s earnings as well as compared to expected 2014 and 2015 earnings. The earnings per share estimates of $2.79 in 2014 and $2.86 in 2015 should include the effect of higher costs associated with the construction of Mississippi Power’s Kemper County integrated gasification combined cycle project. With a market cap nearing $40 billion, Southern Company has been growing its dividend at a measured pace in recent years. While several analysts downgraded the stock, the consensus price target is still very close to the current share price.

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