Recent market turmoil has reignited investor appetite for the safe and staid. Of course, when it comes to the markets, there’s never a 100% guarantee of safety, but because they can be relatively stable and reliable, higher yield (3%+) dividend paying stocks are back in vogue. According to the Wall St. Journal:
This year, stocks in the S&P High Yield Dividend Aristocrats Index—companies in the S&P Composite 1500 that have increased their dividends every year for at least 20 years—are up 1.91%, including dividends, compared with a negative total return of 4.3% for the S&P 500 Index. The total return on the Dow Jones U.S. Dividend 100 Index, composed of stocks that offer consistent, high payouts, is negative 0.8%.
Simply investing in dividend paying companies isn’t a guarantee that you’ll profit from the investment. And a high yield stock isn’t necessarily a safe haven. Reliable is the key here, since some companies intentionally beef up their dividend yields to unsustainable levels in order to attract investors, thereby up their share price.
On the other hand, some companies are thriving, and even if their stock remains relatively flat during specific market cycles, they’ve paid out—and consistently raised—dividends for years. That sort of past performance is a good indicator of future results.
Here’s our list of the top 5 dividend stocks with high yields that have been raising dividends almost every year for at least the past 30 years.
5. AbbVie (NYSE:ABBV)
AbbVie is a pharmaceuticals company focused on the research and development of biopharmaceuticals and small molecule drugs. It employs about 28,000 people and has a market cap of $90B.
Although, AbbVie has only been paying dividends for the past 3 years, it has a good excuse: it’s a spin-off of Abbott Laboratories (NYSE:ABT), a Dividend Aristocrat that's raised its dividend payout for 20 consecutive years. And since the acorn doesn’t fall far from the tree (in this case at least) it seems fair to include AbbVie on our list, since it has continued Abbott's tradition of raising its dividend annually.
AbbVie shareholders enjoy a significant dividend yield of 4.12% along with a 43 year tradition of dividends from its ‘parent’ company. At $56.40 per share as of yesterday’s close, AbbVie also trades for a reasonable P/E ratio of 13.1, compared to the industry average of 38.07.
With solid growth over the past three years, including a 14% rise in revenue in 2015, and an expected blockbuster leukemia drug set to be released in 2016, as well as the ongoing success of its best-selling Humira medication which is used to treat rheumatoid arthritis, ulcerative colaitis and Crohn's disease among others, AbbVie continues to look promising.
The next Ex-Dividend date for AbbVie is April 13th, for a quarterly dividend of $0.57.
4. Old Republic International (NYSE:ORI)
If you think you cannot possibly find reliable companies among smaller market caps, you missed this one. Old Republic International engages in the insurance underwriting, primarily in North America. The company offers a variety of insurance policies, such as automobile, travel insurance, and various specific activities.
Founded in 1887, and headquartered in Chicago, Illinois, Old Republic has a comparatively small market cap of only $4.72B, so it pales in comparison to the usual value of most Dividend Aristocrats. However, it has fully earned its place alongside them.
With an annual payout of $0.75 per share and a stock price of $18.01, the company yields 4.16%. Its EPS of 1.46 also means the company sells at 12.3 times earnings, below the industry average of 15.5. The analyst consensus target price on Old Republic is $20 given potential earnings and revenue growth expectations, which would put its stock price at 10% higher than what it sells for today.
The relatively small market cap may deter some from trusting this company, but that would be a mistake. It’s well worth any dividend investor’s consideration.
The next Ex-Dividend date for Old Republic is yet to be announced. The most recent Ex-Dividend date for the quarter was March 2nd, for a quarterly dividend of $0.1875.
3. Mercury General (NYSE:MCY)
Like Old Republic, Mercury General is in the insurance business. And like Old Republic, Mercury General—depending on the metrics you use—can be considered either a large small cap or a small mid cap with a valuation of 2.97B.
Its $3B revenue doesn’t make it a powerhouse like the top two companies on this list (below), but it still has a lot to offer. How much? A 4.61% yield on its $53.85 per share price tag. It has been paying a dividend since 1986, and raising that dividend annually since the initial payout.
It has a healthy payout ratio of 95.4% (meaning it is not using all its net income to fund the dividend), and though its last earnings report, released on February 8, wasn't quite as expected ($0.52 EPS on expectations of $0.68), the company remains committed to its dividend raise. Luckily, the miss is expected to be a one-time event, predicated on higher than expected loss frequency and severe one-time events in several states. Analyst forecasts predict an EPS of $0.67 for Q1 2016, which would easily cover the dividend payout.
The next Ex-Dividend date for Mercury General is March 15th, for a quarterly dividend of $0.62.
2. Chevron (NYSE:CVX)
The next two companies on our list aren’t really surprising. They’re two of the biggest corporations in the world. First up – Chevron.
Chevron is an American multinational energy corporation, operating in more than 180 countries worldwide. It engages in everything oil and gas related, from exploration to refining through marketing and transport. With a market cap of $167.11B and revenues of $129.87B, it isn't going to disappear in the near or long-term future.
But, while the company itself is here to stay, its $4.28 dividend and 4.82% yield might not be. Like the entire oil industry, Chevron has been hit hard by the recent downturn in commodity prices. The last time it hiked its dividend was in Q2 2014, and the company has said it will not raise its dividend burden until times are easier for energy companies.
For a glimpse at the possible future of this dividend payer, look no further than ConocoPhillips (NYSE:COP), which recently slashed its dividend by 66%. Chevron isn't much of a value buy either, since it trades at a P/E ratio of 36.29, well above the industry's 28 average. Overall, Chevron's dividend probably depends on a certain recovery of oil prices, because right now its 240% payout ratio (that is, almost 2.5 times its earnings) is most certainly unsustainable.
The next Ex-Dividend date is yet to be announced since the Ex-Dividend date for this quarter was February 16th, for a quarterly dividend of $1.07.
1. AT&T (NYSE:T)
When considering yields as well as continuity and consistency, one would be hard pressed to find anything better than AT&T. The telecommunications company is the second largest provider of mobile telephony in the U.S. With a market cap of $24.3B it is the 12th largest company on the S&P 500.
Buying AT&T today would secure you a 5.04% yield, an extraordinary return given current market conditions. AT&T's dividend has been spectacularly stable, rising regularly for 31 years in a row. The company itself is well priced as well, with an acceptable 16.83 P/E ratio compared to 23.9 for the industry as a whole, and a Price-to-Sales ratio of 1.5 compared to the industry's 1.74.
The return on the stock itself isn't as impressive as the dividend, and the company has been trading sideways since mid-2012. But, if it's reliable income you're after – you could do a lot worse than AT&T.
The next Ex-Dividend date has yet to be announced since the Ex-Dividend date for the last quarter was January 6, for a quarterly dividend of $0.48