Stock Pick Paying More Than 4% Dividend Yield

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Mar 10, 2015

In an era of rising inflation, unfavorable market conditions, expensive stocks, high volatility in the stock market and reduced value for investments, stocks that yield good dividends are indeed a blessing. Income investors have their eyes only on dividend stocks, as they guarantee reasonable returns on their investment. With the market conditions so unpredictable, investors are lapping up on stocks that have even close to 1 or 2% dividend yields. Are you an investor who is looking to invest in some good stocks that offer more than 4% dividend yield? Sounds incredible? Read on to see some of the top picks among stocks in this category.

Cutting capital costs and having check on exploration

It is indeed surprise to find a company with close to 4.2% dividend yield from one of the most unsteady sectors now – oil and petroleum. However, there is one company from this sector, ConocoPhillips (COP, Financial), which looks safe for this year and for the next few years as well, with the right moves in progress. Over the last five years, this company has been growing at an annual average rate of 14%. Except for last year, when oil prices witnessed a steep slump, shares and financial performance of ConocoPhillips have been growing at decent rates.

Share prices grew at 12% in the last 30 years and for 2014, prices came down by 3%, which is still reasonable considering the huge slump, some of their other oil peers have witnessed. For the last quarter of 2013, the company reported profits worth $2.5 billion; however the figure for the same period during 2014 was a disheartening loss of $39 million. ConocoPhillips is now involved in cutting its capital costs to a great extent. It is also planning to control its exploration activities, so that it could save on large amounts of costs. The year 2015 could see oil prices improving slightly at least which should spell good news for investors of this company. Currently, ConocoPhillips has a dividend pay-out ratio of 50%, which means, it has a huge window to increase dividends in the coming years.

Good cash flow and constant demand

If there is one company that can run the rest of its business on the success of just one of its brands, it has got to be the tobacco giant, Philip Morris International (PM, Financial). The Marlboro cigarettes manufactured by this company has a unique brand image for itself across all economies and stands in good stead for the performance of Philip Morris, even in the light of unfavourable market conditions. Though governments all over the world have introduced benefits like exemption of taxes and access to public services for non-smokers, there is still one section of loyal Marlboro fans, who contribute to the business of Philip Morris. One of the major strengths of the company is its ability to generate free cash flow. At present, it has close to $6 billion cash flow in hand per year and a 25% growth in net profits, which makes it one of the best companies with more than 4% dividend yield. With a dividend yield of close to 5% and a remarkably high pay-out ratio of 92.4%, Philip Morris surely has immense growth potential for the coming years.

Geographical diversification and a phenomenal occupancy rate

The next stock that we are going to see is a real estate investment trust, National Retail Properties (NNN, Financial). At present, the dividend yield of this trust is close to 4.2%. It is not surprising to see this yield because all REITs are supposed to pay out 90% of their earnings as dividends. What makes this REIT figure in the list of top picks among high-yielding stocks is the strategic holdings of the trust. As the name indicates, this trust holds only commercial retail properties – over 2,000 of them spread across 47 states. It has been increasing its dividends for the last 25 years in a row and hence is qualified to be called a dividend aristocrat. With close to 14.7% annual returns to investors, average lease term of 12 years and an occupancy rate of 99%, this REIT is all poised to be one of the best dividend stocks ever, as long as mortgage rates stay low.

Conclusion

Dividend stocks have always been the pet projects of investors looking for income. These stocks not only add value to investors’ worth, but also play a good role in developing the brand image of a particular company. However, not all high dividend yield stocks are great choices of investment. Investors must be careful to check if that particular stock has potential to grow in the future and only then put their hard-earned money there.