The time for dividend stocks is now!
Because bond yields are dropping once again with the 10 year Treasury now down to only 1.47%. This move greatly increases the appeal of dividend paying stocks.
However, many investors have been tempted by the sirens song of high dividend yields only to crash upon the rocks thanks to them being fundamentally weak companies with tumbling share prices.
The solution for income hungry investors is presented here today with these 5 fantastic dividend stocks with 5%+ yields. Enbridge (ENB), Janus Henderson (JHG), MGM Growth Properties (MGP), Phillips 66 Partners (PSXP) and Rio Tinto (RIO).
What makes them “fantastic” dividend stocks?
At the bottom of the article I share full details on the research study I applied to whittle down to these 5 stellar choices. The short version is to say it’s about showing proof of fundamental strength, and history of healthy dividend increases, that greatly improves the odds of investment success going forward.
Enjoy more details on each stock below.
Enbridge (ENB) This is the largest stock of the group at nearly $85 billion market cap. ENB also sports the highest dividend yield at 5.85%. But what impresses me the most about this “King of the Hill” energy pipeline company is Enbridge’s healthy 12.4% annual increase in dividend payments. These attributes should keep a steady drum beat of interest to ENB making it a solid choice at this time.
Janus Henderson (JHG) Certainly you recognize the Janus name. This is a notable investment management company with a family of over 50 mutual funds. JHG stands out with the 2nd best dividend growth pace at 19.67% a year. Also on the earnings front there are signs of a turnaround for JHG after nearly two years of questionable results. This has JHG earnings estimates up over 7% for the year ahead that should help fuel future share price gains and higher dividend payouts.
MGM Growth Properties (MGP) Yes, it is easy to confuse MGP with the related MGM Resorts (MGM) company. This is the REIT side of the party which explains it’s ample 5.5% dividend yield. By far MGP has the best profile of operational strength which has propelled shares nicely higher over the years. It is from the improved earnings and cash flow position that MGP has been able to pad dividend payments by 11.3% a year on average for the past 5 years. MGP served up another “lovely” earnings beat on Valentines day that has their future looking very bright.
Phillips 66 Partners (PSXP) Just like MGP, we have another spinoff from a well known company. PSX is the integrated oil side of Phillips 66. In PSXP we have the MLP pipeline side where they are able to kick out a much higher dividend of 5.6% a year. What jumps off the page is PSXP list leading 22% annual increase in dividend payments. This is very attractive to investors which explains why Phillips 66 Partners shares rallied 56% last year. Given their excellent track record, on top of the recent earnings beat, points to PSXP being a great investment for the year ahead.
Rio Tinto (RIO) As you already know, RIO is one of the world’s largest mining companies. Typically this is a very cyclical business with boom and bust cycles. Yet few mining companies have managed these rough seas as well as RIO which explains why shares have doubled in price over the last few years. As if those gains weren’t impressive enough, RIO also mines a 5.5% dividend yield for investors that increases by nearly 10% a year. This is probably the riskiest choice of the group because of the uncertainty of future commodity prices. However, it might also pack the most reward as it has proven over the past few years.
Want more great stock picks? Then check out these additional resources:
High Dividend Yield Stock Screener
POWR Ratings Full Strong Buys List
Reitmeister Total Return portfolio
Specifics on Dividend Stock Research Study
Here are the steps I took to narrow down to these 5 elite high yield dividend income stocks out there today:
2,011 stocks with a POWR Ratings of A and B. Always need to start the party with our proprietary ratings model that finds stocks with the best momentum and timeliness. Typically the strength in price action is a reflection of positive fundamental catalysts at play.
1,072 stocks with market cap greater than $3 billion. I didn’t want small caps onboard because they often have riskier earnings outlooks that call future dividend payments into question. So mid-caps and large caps only. ENB @ $84 billion and RIO @ $69 billion are at the top end of the market cap scale.
50 of those stocks have 5% dividend yield or higher. So this single criteria quickly got rid of 95% of the potential candidates. So at this stage its already a pretty impressive group of stocks. Our stocks are pretty tightly packed with dividends in the mid 5% level. Yet ENB tops the list 5.85%
11 of those stocks had grown dividend payments by more than 8% per year for the past 5 years. This is probably the most important step because the stocks with healthy increased dividends in the past are more likely to keep up that trend in the future. But also it is hard to pay more dividends if the company is not producing enough earnings and cash flow to make it happen. So this is a vital health check on the operational strength of the firm. PXSP is the most impressive of the group with a greater than 20% per year increase in dividend payments the past 5 years.
5 of these stocks also came out of earnings season with their earnings estimates going higher for the year ahead. This is an important health check on their operational strength. Meaning it is very hard to grow dividends if you are not growing profits. So this sign of improved earnings prospects increases the odds of more frequent and large dividend increases in the future. JHG impressed the most this earnings season with estimates up over 7% since the report.
OK…you get the idea. These are not just your ordinary high yield stocks. They have been specifically selected to also provide attractive capital appreciate given the proof of operational strength, history of dividend increases, along with ample price momentum to make them timely and attractive selections today.
ENB shares closed at $41.87 on Friday, up $0.11 (+0.26%). Year-to-date, ENB has gained 6.80%, versus a 3.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More…
More Resources for the Stocks in this Article
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