Dividend Stocks that Always Pay

in Investing Trade by Travis — December 16, 2011 at 10:59 am | 0 comments

When searching for dividend stocks which payout high yields, it is extremely tempting to choose a high yield that pays over 10%. While some high dividend stocks may show great income and stability, usually there are risks associated with a high dividend. Again, it goes back to your personal investing goals and your portfolio’s risk aversion or how willing you are to do in depth research of dividend stocks that have unusually high yields.

For those who use dividend stocks for income growth or in a retirement account, low-risk and consistent paying dividends are the major factors when choosing an appropriate dividend stock. If you are this type of investor, long term growth is key. Avoiding wild fluctuations in the yield will pay off in the long run while keeping risk at a minimum. Further, high dividend stocks which are not supported by strong fundamentals may see a dividend cut. If the yield is cut, not only will you lose out of the dividend payment itself, but more than likely, the underlying stock will drop causing capital losses.

Below is a list of 5 companies that are consistent payers of their stock dividend. Many of these companies have been in business a long time and have survived numerous boom and bust periods and yet, still pay out some of the highest dividends for risk adverse stocks.

1.) Coca-Cola (KO) – Although the stock price is somewhat high, the dividend stock payout of 2.8% isn’t too bad. While this dividend yield is nothing to write home about, the company is constantly growing and expanding to further reaches of the globe. The growth is small but with a huge company like Coke, even small growth equals big dollars come earnings season. While KO is susceptible to swings in the market, it has become somewhat of a consumer staple. Further, dividend stocks of this caliber usually carry lots of cash and have an excellent debt to equity ratio, and KO falls in this category.
2.) DuPont (DD) – Dividend stocks are difficult to choose because so many factors need to be taken into account. Global growth companies, such as DuPont, often fair well in all types of markets. DD currently carries a dividend yield of 3.60% , had lots of cash, and pays out about 45% of its earnings towards the dividends. For high dividend stocks without the risk, these are all great numbers. DD stock price was hit fairly hard during the fall in 2008-2009, so if you do see a drop in price, having extra cash on hand to lower your pricing point is always a sure bet with quality dividend stocks.
3.) Intel (INTC) – The computer chipmaker and developer owns most of the chip market and with more and more mobile devices, computers, servers, etc coming to market that only leaves room for INTC to find more customers. Dividend stocks in sectors such as consumer electronics can be a little worrisome in bad economic times. While the stock price did take a bit of a hit during the downturns over the past couple of years, INTC continues to grow and develop its products. The company has lots of cash and will continue to bring in lots of cash while the computer industry continues to grow. The dividend stock currently has a yield of 3.60%.

4.) McDonald’s (MCD) – Another huge global brand…see a trend developing here? Similar to KO, MCD is always expanding to new countries. The company does extremely well during down turns in the economy as people choose to eat cheaper rather than healthier. The dividend stock carries a yield of 3.00% and, again, has lots of cash on hand. MCD is not going anywhere and there is no reason for the company’s growth to stall either. Moreover, the stock has low market correlation with a Beta at 0.34…meaning it barely follows what the underlying market does; an extremely good trait to have during volatile market fluctuations.
5.) Merck (MRK) – With the baby boomer generation growing older and older, the need for quality medicines is only going to increase. MRK is definitely not a growth stock unless the drug company stumbles onto the next Viagra. However, most high dividend stocks would be envious of this type of company. The stock has a high yield of 4.90% making it an amazing income generator for any portfolio. Lastly, MRK continues to bring in strong positive cash flow as well as growing its cash base. Always good signs when buying dividend stocks.

While most of these dividend stocks do not carry the ultra high dividend yields of 10% or more, the companies are a great risk adverse play for a portfolio. The stock prices may bounce around a bit with the economic times, but this will give you opportunities to lower your pricing point and thus increase your dividend yield further. The above companies are all extremely strong fundamentally and have long histories of growth, which are all positive signs when looking for high dividend stocks.