A stock with a high yield doesn't offer much if the price significantly declines after its dividend is cut or eliminated. Fortunately, the market does not always behave in a rational manner. This will sometimes create an abnormal relationship between risk and yield.
As a society we have grown accustom to wanting it all, including our investments. Specifically, many income investors want both high yield and low risk. Sometimes individual stocks find themselves in the unusual position of providing both higher yields and lower risks. If you don't look for them, you will never find them.
This week week, I screened my dividend growth stocks database for stocks rated as Low risk and with yields above 3.75%. (Click here to see how I calculate Risk.) The results are presented below:
National Retail Properties, Inc. (NNN) is an equity real estate investment trust that invests in high-quality, freestanding retail properties subject to long-term net leases with major retail tenants. Yield: 3.8%
Leggett & Platt Inc. (LEG) makes a broad line of bedding and furniture components and other home, office and commercial furnishings, as well as products for non-furnishings markets. Yield: 3.8%
Chevron Corporation (CVX) is a global integrated oil company (formerly ChevronTexaco) has interests in exploration, production, refining and marketing, and petrochemicals. Yield: 3.9%
Mercury General Corp., (MCY) operating primarily in California, writes a full line of automobile coverage for all classifications of risk. Yield: 4.6%
ONEOK, Inc. (OKE) is an Oklahoma-based natural gas utility with substantial midstream operations through its 2% general partnership interest and large limited partnership interests in a master limited partnership. Yield: 4.8%
Dominion Resources, Inc. (D) is one of the largest producers and transporters of energy in the U.S., Dominion also operates the largest natural gas storage system and serves retail energy customers in 15 states. Yield: 4.8%
As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 150+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: No position in the aforementioned securities.
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