The Safest Dividend in the S&P
If you’re a longtime Dividend Opportunities subscriber, you might remember an issue way back in March where I hunted down the safest dividend in the S&P 500.
The response to my article was overwhelming. So I’ve decided to provide an update to my newest readers — taking the same rigorous metrics I applied before to discover where the safest dividend in the S&P is today.
Thankfully, the draconian cuts that we saw in 2008-2009 seem to be history. Believe it or not, these cuts added up to $52 billion in lost income during 2009 — and that’s for just the cuts from stocks in the S&P 500. To put that figure in perspective, losing $52 billion would put Warren Buffett into bankruptcy.
Today the news looks much brighter. Standard & Poor’s reports that in the first three quarters of 2010, 1,033 companies increased payments (compared to 707 at this time in 2009). Even so, dividend safety still has its place. During the first three quarters of the year, 117 companies cut their payments.
To make sure you don’t have to worry about dividend cuts, I’ve taken a look at every dividend-payer in the S&P 500 to find the safest yields available right now. Let’s see who took home the title…
Safety Criteria #1: Yield
When it comes to yield, it usually takes something above 6% to garner even a second look from me. So I started my search with all the stocks within the S&P 500 that yield above that magic 6% number.
As I suspected, it turns out the common stocks in the S&P 500 don’t offer much in the way of yields overall, but you can still find a few individual companies offering attractive payments. (For the record, I typically broaden my income search to include closed-end funds, exchange-traded bonds, master limited partnerships — and a bevy of other asset types — to bring readers of Dividend Opportunities and my premium High-Yield Investing newsletter the most attractive yields.)
In total, eight stocks in the S&P (only 1.6% of the total) yielded 6% or more. Of those, the highest-yielding stock was Frontier Communications (NYSE: FTR), which pays investors 8.4% a year.
With this handful of stocks in focus, I turned to my next metric to uncover the safest dividend: earnings power.
….read more on the following topics HERE
- Safety Criteria #2: Earnings Power
- Safety Criteria #3: Dividend Coverage
- Safety Criteria #4: Proven Track Record