5 Diversified Dividend Stocks for Income Investors
Nur is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Most income-oriented investors are hardly convinced about the safety of their investments in stocks, given the highly volatility in trading. However, the investment risk is substantially reduced in large-cap dividend companies due to their relatively solid and stable financials. Investing in dividend stocks may not make someone rich overnight, but it can help provide a good retirement portfolio. So, for conservative investors looking for safer investments for their retirement, high-yielding large cap dividend stocks are the ideal choice. Five of my favorite dividend stocks are listed as follows.
One risky REIT
American Capital Agency (NASDAQ: AGNC) is a mortgage real estate investment trust (REIT) that is involved in the investment of agency securities. It has a market capitalization of $10.9 billion with a P/E ratio of 11.65. American Capital Agency posted revenue of $1.08 billion, while its net income was $854 million.
The company is currently suffering from the Federal Reserve’s “Operation Twist.” Its dividend is down. As the margin between short-term and long-term interest rates shrink, it is likely to offer another dividend cut. While its yield is still at double-digit levels, the stock is probably the riskiest in the list as its distributions are highly volatile.
Two energy giants
Unlike American Capital Agency, utility stocks do not have anything to do with the Federal Reserve. Their customer base and revenues are pretty stable. Since their growth potential is limited, they mostly share profits with shareholders.
Exelon (NYSE: EXC) is one of those utility dividend stocks. It is a leading competitive energy provider in the U.S. with expansive operations across several states. It boasts of having one of the country’s low-cost and clean energy fleet with about 34,700 megawatts of owned capacity.
It has a strong market capitalization of $26 billion. The P/E ratio of 30.94 is a bit high due to one-time events, but I expect this to match up with the industry by next year thanks to earnings growth. The company posted revenue of $24.8 billion with quarterly revenue growth of 29.7% year-over-year. It posted net income of $956 million with diluted earnings per share of $1.12. Exelon’s current yield is 3.57%, and the annualized dividend is $1.24 per share. The company reduced its dividend substantially in last year, but I expect the dividend to recover along with the stock price.
Another attractive long cap dividend stock is Duke Energy (NYSE: DUK). It has a solid market capitalization of $48.6 billion. Its P/E ratio is about 20. Duke Energy reported strong revenue of $21.35 billion with quarterly revenue growth of 33.43%. Its net income was $2.07 billion, while its quarterly earnings growth was 114.9%. Duke Energy has an annualized dividend of $3.06 per share and its current yield is 4.39%.
Having an almost monopoly position in the Carolinas and nearby states, Duke is likely to benefit from the relatively faster growth in these areas. As such, a dividend boost is likely this year.
What about a publisher?
McGraw Hill Financial (NYSE: MHFI) is a large cap company with a market capitalization of $14.65 billion. It has a P/E ratio of 14.53. The company has a profit margin of 22.82%. It posted revenue of $4.6 billion with quarterly revenue growth of 14% year-on-year.
McGraw Hill has regularly paid its shareholders an yearly dividend since 1937. It is one of only few companies in the S&P 500 with an increasing yearly dividend for the past four decades. Since 1974, the firm’s average compound annualized dividend growth rate is 9.6%. The latest annualized dividend is $1.12 per share. So far this year, two quarterly dividends were already declared at $0.28 per quarter.
In February, its shares dropped $13.8% in a single day after the S&P received a lawsuit threat from the DOJ. But, the shares eventually bounced back and started to recover lost traction.
Dividends from toys
Mattel (NASDAQ: MAT) looks good with $15 billion in market capitalization and a current yield of 3.18%. The annualized dividend is $1.44 per share. Just like Exelon, Mattel has also gained on the trading floor this year. Mattel has a P/E ratio of 19.84.
Mattel is the manufacturer of well-known brands like Hotwheels, Matchbox, Barbie Collections, Fischer Price, and Polly Pocket. It also carries other famous brands like WWE toys and collectibles, and Disney Movie toys. Since the market fell in 2009, Mattel shares have been generally upbeat and have traded in an upward trend, and this is backed by solid financials. With quite an attractive dividend profile, Mattel is one of the ideal dividend stocks for long-term investment.
High yielding dividend stocks may look attractive, but it is similarly important to check the financials to ensure that your investments are in good hands. Moreover, market capitalization is also among the investment signals that can help ensure that your investment is safe. Although, they are not completely risk-free, the dividends provide a safety cushion against market downturns.
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Nur Tarkak has no position in any stocks mentioned. The Motley Fool recommends Exelon and Mattel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!