Finding 5%-Plus Yielders
11/15/2013 10:00 am EST
Kiplinger's Personal Finance writer Carolyn Bigda looks at a trio of favored blue chip stocks, each providing investors with yields above 5%.
Steve Halpern: We are here today with Carolyn Bigda of Kiplinger's Personal Finance. How are you doing, Carolyn?
Carolyn Bigda: I am fine, thank you.
Steve Halpern: In your recent article for Kiplinger's, which just hit the newsstands this week, you look at what you call Steady Eddie stocks, long-term dividend payers, and for this article, you focus on stocks yielding 5% or more. First off, you look at AT&T (T). Could you explain what the attraction behind that idea is?
Carolyn Bigda: Sure. AT&T is paying just north of 5%, which is a pretty big yield for telecom, and the company—as you said earlier—these are Steady Eddies.
And the company has raised its dividend consecutively for 29 years, which is a pretty good record. You have a pretty reliable dividend payer with a very attractive yield.
Steve Halpern: Now, you have also highlighted a utility stock, Entergy (ETR). Could you explain your reasons for selecting that?
Carolyn Bigda: Yes. In today's environment, the utility stocks have some of the most attractive yields, but like a bond, they are more at risk when interest rates rise, because these types of companies don't have a lot of earnings growth, and so, as interest rates rise, you don't get as much price appreciation.
But Entergy is paying north of 5% and it is a little bit different than most utilities. About 20% of the company comes from nuclear power, and so there is potential for this stock to do better in the future, especially if natural gas prices increase.
Steve Halpern: Now, another Steady Eddie you have chosen is Altria (MO) and that company has raised its payout for 44 years. I know a lot of listeners might not like the idea of a cigarette company, but from a financial standpoint, this is about as close to a Steady Eddie as you could get. Could you tell us a little more about the company?
Carolyn Bigda: Sure, yes. As you said, Altria is a very reliable dividend payer, and it has been increasing its dividend over the years. The thing about the company is, you know, cigarette sales have been declining in the US, but they have very strong brands.
They produce Marlboro, and so they can increase their prices, even as the volume of cigarette sales goes down, so they have pricing power and that works well for them. They are able to generate a lot of cash and they are returning that cash to shareholders.
Steve Halpern: Well, I would suggest that listeners read your article in Kiplinger's to get some additional ideas, but I really appreciate you sharing some of these 5% yielders with us.
Carolyn Bigda: Well, thank you for having me.