The 5 highest yields on the Dow
In the tumult of this pullback, investors can find a safe haven in these blue-chip dividend payers.
Following the recent pullbacks, the market only needs to shed about 5 percent more to meet the widely accepted definition of a correction (a decline of at least 10 percent).
The latest escalation: deep discounts by T-Mobile to try to elevate itself from the No. 4 spot in the cellular services industry. T-Mobile may end up shooting itself in the foot, though. AT&T and Verizon are far larger and better able to withstand price wars while staying profitable and paying dividends.
In AT&T's case, the company has hiked its dividend by 4 percent or 5 percent a year for more than a decade, and even the recent recession didn't hinder this. As an industry leader with cash and equivalents of $22.7 billion and annual free cash flow of nearly $16 billion, AT&T should easily be able to maintain its pace of dividend increases.
Last September, the firm said it would buy the remaining 45 percent from Vodafone (VOD) for $130 billion in cash and stock, and the deal is expected to close sometime this quarter. Management estimates the acquisition will immediately boost earnings per share (EPS) by about 10 percent, excluding any one-time adjustments.
Like AT&T, Verizon has long offered reliable dividends, which have ranged from $1.54 to the current $2.06 per share during the past decade or so. The company should be able to raise its dividend at least as quickly as AT&T, especially once it owns Verizon Wireless outright.
I doubt the company can increase its dividend that fast in coming years because it depends so heavily on the PC market for revenue, and that market is mature. However, there ought to be many growth opportunities for Intel's server processor business. That segment should greatly benefit from the rise of cloud computing since servers are crucial for that fast-growing industry's infrastructure. Thus, I'd look for Intel to deliver more modest but still attractive dividend growth of, say, 12 percent a year, which would bring the firm's payout to $1.59 a share in 2019.
A variety of compelling factors suggest GE can maintain this growth rate, such as its huge $125.9 billion cash position, increasing dominance of the burgeoning clean energy industry, and improved profitability and capitalization of the retail finance portion (loans and credit cards) of its GE Capital segment. It's common knowledge that GE has been shoring up the retail finance business in preparation for a spin-off sometime in the next couple years. So in addition to enjoying reliable dividends, shareholders might also profit from GE by getting shares of the new company when it has its IPO.
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