The absolute best dividend stocks in America

This little-known index contains a collection of reliable, high-yield stocks. It could lead you to some of the most attractive yields on the market.

By StreetAuthority Apr 30, 2013 10:38AM
Financial Stock Chart © Kick Images Photodisc Getty ImagesBy Carla Pasternak

I'd bet most income investors know about the S&P Dividend Aristocrats Index.

To be included in this index, an S&P 500 company must have raised its dividend annually for at least the past 25 years. The standard is brutal: One slip and you're out. Start all over and compile another spotless dividend track record over the next 25 years.

This is an index of the bluest of blue-chip dividend stocks. But I've found a little-known "sister" index that income investors might find even more interesting -- and profitable.

In a variety of market conditions, this little-known index has been able to match -- and usually beat -- the broader markets, while also paying a significantly higher yield.

How can you improve on an index that contains some of the best dividend-payers in history? The S&P High Yield Dividend Aristocrats Index ($SPHYDA) has just the answer.

This index holds companies to a still-lofty standard of at least 20 consecutive years of dividend increases. But it selects companies from the S&P 1500, which includes midsize and small-cap companies. That means the High Yield Dividend Aristocrats are put together in such a way as to balance both growth and income, as opposed to the Dividend Aristocrats Index, which is focused mainly on income.

The two indices have other important differences as well. For starters, the high-yield version is built around a fixed number of companies -- 84 of them, to be exact. And instead of being equally weighted, each company is weighted according to its dividend yield. The companies with the highest yields exert the most influence on the index's performance. 

To prevent a handful of stocks from having too much influence, however, no one stock can have more than a 4% weighting. Companies in the index must have a market cap of at least $2 billion and have a daily trading value averaging at least $5 million per day. 

And since the High Yield Dividend Aristocrats Index includes stocks from any of 10 different sectors, it offers much more diversification than many high-yield indices.

Here's a look at the top 10 holdings of the High Yield Aristocrats:

Despite their yield-touting name, the High Yield Aristocrats are no slouches when it comes to returns either. An S&P study showed that the index outperformed the S&P 500 ($INX) for a decade in virtually all types of market conditions (150% to 112%, including dividends). 

For the past five years, the results have still been great.

As we've said many times before, however, it's in bear markets that the role of dividends in cushioning stock market price declines is most important. In 2008, for example, the S&P 500 lost 37%, but the High Yield Dividend Aristocrats Index was off by just 23% -- roughly 1,400 basis points better. 

And from March 2009 to today, which has seen a sharp rally off the bear market bottom, the index has crushed the S&P 500 -- 171% to 146%, including dividends.

Action to take --> Put simply, these stocks perform better in bull and bear markets. Not to mention, they yield far more in dividends than your average S&P 500 stock as well.

Now, there are two ways you can profit from these high-yield stocks. One would be to buy the exchange-traded fund (ETF) designed to mirror the index's performance, the SPDR S&P Dividend (SDY). But if you're looking for even higher yields than that, you might try looking into some of the individual stocks contained within the actual index, like those I've mentioned above.

Carla Pasternak does not personally hold positions in any securities mentioned in this article. 
StreetAuthority LLC owns shares of T in one or more of its "real money" portfolios.

More from StreetAuthority
Apr 30, 2013 1:10PM

What a strange, misleading article. Many issues such as VZ, T, MSFT, or GE now pay much better, have been paying much better, and can reasonbably be expected to continue to pay much better.


Plus, their payouts don't require an annual fund expense of 0.35%, as does the SPDR S&P Dividend ETF. Such a fund expense may not sound like much, but run a few numbers and see what such an expense can do to your actual gain.



Apr 30, 2013 12:39PM
I just love it when the person recommending these stocks does not own a single one
Apr 30, 2013 12:36PM
Apr 30, 2013 3:43PM
PBI - really good choice!  Guess this was written before they imploded.
Apr 30, 2013 12:23PM
I`ve got some monthly dividend pays I like more.
Apr 30, 2013 4:16PM
Also, PBI just cut the dividend in half today so that 10.2% is now half that.
Apr 30, 2013 8:27PM
"This is an index of the bluest of blue-chip dividend stocks."

What a crock!  Pittney-Bowes just cut it's dividend in half, announcing it the same day this article was published!
Apr 30, 2013 2:51PM

RAI....1/02....5.5%            F.....3/01....3.2%       

MO....1/10....5.4%            CAG..3/05...2.9%

PM....1/11....4.0%            TGT...3/10...2.2%

GE....1/25....3.5%             WAG..3/12..2.7%           

MTGE..1/26...13.9%         CSX...3/15...2.4%

AGNC..1/28..15.9%          WM....3/22...4.0%

NLY....1/29...12.5%           FTR...3/29...10.0%

Leaving out 3 in February...They pay an Average of 6.2%....(One only pays about 1.8%)

Left out a few others, that vary and average about 2-4%...BUT you can get the picture.?

AND it ALL started over again on May 1st.

It's fairly easy and anyone can do it with an Account and a little work, and of course cash. 

Apr 30, 2013 5:50PM
I've got 40% parked on the sideline - the way our govt is meddling with everything, I don't see these peaks being sustained, and the free money is setting us up for more bubbles.  Hopefully, there will soon be some opportunities on some of what is spoken of here.
Apr 30, 2013 2:30PM


All of these I own and are from 4- 13%


I guess the '10' are just the ones the article staff owns....

Apr 30, 2013 2:17PM

REGAL.....I know you have some MF/ETFs that pay Monthly...That's great if you want a Rev-Stream that pays the bills..

But we/I have managed to build my own little Mutual Fund...Usually runs between 22-28 Equities at anyone time(26)....I do trade in and out, calling it re-allocation...Or sometimes "better choices."


The point I'm making is we get dividends just about EVERY WEEK...Year round...And I was not trying to accomplish that...It just happened...No fees from Funds or Managing FA...etc.

Some come in the same days, other come in a different week.

Only in February and a 3 month cycle from that, do we not receive on a weekly basis...!!

Three different Companies pay on that same day...It was 2/14 this year.

When a Mutual or ETF pays once a month, they have been collecting divs all month long and then pay you...

In the meantime they have manipulated your money for 1-4 weeks and made a bundle.

Apr 30, 2013 4:29PM
MLP's are good for income choices such as APU, BWP, ETP, KMP and RGP.  Also I like CTL for dividend income!
Apr 30, 2013 4:14PM
My portfolio AVERAGES 7% dividends. It had been 9% but at my age, I've decided to be less aggressive and have repositioned some into more stable investments with lower returns.
Apr 30, 2013 3:45PM

Phil....Those are all good choices...I guess MSN chooses the Flavors of the Week??


I didn't list some other info, takes too long, but there are good plays in Energy oil/coal/gas/reatail

and Pipelines..Some or many are MLPs or LPs...

And Home improvement had/is on a tear...But like many good stocks...Everything is pricey.

That's part of the reason "Dividend Percentages" are down a little.

Any one investor has to make those choices and should do the research...imo.

Mix it up and be diversified..

Apr 30, 2013 6:06PM
BBEP  Breitburn Energy Partners yields 9.25
Apr 30, 2013 3:55PM
A lot of complaining about "fees" yet they sure still beat a savings account 0.1% yields.  Crap.
Apr 30, 2013 6:16PM

someone has an agenda ! Best Dividend Stocks? How much did SPDR pay you to write this article ?



Apr 30, 2013 11:11PM
Information is dated. PBI cut their dividend in half today
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

125 rated 1
267 rated 2
455 rated 3
612 rated 4
682 rated 5
695 rated 6
632 rated 7
472 rated 8
279 rated 9
147 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.