4 Stocks Yielding More than 4% - Investment Ideas
October 03 2012 - 8:00PM
Zacks
When most people think of generating returns from the stock market,
they think of only one thing: capital appreciation.
This is somewhat understandable given that the
average yield on the S&P has fallen considerably over the last
few decades. It currently yields just 1.9%, well below its
historical average of 4.5%. Check out this chart from
multpl.com:
But historically, dividends have accounted for more
than 40% of the total return of the S&P 500, and most of the
best performing stocks over the long haul have been stodgy dividend
payers.
Growth & Income
Of course, it shouldn't be all about the
dividend. There are plenty of stocks out there that offer alluring
yields but have virtually no growth prospects. Those quarterly
dividend checks will provide little comfort if the company's stock
price is heading off a cliff.
That's why it is wise for investors to consider
both growth and income. While stock prices can swing wildly
over the short-term, stock prices tend to follow earnings over the
long haul.
Long-term Focus
For investors willing to ride out the short-term
volatility and take a long-term approach, stocks look relatively
attractive compared with bonds. The yield on the 10-year Treasury
note is hovering around 1.6%, well below its 50-year average of
6.7%, and less than the average yield of the S&P 500.
And dividend-paying companies with strong cash
flows and rising earnings typically raise their payouts, unlike a
bond which usually comes with a fixed coupon payment.
I've compiled a list of 4 stocks with both growth
and income characteristics. These companies have a yield
greater than 4%, a history of raising their dividends and are
expected to grow earnings in both 2012 and 2013.
Here they are:
Brookfield Infrastructure Partners (BIP)
Brookfield Infrastructure Partners is comprised of
long-life assets that provide essential products and services for
the global economy. It primarily operates in 3 segments:
Utilities: (57% of total funds from operation)
Transport & Energy: (39%)
Timber: (4%)
Brookfield pays a dividend that currently yields a
solid 4.3%. And it has steadily risen it since going public in
2008.
Lorillard Co (LO)
Lorillard is the third largest cigarette maker in
the United States. It is also older than the United States, having
been founded in 1760. It sells cigarettes under six brands, its
most popular being Newport.
Like it or not, Lorillard generates strong, stable
cash flows. And this has lead to steady dividend increases. It
currently yields 5.3%:
Genesis Energy, L.P. (GEL)
Genesis Energy is a master limited partnership
("MLP") focused on the midstream segment of the oil and gas
industry in the Gulf Coast region of the U.S. Because it generates
steady fee-based income, its results do not fluctuate heavily with
volatile oil and gas prices.
It currently pays a distribution that yields a
juicy 5.4%. After cutting its distribution early last decade, the
partnership has been consistently raising it over the last several
years:
Omega Healthcare Investors (OHI)
Omega Healthcare is a Real Estate Investment Trust
("REIT") that invests in long-term care facilities, primarily
nursing homes. It generates revenue from long-term leases and
mortgage agreements on these facilities.
From 2007-2011, core operating revenue and funds
from operation (FFO) increased every year at a compound annual
growth rate of 16% and 17%, respectively. It currently pays a
dividend that yields a juicy 7.3%. That's more than 4x what you'd
get on a 10-year Treasury note. And since 2004, its dividend has
grown at a compound annual rate of 11%.
The Bottom Line
Income investors looking for yield should consider
looking to the stock market these days. Likewise, growth investors
looking for total return should consider dividends along with
capital appreciation, as dividends historically have made up a
large chunk of overall returns.
These 4 stocks offer both growth and income and
should provide strong total returns over the long haul.
Todd Bunton is the Growth & Income Stock
Strategist for Zacks Investment Research and Editor of the Income
Plus Investor service.
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BROOKFIELD INFR (BIP): Free Stock Analysis Report
BROOKFIELD INFR (BIP): Free Stock Analysis Report
BROOKFIELD INFR (BIP): Free Stock Analysis Report
BROOKFIELD INFR (BIP): Free Stock Analysis Report
GENESIS ENERGY (GEL): Free Stock Analysis Report
GENESIS ENERGY (GEL): Free Stock Analysis Report
GENESIS ENERGY (GEL): Free Stock Analysis Report
GENESIS ENERGY (GEL): Free Stock Analysis Report
LORILLARD CO (LO): Free Stock Analysis Report
LORILLARD CO (LO): Free Stock Analysis Report
LORILLARD CO (LO): Free Stock Analysis Report
LORILLARD CO (LO): Free Stock Analysis Report
OMEGA HLTHCARE (OHI): Free Stock Analysis Report
OMEGA HLTHCARE (OHI): Free Stock Analysis Report
OMEGA HLTHCARE (OHI): Free Stock Analysis Report
OMEGA HLTHCARE (OHI): Free Stock Analysis Report
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