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When the Government Forces You Into Dividends, The Great Dividend Portfolio (MO, AEP, AWK, T, DLR, GE, GOV, KMB, KMP, SNH, WMT)
Posted: August 11, 2011 at 10:37 am

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What on earth are investors supposed to do when T-Bonds offer almost zero income? Interest rates are now so low that the price-risk in long-term Treasury bonds is too great. Ben Bernanke has now quantified that low (or almost no) interest rates are here to stay for at least another two years. Bernanke and the Federal Reserve are forcing income-oriented investors out of Treasuries to find income elsewhere. Some investors will choose more risky bonds and convertible issues, but the time is right for some of the higher dividend stocks that also offer some degree of implied price safety. 24/7 Wall St. tracks a myriad of dividend stocks, and we have looked through the price performance, compared them to

peers, and done a valuation dive to determine which are the safest of the high-yield stocks out there today. Our list of high-yield dividend winners includes the following: Altria Group Inc. (NYSE: MO); American Electric Power Co., Inc. (NYSE: AEP); American Water Works Company, Inc. (NYSE: AWK); AT&T, Inc. (NYSE: T); Digital Realty Trust Inc. (NYSE: DLR); Enterprise Products Partners LP (NYSE: EPD) or Kinder Morgan Energy Partners LP (NYSE: KMP); General Electric Co. (NYSE: GE); Government Properties Income Trust (NYSE: GOV); Kimberly-Clark Corporation (NYSE: KMB); Senior Housing Properties Trust (NYSE: SNH); and Wal-Mart Stores Inc. (NYSE: WMT).

If you use the average yield of this basket it actually comes to about 5.5%. That is a phenomenal portfolio yield considering that the yield of the 10-Year Treasury auction just went off at 2.14%. Chasing yields is a tricky game because not all dividends are alike and not all dividends are safe. Our aim is to find dividends which are not only considered to be safe. We think every one of these businesses can grow their dividends through time and some of these companies even classify as value stocks that investors seek when looking for havens in rough markets. Altria Group Inc. (NYSE: MO) recently closed at $24.53 and its 52-week trading range is $22.15 to $28.13. Its market cap is $50.4 billion and the shares trade at 11.2 times forward earnings. The companys return on equity is 74.4% and the latest dividend yield was 6.2%. With Obama and Boehner both being smokers, maybe this ultimate continued-surprise winner is truly immune from Washington D.C. The state penalty issues have mostly been resolved, with a few exceptions. Also in the favor of Altria is that juries seem to no longer award cases for smokers who got duped into smoking and were told smoking didnt kill you in the case. Altria carries almost no currency risk for its core tobacco business. It also holds a stake in SAB/Miller. That dividend has never wavered. American Electric Power Co., Inc. (NYSE: AEP) recently closed at $34.27 and its 52-week trading range is $33.09 to $38.99. Its market cap is $16.5 billion and the shares trade at 10.6 times forward earnings. The companys return on equity is 9.0% and the latest dividend yield was 5.4%. Low interest rates work hugely in the favor of power companies. AEP has a blend of power sources for its client base, it covers millions of Americans in many states, and is now cheap compared to the market and cheap against many peers. AEP is due soon for yet another dividend hike and this company is very proactive when it comes to protecting the dividend. American Water Works Company, Inc. (NYSE: AWK) recently closed at $26.82 and its 52-week trading range is $21.72 to $30.70. Its market cap is $4.7 billion and the shares trade at 14.5 times forward earnings. The companys return on equity is 7.0% and the latest dividend yield was 3.6%. This is the best water stock out there and it is extremely rare that this water utility is off by more than 10% from highs. The company has said that it can keep raising its dividend and it seems to be unstoppable. As a utility, it benefits greatly when interest rates are so low as it can borrow on the cheap and has the franchise to lock in low-rate borrowing for the long-term.

Next Pages: 1 Sponsored Link: Why retirees should be worried about Capps Law.Learn how to protect yourself from dangerous new legislation. Read more: Conglomerates, Consumer Goods, Corporate Governance, Currency, Defensive Stocks, Dividend, Economy, Editor's Picks, International Markets, REIT, Shareholder Issues, Value Investing, best dividend stocks, defensive stocks, dividends above Treasury yields, income stocks, safe dividend stocks, AEP, AWK, DLR, EPD, GE, GOV, KMB, KMP, MO, SNH, T, VZ WMT

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