SmartMoney’s 5%+ dividend stocks you can believe in

SmartMoney has come out with a list of dividend stocks with 5% dividend yields you can believe in. The list includes such names as Consolidated Edison, Eli Lilly, Genuine Parts Co., Heinz, Pitney Bowes and Verizon – several of which I’m actively following.

However, I’m not buying any of them yet. Here are my quick takes:

Consolidated Edison [[ED]] – I wouldn’t mind owning this utility stock (currently yielding 6.4%) at the right price. The dividend has been increased for 35 consecutive years – although recently at a snail’s pace – and appears safe. However, a quick valuation check suggests the stock is overvalued here (at ~$37). I’d get interested down at around the $30 level.

Eli Lilly [[LLY]] – This drug stock (currently yielding 6%) is starting to look interesting at these levels (~$32.5). The company has increased its dividend for 41 consecutive years, with a five-year average dividend growth rate of almost 7%. The stock looks reasonably valued too. I’m watching for an opportunity to buy below its recent lows of $28-$29.

Genuine Parts Co. [[GPC]] – I’m also looking for an opportunity to buy this auto parts maker (currently yielding ~5.5%) at somewhat lower prices. The company has raised its dividend for 52 consecutive years (the latest five-year dividend growth rate is about 6%) and the stock seems fairly valued here at about ~$29.

Heinz [[HNZ]] – This maker of food products would seem like a safe bet. However, it doesn’t have a consistent history of raising its dividend (in fact, it cut its dividend in 2003 according to Yahoo Finance) and valuation analysis suggests it may still be overvalued here (at ~$34). I’m staying away.

Pitney Bowes [[PBI]] – Currently trading at around $20 per share, the stock of this mail processing solutions provider shows up as significantly undervalued by some valuation measures. However, PBI’s spotty history of dividend increases, negative book value and questions about its long-term business strategy are more than enough to keep me away.

Verizon [[VZ]] – The stock of this telecom company appears about fairly valued here at ~$28 (with a ~6.6% yield) and the dividend seems reasonably safe, although I wouldn’t expect any significant dividend growth (if at all). I may consider buying some VZ at lower prices, although I do already have a short put position in AT&T (T).

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