Five dividend stocks yielding over 5%
Despite all the recent dividend cuts, it’s easy to find plenty of high-yielding dividend stocks in the current market environment. And Investopedia does just that with its list of five dividend stocks yielding 5% or greater.
Here’s my quick take on the five dividend stocks mentioned (the stars represent Dividendinvestor.com’s star ranking system – three stars are five years of consecutive dividend increases, four stars are ten, and five stars are 20):
Alcoa (AA: 11.31 +2.17%, yld: 1.08%) (0 stars) – The shares of this aluminum producer have been hammered down to a point (between $5 and $6) where they’re currently yielding over 12%. With estimated worst-case earnings showing a loss for 2009, it’s difficult to assign a value to the stock. But it’s not difficult to predict that a dividend cut may be likely. I’m staying away.
AFLAC (AFL: 51.1349 +2.07%, yld: 2.24%) (*****) – The shares of this health and life insurance provider haven’t been able to catch a break lately. Down over 80% from its highs of last year on fears over the company’s investments in hybrid securities, the stock is currently trading at about $11.50 and yielding 9.7%. This Dividend Aristocrat appears significantly undervalued here, but no surprise in this market where it seems almost anything can happen. I’m short puts on AFL at higher levels. (See my full take on AFLAC.)
Barnes & Noble (BKS: 15.54 +1.11%, yld: 6.51%) (0 stars) – Trading at about $16 and yielding over 6%, the shares of this bookseller appear roughly fairly valued based on conservative valuation measures. That and a somewhat high payout ratio and short dividend history are enough to keep me away.
Diebold (DBD: 29.19 +0.66%, yld: 3.69%) (*****) – BusinessWeek ranks the dividend of this maker of ATMs, security systems and election equipment as “very safe.” Currently trading at about $19 per share, the stock yields about 5.5%. DBD here appears undervalued by most valuation measures. I’m actively watching it with an eye toward buying it around long-term support at about the $18 level. Below that, the $15 and $12 levels appear to be the next lower support levels.
Foot Locker (FL: 13.20 +1.07%, yld: 4.59%) (***) – The shares of this athletic footwear retailer are currently trading at around $9 with a dividend yield of 6.7%. FL appears either fairly valued or somewhat overvalued here based on conservative earnings estimates and when compared with recent historical valuation ratios. While it may be an interesting value play if it drops to lower levels (the $4-$5 range), it doesn’t seem likely that the dividend is going to stay. I’m staying away.
Related posts:
The highest dividend yields of the Dow
BusinessWeek: The U.S. companies with the safest dividends
