A stock with a high yield doesn't offer much if the price significantly declines after its dividend is cut or eliminated. Fortunately, the market does not always behave in a rational manner. This will sometimes create an abnormal relationship between risk and yield.
As a society we have grown accustom to wanting it all, including our investments. Specifically, many income investors want both high yield and low risk. Sometimes individual stocks find themselves in the unusual position of providing both higher yields and lower risks. If you don't look for them, you will never find them.
This week, I screened my dividend growth stocks database for stocks rated as low risk and with yields above 4%. (Click here to see how I calculate risk.) The results are presented below:
Kimberly-Clark Co. (NYSE:KMB) | Yield: 4.1%
Kimberly Clark Corp. is a global consumer products company that produces tissue, personal care and health care. Its brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and Kimberly-Clark.
Nucor Corporation (NYSE:NUE) | Yield: 4.1%
Nucor Corporation is the largest minimill steelmaker in the U.S., and has one of the most diverse product lines of any steelmaker in the Americas.
Nextera Energy Inc. (NYSE:NEE) | Yield: 4.2%
FPL Group Inc. (formerly FPL Group) is the holding company for Florida Power & Light and NextEra Energy Resources.
Middlesex Water Co. (NASDAQ:MSEX) | Yield: 4.2%
Middlesex Water Co. primarily provides regulated water utility service in parts of New Jersey and Delaware, as well as operates wastewater systems and conducts municipal contract operations.
Community Trust Bank Corp. (NASDAQ:CTBI) | Yield: 4.6%
Community Trust Bank Corp. owns and operates Community Trust Bank, Inc. of Pikeville, KY, which provides commercial banking services in Kentucky andWest Virginia; and a trust company.
Black Hills Corporation (NYSE:BKH) | Yield: 4.9%
Black Hills Corp. is a diversified South Dakota-based holding company that encompasses electric utility and integrated energy businesses.
Vectren Corporation (NYSE:VVC) | Yield: 5.1%
Vectren Corp. is an energy holding company that delivers gas and/or electricity to more than one million utility customers in Indiana and Ohio, and offers other energy related products and services.
Cincinnati Financial Corp. (NASDAQ:CINF) | Yield: 5.8%
Cincinnati Financial Corp. markets primarily property and casualty coverage. It also conducts life insurance and asset management operations.
Washington Real Estate Investment Trust (NYSE:WRE) | Yield: 6.8%
Washington Real Estate Investment Trust is a real estate investment trust that owns and develops income-producing real properties in the greater Washington metro region.
As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 210+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long KMB, NUE, CTBI, VVC, CINF. See a list of all my dividend growth holdings here.
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