As an investor, it doesn't pay to follow the crowd.
In this series, though, we highlight a possible exception -- the collective wisdom of our CAPS community. Read the next section if you're unfamiliar with our methodology. Skip it if you want to go straight to the results.
Why this crowd is different
Jumping into a stock because your rich neighbor did, or because you heard about it from your friend's uncle who used to work on Wall Street, or because CNBC has been talking about it nonstop is a recipe for disaster.
If there's one thing I've learned as a stock analyst, it's that any stock can be gussied up to sound like a world-beater. If there's a second thing I've learned, it's that being a smart person doesn't make you a good investor.
In the hands of a smart person with good communication skills, the never-were and never-will-be stocks sound like tickets to instant fortune. The ancient Greek philosophers made the distinction between rhetoric and knowledge. The former is convincing; the latter is true.
That's why we factor in track record in our Motley Fool CAPS community. We invite everyone to give stocks an outperform (akin to a "buy" call) or underperform rating (akin to a "sell" call) in CAPS. We then use those opinions to calculate a rating for each stock -- from one to five stars (five being the best). But -- and this is a big distinction -- we give more weight to the opinions of folks whose picks have performed well in the past.
The top 10 high-yielders
So, with that methodology as prelude, I present to you the 10 four- and five-star-rated stocks that yield at least 5% and that have garnered the most outperform ratings by CAPS members. I used a minimum market capitalization of $100 million and the proviso that it must be listed on a major U.S. exchange. Remember, stocks are rated on a five-star scale by our CAPS community, so four- and five-star stocks are consensus outperforms.
|
Company Name |
Market Capitalization (in millions) |
P/E Ratio
|
Dividend Yield |
CAPS Rating (out of 5) |
Outperform Picks |
|---|---|---|---|---|---|
|
Altria |
$46,514 |
13.4 |
6.8% |
**** |
8,187 |
|
Verizon |
$87,634 |
113.6 |
6.4% |
**** |
4,050 |
|
Duke Energy |
$22,655 |
33 |
5.7% |
**** |
1,725 |
|
Frontline |
$2,063 |
19.5 |
11.3% |
**** |
1,534 |
|
Exelon |
$25,491 |
10.7 |
5.2% |
***** |
1,489 |
|
Penn West Energy Trust |
$7,968 |
32.7 |
9.1% |
***** |
1,366 |
|
Paychex |
$8,997 |
18.9 |
5% |
**** |
1,330 |
|
Kinder Morgan Energy Partners |
$14,425 |
45 |
6.5% |
***** |
1,134 |
|
Terra Nitrogen Company |
$1,637 |
15.1 |
10.7% |
**** |
1,133 |
|
Apollo Investment Corporation |
$1,857 |
15.7 |
11.7% |
***** |
1,127 |
Source: Motley Fool CAPS. NM= not meaningful.
Wow, big dividends with lots of fans and high ratings by our CAPS community. It sounds very tempting to just buy in. But beware. Just because a stock has all these qualities doesn't make it a winner. If I extended this out to 15 companies, you'd have seen shipper Nordic American Tanker
I am a fan of both tobacco company Altria and payroll processor Paychex, though. I like the chances for both of them maintaining their tasty dividends for years to come. In fact, I've written about combining them with a few other companies to form the best dividend play in the market.
More CAPS members think Altria is an outperform than any other big-time dividend stock. Which is your favorite? Make your thoughts known in CAPS by clicking here. Or just go there to do further research on one of these stocks.
