Bull Market or Bear, These 7 Dividend Stocks Will Boost Your Portfolio

Markets have been nothing if not turbulent since mid-summer. The S&P 500 is down almost 14% since the start of May, and with debt problems in Europe, there's no telling how long it'll be until we get back to where we were then.

But savvy investors who use dividends to buoy their portfolios have slept well despite the turbulence. If anyone had a doubt about the power of dividends, they need only read Jeremy Siegel's The Future for Investors, where he writes: "Dividends matter a lot. Reinvesting dividends is the critical factor giving the edge to most winning stocks in the long run."

Today, I share with you seven super-dividend stocks that all share the following three key attributes:

1. Fat dividend yields
All seven of the stocks that I've hand-selected have yields over 3%. Set your account up for a dividend reinvestment program, and you'll continue to add shares without having to move a muscle.

Company

Dividend Yield

Intel (Nasdaq: INTC  )

3.8%

Arcelor Mittal (NYSE: MT  )

4.5%

Banco Santander (NYSE: STD  )

8.2%

Cooper Tire & Rubber (NYSE: CTB  )

4.1%

Navios Maritime (NYSE: NM  )

7.2%

Eaton (NYSE: ETN  )

3.8%

Seagate Technology (Nasdaq: STX  )

6.4%

Source: Yahoo! Finance.

2. Opportunity for growth
With dividends like these, the average investor -- especially those nearing retirement -- wouldn't need much appreciation in share price to turn a nice profit.

But we here at the Fool don't aim to be average investors. So I went out and made sure that these seven stocks not only had large dividends, but that they also had potential for growth. I looked for that by delving into their PEG ratios.

In the most basic sense, a PEG ratio under one represents a stock that is priced below its expected growth. The closer the PEG is to zero, the more underpriced the stock. Take a look at how our seven stocks stack up.

Company

PEG Ratio

Intel

0.97

Arcelor Mittal

0.32

Banco Santander

0.50

Cooper Tire & Rubber

0.81

Navios Maritime

0.34

Eaton

0.85

Seagate Technology

0.96

Source: Finviz.com.

While some companies, like Arcelor Mittal and Navios Maritime, have wildly low PEG ratios, all of these stocks look to be undervalued at today's prices. This means that along with high dividend yields, you could benefit from appreciating prices as well.

3. Dividends that will stick around for a long time
But let's be honest, while high dividends and the chance for price appreciation are nice, it means nothing if the company isn't paying out a sustainable dividend.

One of the most popular metrics for checking on a dividend payer's sustainability is the earnings payout ratio, which essentially measures the amount of earnings a company dedicates to paying out dividends. As the theory goes, the lower the payout ratio is, the more sustainable the dividend is.

Company

Payout Ratio

Intel

31%

Arcelor Mittal

31%

Banco Santander

51%

Cooper Tire & Rubber

24%

Navios Maritime

38%

Eaton

37%

Seagate Technology

17%

Source: Yahoo! Finance.

In their book Million Dollar Portfolio, David and Tom Gardner suggest that you should hold only stocks with a payout ratio of less than 65%. Clearly, these seven stocks pass that bar with flying colors.

What these numbers really mean is that should times get tough, they'll have no problem continuing to pay their dividends; and should things go well, they have plenty of room to raise their dividends.

Don't stop now!
If you're looking for some dividend ideas, consider 13 names from a free report from The Motley Fool's expert analysts called "13 High-Yielding Stocks to Buy Today," including one that a senior retail analyst calls "the dividend play of a lifetime." Tens of thousands have requested access to this report, and today I invite you to download it at no cost to you. Get instant access to the names of these 13 high yielders. It's free!

Fool contributor Brian Stoffel owns shares of Intel. You can follow him on Twitter at @TMFStoffel. The Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position on Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (23) | Recommend This Article (65)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 28, 2011, at 5:22 PM, newageinvestor wrote:

    Here are the three stocks in my portfolio that have maintained double digit gains despite our current roller coaster: COST, ED and NIKE. That's what's important to me right now. They never went into the negative category this year for me. Everything else had been a sea of red.

  • Report this Comment On September 28, 2011, at 5:27 PM, xetn wrote:

    Hmmm, It is one thing to obtain a 3 or more percent return in the form of a dividend, but when you lose 14 percent of your initial investment, that is a serious loss and I don't believe many investors would be "sleeping well" und those circumstances. Those yields are on an annual basis, while the losses are real time (if you happen to sell). And, of course, the "yields" are subject to suspension at any time. Perhaps you studied what used to be termed "new math".

    Oops, I guess I just dated myself. :)

  • Report this Comment On September 28, 2011, at 5:43 PM, TMFCheesehead wrote:

    xetn-

    I think the last section covers pretty thoroughly why these companies have healthy looking yields that down show any warning signs of nearing suspension.

    If there's something I'm missing here, feel free to add.

    Brian Stoffel

  • Report this Comment On September 28, 2011, at 5:45 PM, Doris411 wrote:

    xetn,

    I think that's why Brian's looking at the PEG ratios as well, to try to be sure that temporary price drops will be just that, temporary. Then the payout ration measures the ability to continue the dividends at the current level.

    Your mention of "new math" takes me back. I was in grade school when the school district decided new math was the latest great thing. (May I soundly recommend Mensa's gifted children's programs as a remedy for misguided educational bureaucrats, by the way.)

    For younger readers -- "New" math attempted to introduce concepts such as group and set theory that were normally taught at much more advanced levels, at the expense of such basics as long division. Thank heaven for parents who believed in arithmetic and phonics (equally out of style at the time). But it was trendy, and teachers could get continuing professional education credits for taking classes to teach it.

    And now we all use computers and the calculator on our smart phones, so we didn't need long division after all.

  • Report this Comment On September 28, 2011, at 6:28 PM, Trafduolaru wrote:

    A SPANISH bank (as in PIIGS) that's down 40% for the year? Are you sh---ing me? Eaton and Intel are the only ones I might buy in the future, but not even them now.

  • Report this Comment On September 28, 2011, at 8:09 PM, amedici wrote:

    I continue to be surprised at the frequent mention of Banco Santander. A bank, in Spain, with huge losses ytd?!!?

  • Report this Comment On September 28, 2011, at 10:05 PM, tms88 wrote:

    The problem with buying dividend paying stocks like these is that their price goes down and with it your capital. No amount of dividend would be able to offset the loss of capital.

    These dividend paying stocks are only good to own if their price would keep increasing or at least stable.

    We are not in that kind of a market though.

  • Report this Comment On September 28, 2011, at 10:24 PM, brewersfan81 wrote:

    tms88-

    For what it's worth, I encourage you to take a decades-long approach. If the stock price of these companies is depressed, and you have a DRIP set up, then you're getting more shares for basically nothing when the dividends pay out.

    In fact, that's the reason that Phillip Morris has been such an amazing investment for those who've stuck with it through the years. If you don't believe me, read Jeremy Siegel's work, which points out that getting more shares in a DRIP account at depressed prices is exactly what made PM such a great investment over the years.

    Brian Stoffel

  • Report this Comment On September 28, 2011, at 10:27 PM, neamakri wrote:

    I am really into dividends. For you Fools, a great buy right now is (NYB).

    Anyway, please skip (STX) if you are looking for reliable dividends. The following 8 quarters have ZERO dividends; Q2-Q3-Q4-2009,Q1-Q2-Q3-Q4-2010, and Q1-2011. Only the last 2 quarters have paid something in the last 2 years...so beware.

  • Report this Comment On September 28, 2011, at 10:44 PM, trader350 wrote:

    How about BMY, VZ, TXN, or WM? I am short all of these stocks except for INTC

  • Report this Comment On September 29, 2011, at 12:11 AM, PeakOilBill wrote:

    That Spanish bank could go to 0 in days. It will still operate, but your investment will be toast if it gets nationalized. It probably won't happen, but it sure could. Europe is a total mess. Keeping the PIIGS in the euro will condemn the residents of those countries to virtual economic slavery for decades. Throwing them out will be worse!

    Germany could soon be downgraded.

  • Report this Comment On September 29, 2011, at 12:42 AM, mmmm101 wrote:

    FYI:

    ADRs are not "DRIPable".

    STD is ADR

  • Report this Comment On September 29, 2011, at 3:48 AM, IgnacioAgustin wrote:

    Nationalize the Banco Santander? What or who are you listening to? Please look at the fundamentals. Also might be good to look at the fundamentals of Spain in general. With a debt of 60% of GDP, it is far better off than the US on that take. It is true that it is tied to a currency with a large group of nations without fiscal unity (that is the problem!!). However, as a whole, Europe still has some room to maneuver in terms of interest rates where the US has run out of options other than printing more base currency.

  • Report this Comment On September 29, 2011, at 5:53 AM, rdpalma wrote:

    I really have to point out that some of the Americans should read and listen to more news out of their own national chains. As Ignacio said, unfortunately the Eurozone is going through a fiscal unity problem, the economy still has lots of strong points but the central bank (and most of our politics) are showing that they know as much about governing and the average citizen (but then again, i see that happening in the U.S as well right now). My disbelief goes not to these stocks but to the stock market as a whole right now, since it is also ruled (or may i say, manipulated) by people that do not have other interests than their own in mind. This makes the market so volatile because of the lack of trust that is abounding all over the world. Just my 2 (Still quite strong, Euro) cents.

  • Report this Comment On September 29, 2011, at 9:09 AM, centerline150 wrote:

    So I click on the MT symbol and MF's stock page shows a dividend of 1.60%, not the 4.5% shown in the table above. That MF stock page also shows a dividend of 0.64 -- another source I have shows MT's dividend as 0.75... Hard to make a rational decision with all these conflicting data.

  • Report this Comment On September 29, 2011, at 12:38 PM, flhstc wrote:

    When I checked on the Schwabb web site MT does not allow you to reinvest dividends in there stock. What gives.

  • Report this Comment On September 29, 2011, at 1:51 PM, TMFCheesehead wrote:

    @flhStc-

    MT is not a US-based company. I think that is why you Can't set up a DRIP

    Brian Stoffel

  • Report this Comment On October 01, 2011, at 9:05 AM, DonkeyJunk wrote:

    Etrade allows me to set up a drip for adrs, including MT. It may be because the broker manages the process. I can enroll any stock of $5 or more that pays a dividend in a drip.

  • Report this Comment On October 01, 2011, at 12:16 PM, dmccartney wrote:

    I suspect the reason most of these stocks look good on a PEG basis is that the stock price has been beaten down so low. With the exception of INTC they all have underperformed the S&P.

    The low price makes for a higher dividend yield and a lower PE ratio. I hear what some of you are saying about how it would not have been good to buy them a while back and suffer a capital loss larger than the dividend gain. But wouldn't it be lower risk now to buy them at much cheaper prices?

  • Report this Comment On October 01, 2011, at 12:51 PM, patternpro wrote:

    IgnacioAgustin

    Europe has room to maneuver w interest rates??

    U have got to be kidding, have you heard about the leveraged fund they are trying to get all 17 memebers to agree on? (leveraged) If europe doesn't start to print money to kick the can, major deleveraging is going to take place. Anything could happen. short term they are worse off than the us because they can not print money without an agreement of all nations. compare spanish bonds with us. Not saying that u are wrong but lets be honest, european banks are a high stakes gamble right now

  • Report this Comment On October 03, 2011, at 4:09 PM, IgnacioAgustin wrote:

    Hi PatternPro:

    I agree with you that in general all banks (not just European) are a high risk gamble right now, but we are talking about one specific bank. I am short on the finance sector but I am bullish on Santander. They have good management, good fundamentals and I believe it to be greatly undervalued and a good buy for the long run (although it may present many bumps in the way).

    As for Europe, the fact is that the EU interest rates are 2.25 as opposed to 0 in the US. Dropping interest rates is still the number one (well, after increasing the baby production) stimulation of a sick economy.

    Printing money is not a very good policy. If that money goes into circulation, you are devaluating your purchasing power which in turn hinders spending and slows economic growth.

    Having said all this, Greece is the very serious problem. I do not believe the real problem to be Greece's debt. After all, it is only 2% of Europe's GDP. So the logical thing is to kick them out, which is good for the euro nations and good for Greece as they can devalue their new currency, and within a year or two, they will be sitting happy. The issue is that that debt is constituted by an unknown amount of very fancy derivatives which could be a very large multiplier. Most of these derivates are held by French and German banks, and if that multiplier is as large as some people think, if Greece goes down, it could have consequences of a far greater magnitude than Lehman did.

    Sorry for the length, just my 2 cents....

  • Report this Comment On October 07, 2011, at 11:55 PM, stef333 wrote:

    @ IgnacioAgustin

    I would be careful trusting the fundamentals of any bank these days. Unless you can go thru every security and loan on their balance sheet: most of them have tons of stuff on their books that is not worth the paper it is printed on; as long as they hold it they can keep it at book value, but if they ever need the money they won't be able to sell it to anyone, or maybe 2 cents on the dollar. Even the idea of a run on the bank is enough these days.

    If you feel sure that STD doesn't hold chocolate covered turds ... and since even BAC and ING keep bouncing back ... whatever, still less risky than farming.

    That said, I have started a position in WBK (similar situation but in AUD) myself around $90 and I am sorry I could not find the time to close it at 104 today: please stay up until Monday.

  • Report this Comment On October 08, 2011, at 12:57 AM, stef333 wrote:

    @ IgnacioAgustin

    In 2008 I tried making money with PUTS on Wachovia and BAC. The SEC banned shorting financial companies. My PUTS on Wachovia turned out being european style binary PUTS that won me $350 instead of $22000, I never get tired of making rookie mistakes, now I beware of options that look weird or mispriced. If I made any money during that disaster of the whole financial sector it was because I bought Wachovia shares just before Wells Fargo "bought" them (from $1 to $6/share in less than 24 hours). When the market is normal I tend to forget how fast it can move, up or down.

    I kind of expect similar events this time, financial stocks deflating steadily like a ballon with a leak and a guy with emphysema blowing into it, trying to keep it inflated.

    Just before it gets too bad governments and central banks all of a sudden will stop pretending to care about fiscal austerity and will intervene really big to save their banker buddies, but a lot of shareholders will get shafted anyway (additional offerings of company stock, disposition of assets and subsidiaries at a 1/10 of the acquisition price, special bonus to get rid of CEO, CFO and COO, and special bonus to attract new senior management: it doesn't take a bankruptcy for the shareholders to get killed).

    Even though Germans and French like to portray the EMU like a system where lazy southern bums enjoy life at the expense of the industrious children of Walhalla, it was mostly a system that insured that German and French companies along with a few Dutch ones had a chance at dominating the whole European market and occasionally enjoying the benefits of cheaper labor costs, first in Ireland, then Portugal, then Romania, Hungary, Poland, and wherever else. For many years the costs of keeping together an odd group like that has been hidden inside their banks' balance sheets, now that trick doesn't work anymore so the money has to come from taxpayers' pockets instead of bank shareholders' pockets (over Merkel's dead body!).

    Just like the Chinese keep Americans afloat so that Chinese companies can keep selling them stuff, European companies need the EMU to continue. Unfortunately European politicians don't have the huevos (and the fat lobbies) of American politicians, so they show up carrying puny bags of cash and expect to fix 200 trillion Euros of bad debt with a couple of hundred billions.

    So yes, I agree with IgnacioAgustin and would rather pick STD than a French or German Bank.

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