It's no secret that the market has been on an impressive rally since New Years, but why is that? Are people generally more optimistic? Has value been restored? Has Europe smoothed over its debt issues? Did Greece and Italy stumble upon a sunken treasure that can pay off their national debts?

Sam Ro of Business Insider writes that there's a strange relationship between the markets and fiscal reality. Treasury yields have been at historic lows, and analysts have adjusted Q4 earnings expectations to brace for disappointment.

"Only 7% of the S&P 500 have announced their Q4 financial results during this earnings season. However, 110 companies have preannounced their results, and the trend has not been good."

Business Insider's Joe Weisenthal also comments that Bank of America and European banks are doing great. "What used to be hated, now people can't get enough of." But he's not very optimistic, describing the current market as a "dash for trash."

Barclay's warning
Barclays has warned investors that they may want to strap on their seat belts, because if/when all this optimism hits the fan, it's going to be a bumpy ride.

Business Insider relays this passage from his latest U.S. Equity Strategy Instant Insights note:

Equities currently look fairly priced relative to our earnings forecast for 2012. However, having rallied from below 1200 over the past six weeks, even as earnings estimates fell, we do not expect a favorable reaction to either the reality of slowing growth or the inability to beat expectations significantly. In addition, two earnings-related indicators-the ratio of negative-to-positive preannouncements and our earnings surprise index for the 7% of S&P 500 companies that have reported-point to a poor-to-middling earnings season.

Business section: Investing ideas
Do you think we're in store for more volatility? If so, you may want to apply the lessons learned in 2011. Specifically, that in times of low returns and high volatility, investors become keen on high-yield dividend stocks.

In 2011, dividend paying stocks also outperformed stocks that didn't pay dividends. Stocks that paid a dividend gained 1.4% on average in 2011, vs. a 7.6% average loss for S&P 500 stocks that didn't pay a dividend, says S&P Capital IQ.

With that in mind we created a list of high-yield companies that benefited from this trend last year. Specifically, we created a list of high-yield S&P 500 stocks and picked the top 10 yearly performers in the past year. Do you think 2012 will bring similar results?

List sorted by yearly performance. (Click here to access free, interactive tools to analyze these ideas.)

1. Lorillard: Engages in the manufacture and sale of cigarettes in the United States. Market cap of $15.25B. In the past year, the stock's value increased by 55.51%. Dividend yield at 4.6%.

2. Bristol-Myers Squibb (NYSE: BMY): Develops, and delivers innovative medicines that help patients prevail over serious diseases. Market cap of $57.16B. In the past year, the stock's value increased by 36.84%. Dividend yield at 4.03%.

3. Philip Morris International (NYSE: PM): Engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. Market cap of $127.25B. In the past year, the stock's value increased by 35.84%. Dividend yield at 4.2%.

4. Reynolds American: Reynolds American (RAI), through its subsidiaries, manufactures and sells cigarette and other tobacco products in the United States. Market cap of $24.02B. In the past year, the stock's value increased by 35.39%. Dividend yield at 5.44%.

5. H&R Block: Provides tax preparation, retail banking, and various business advisory and consulting services. Market cap of $4.76B. In the past year, the stock's value increased by 29.48%. Dividend yield at 4.92%.

6. Altria Group (NYSE: MO): Engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally. Market cap of $59.55B. In the past year, the stock's value increased by 27.46%. Dividend yield at 5.66%.

7. CenterPoint Energy: Operates as a public utility holding company in the United States. Market cap of $8.07B. In the past year, the stock's value increased by 25.68%. Dividend yield at 4.17%.

8. Progress Energy: Engages in the generation, transmission, distribution, and sale of electricity in North Carolina, South Carolina, and Florida. Market cap of $15.99B. In the past year, the stock's value increased by 25.28%. Dividend yield at 4.57%.

9. Duke Energy (NYSE: DUK): Operates as an energy company in the Americas. Market cap of $28.38B. In the past year, the stock's value increased by 24.75%. Dividend yield at 4.69%.

10. Pfizer (NYSE: PFE): A biopharmaceutical company, offers prescription medicines for humans and animals worldwide. Market cap of $168.88B. In the past year, the stock's value increased by 24.55%.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data sourced from Finviz.