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The 7 Biggest, Baddest Dividend Stocks Out There

Anand Chokkavelu, CFA
July 30, 2010

Now more than ever, dividend stocks are a good play.

Why's that?

If you missed it, my colleague Morgan Housel explained earlier this month that stocks yield more than bonds.

Specifically, the average dividend yield of the Dow 30 stocks slipped past the 10-year Treasury bond yield. Historically, bonds have yielded 3.8% more than stocks since stocks also provide the prospect of capital appreciation. But with investors turning to Treasuries out of fear and the Fed working actively to keep rates low, 10-year bond rates are yielding a paltry 2.9%.

For that reason alone, investors who want the promise of a steady stream of income may want to increase the dividend-paying portions of their stock portfolios.

But I'm just getting started
Don't be fooled into thinking dividend stocks are just for those nearing retirement, though. For fans of growth stocks, a study by Robert Arnott and Clifford Asness actually links higher dividend payouts to higher earnings growth. Further, Wharton professor Jeremy Siegel has studied the dividend situation and concludes: "Through the years, diversified portfolios of stocks that pay dividends have not only beaten those that don't, but have also handily outperformed the S&P 500."

That may surprise you.

The chance for big returns isn't what many investors expect from steady dividend payers.

Here's the thing. A company, unless suicidal, won't institute a dividend unless it plans on paying it for the long term. It's signaling to the market that its operations are steady and self-sufficient enough to start returning capital to its investors. The danger to a company that lowers or suspends its dividend is frequently a violent market reaction on the down side.

From a management standpoint, paying a dividend instills discipline. When government departments get their budgets each year, there's a use-it-or-lose-it mentality. The same is true for company departments -- there's always an extra project to justify. But by taking a portion of this capital away, managers are forced to allocate their capital to their highest-priority, highest-value projects.

Where are the biggest, baddest dividend payers?
For those looking for some of these dividend plays, Standard & Poor's helps us out. Each year, they construct a list called the Dividend Aristocrats. These are "large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years."

Yes, you read that right. 25 years.

Only a few dozen companies make the list. Here are the seven with the highest dividend yields.



Market Cap

Payout Ratio

P/E (trailing)

Dividend Yield

CenturyLink (NYSE: CTL  )


$10.7 billion




Pitney Bowes (NYSE: PBI  )

Mail processing equipment

$5.1 billion




Cincinnati Financial (Nasdaq: CINF  )

Property casualty insurance

$4.5 billion




Integrys Energy Group (NYSE: TEG  )


$3.8 billion




Eli Lilly (NYSE: LLY  )


$41.1 billion




Consolidated Edison (NYSE: ED  )


$13.3 billion