General Electric (GE 3.94%) investors breathed a sigh of relief when new CEO John Flannery opted not to cut the company's dividend -- at least for now. He did say, however, that the decision might change after a pending insurance review.
Certainly, there are other reasons to like GE besides its current 4.7% dividend yield. But if that yield is what you're after, here are three stocks to consider that are sporting even better yields than General Electric, and that aren't publicly mulling a dividend cut: Royal Dutch Shell (NYSE: RDS-A)(NYSE: RDS-B), Ford (F 0.69%), and Magellan Midstream Partners (MMP +0.00%).
GE's big dividend yield may put a smile on your face, but here are three yields that are even better. Image source: Getty Images.
Royal Dutch Shell (Current Yield: 5.9%)
Not only is the Dutch oil behemoth's yield higher than GE's, but it's also one of the best yields in the entire oil and gas sector. Better yet, Shell has been taking steps to ensure that it's going to be able to continue to offer its dividend for years to come by making changes to its business model.
Shell bought BG Group in 2016 in a $52 billion deal, which gave the company a major offshore footprint in Brazil and also increased its exposure to liquefied natural gas. The company sees LNG as a fast-growing market and jumped at the chance for more exposure. It has also made changes to its operations to focus on generating better returns.
Better yet, the dividend appears to be sustainable. When reporting on the company's Q2 performance, CEO Ben van Beurden announced that Shell had been able to generate $38 billion in cash flow over the prior 12 months, with an average oil price of less than $50 a barrel. That was more than enough cash to cover the company's cash dividends for each quarter during that time. The company was even able to reduce net debt by nearly $9 billion.
That puts Shell's dividend in a much better position than GE's.
Ford (Current Yield: 5%)
Like GE, Ford's stock has been slumping lately, down about 13% over the past three years. This year, though, hasn't been as bad for the company's shares, which are down only about 0.3%, compared with General Electric's 35.6% drop.
Yet the company posted record profit in 2015 on a pre-tax basis. In 2016, profit was nearly as high. So while GE's stock slide seems at least somewhat justified, Ford's seems absolutely mystifying. It's likely that investors are nervous about new disruptive technologies -- think self-driving or all-electric vehicles -- or are concerned that the notoriously cyclical auto market is starting on a downward trend.
Still, even if a downtrend occurs, Ford should have no trouble sustaining its dividend, which at this point is more than we can say about GE.
Magellan Midstream Partners (Current Yield: 5.1%)
Gas pipeline operator Magellan Midstream Partners has been able to grow its dividend -- and grow it, and grow it, and grow it. In fact, the company has grown its dividend by 86.6% over the past five years. Much of that growth occurred during the current energy price downturn, all while being in what's generally considered a sleepy part of the oil and gas industry.
The "midstream" sector of the energy industry focuses on transportation and storage. Magellan owns and operates a network of pipelines and uses a "tollbooth" model, charging oil and gas companies to ship their products through its pipelines. In fact, Magellan owns the longest refined-products pipeline system in the United States. That means its business is pretty stable, and largely immune from energy price fluctuations. But how does it manage to pay such a big dividend?
Magellan is classified as a master limited partnership, which basically means it's a limited partnership traded on an exchange. Investors are technically partners in the company and are sometimes referred to as "unitholders," as opposed to stockholders. MLPs don't pay corporate taxes, which gives them more money to spin off to their partners in the form of big dividends. The drawback is that each partner -- you, the investor -- is then responsible for paying your share of the partnership's income tax. That can get tricky come tax time, even if your units are being held in a tax-advantaged account.
But it also means Magellan is unlikely to cut its dividend anytime soon, if at all. And again, that's something you can't say about GE.
Investor takeaway
Although Shell, Ford, and Magellan have better dividend yields than GE, it's important to remember that yield isn't the only thing to look at when choosing a dividend stock. Stability of the dividend, potential for dividend growth, and overall company health are things to take into consideration. These three companies happen to deliver on those counts.
This also isn't to say that GE is a bad investment. While it's performed poorly in 2017, the company still has several things going for it beyond its current high dividend yield. That said, if dividends are what you're after, General Electric's may not be at this level for long.
