We're just over halfway through 2018, so it's a good time to take a step back and look at how investments have performed so far this year. As far as high-dividend stocks go, many have been under significant pressure thanks to rising interest rates. In fact, high-dividend stocks have underperformed the S&P 500 by more than 4 percentage points, as a group.
With that in mind, here are the five best-performing high-dividend stocks (defined as yields of 3% or more) on the S&P 500 through the first six months of 2018, followed by a brief discussion of why they've done so well.
Image Source: Getty Images.
|
Company (Symbol) |
Recent Stock Price |
Dividend Yield |
Year-to-Date Total Return |
|---|---|---|---|
|
Macy's (M -2.68%) |
$36.52 |
4.1% |
48.5% |
|
Seagate Technology (STX) |
$58.33 |
4.3% |
42.6% |
|
ONEOK (OKE 2.25%) |
$71.34 |
4.5% |
37.1% |
|
Kohl's (KSS 1.49%) |
$70.78 |
3.4% |
33.1% |
|
First Energy (FE 1.44%) |
$36.27 |
3.9% |
21.2% |
Data source: TD Ameritrade. Prices, yields, and total returns as of July 9, 2018.
For some retailers, things aren't as bad as they may have looked
Many retail stocks had been beaten down tremendously in 2017, as investors worried about the "retail apocalypse." While this certainly made sense given the wave of high-profile retail bankruptcies of recent years, it appears that the fears were overblown for certain retailers.
You can see two good examples of this in the chart: Macy's and Kohls. Both are among the S&P 500's top performers so far in 2018, and have returned 68% and 93%, respectively, over the past year.
M Total Return Price data by YCharts.
Kohl's has produced some impressive returns recently. As my colleague Adam Levine-Weinberg pointed out in a recent episode of the Industry Focus podcast, it was Kohl's 6.3% comparable sales increase during the fourth quarter that was really the key to the stock's rally, and sales figures have continued to look impressive since then. Macy's has also seen comps grow, with a 4.2% increase in the first quarter.
Simply put, it looks like some of these retailers' turnaround initiatives have been working, such as Macy's expanded loyalty program. And there could be more growth ahead with the company's omnichannel efforts to grow in-store pickup and ship-to-store sales. Not to be outdone, Kohl's is developing an "if you can't beat 'em, join 'em" attitude when it comes to Amazon.com (NASDAQ: AMZN), and is testing a partnership with the e-commerce giant to accept Amazon returns in certain Kohl's locations, with the goal of creating more foot traffic in their stores.
The hard-drive business is doing well
Seagate is another company that has performed incredibly well this year, as demand for storage seems to be trending upward. In the most recent quarter, Seagate shipped 87.4 exabytes of hard-drive capacity, a 33% increase over the previous year.
A big driver of this is increased enterprise business -- specifically, the growth of data centers in recent years. Enterprise customers now make up 44% of Seagate's revenue, up by 700 basis points over the past two years. And as I've written before in reference to data center real estate investment trust Digital Realty (NYSE: DLR), the need for data storage doesn't appear to be slowing down anytime soon.
One of the top-performing energy stocks
ONEOK is a midstream energy company -- which essentially means that they transport energy products, particularly natural gas. ONEOK has one of the largest natural gas pipeline systems in the U.S. and is investing considerable money in planned expansion projects, with about $4 billion of growth projects announced over the past year or so.
Not only is ONEOK one of the highest-dividend companies in the S&P 500, but the company has an ambitious goal of increasing its dividend at a 9% to 11% pace over the next several years, fueled by the aforementioned expansion projects.
A utility in the top performers?
It may seem odd to see a utility stock like Ohio-based FirstEnergy in the list of highest-performing stocks, since not only are utilities generally considered low-volatility safe stocks but because many high-dividend utilities have been under pressure as interest rates have risen.
However, FirstEnergy's recent results were enough to cause the stock's impressive rally. The company's revenue has increased during the past two quarters, reversing a nearly two-year decline, and earnings soared. Also, FirstEnergy's profit margin was the highest it's been in nine years.
