Yield is something retirees, savers, and anyone looking to get their money to work for them seeks. Current US Treasuries pay about 2.75% and they are fully taxable by the Federal Government, so your final yield could be as low as 1.5% or so. Not much and certainly will not keep up with inflation. So where does one go for yield, or more specifically safe yield. Quality dividend paying stock are our choice. Some over or close to 5% yields, well covered by cash flow, and a favorable preferred federal tax rate.
In the past most would reach for the nearest electric power utility, which is almost guaranteed to stay in business, hold the current dividend, and raise it a bit each year or so. Frankly electric utilities now are no longer safe. In fact one that I found to be very safe Southern Company, symbol SO, now concerns me a good bit. Southern has been forced into the carbon capture business by the EPA due to their dependence on coal fired generating plants and the cost overruns, the large increases in rates to consumers, and the ever increasing regulatory hand of the federal government have made this stock's dividend suspect. One can now say that about almost any utility, Duke Power being a local one that now is getting eaten up with costs from their own clean energy projects.
So again this leaves one asking where are good alternatives now. Below we will list several we believe to be quality companies with safe and sometimes increasing dividends for the next five years or so. Understand with the current administration in Washington DC there are no completely safe alternatives as any day Obama could wake up and decide today is the day to regulate this industry into submission.
BCE...A 5% plus dividend in Canada where this telecom is safe from the over regulation in the US. The recent huge buy out of Verizon Wireless by Verizon will keep that company from moving any assets in to Canada and that pushed up these shares about 5% recently. The closer to $40 per share you can buy it the better.
JPM...Despite the recent fees and fine this company has had to pay it is still the premier banking franchise in the US and has plenty of profits and cash flow going forward to do well and pay dividends. Once the Obama administration is gone you can expect this stock to soar and payouts to increase significantly. Just at 3% yield. Try to buy it around $50 or just above.
O...Realty Income might be the safest dividend in the country now. Yield is above 5% and is regularly increased and is paid monthly. Realty Income has long term triple net lease rents that are secured by long term retail businesses. Add in that the recent low borrowing rates have been a bonanza for this company that has restructured a good bit of their long term debt at cheap rates. Buy under $40
T...AT&T will be one of the two remaining wireless telecom assets in the US soon. They have significant cash flow, low borrowing costs, and a dividend well covered by profits. At 5% plus this is a sleep well at night payout. I like the stock at around $33 per share.
VZ...Verizon having finally made the deal to consolidate their wireless assets in the US should prosper going forward. The best network added to low borrowing rates and huge cash flow protects your dividend. VZ now around 4.5% yield is another sleep well at night payout. Buy at around $45.
We have positions in all these stocks.
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