Buying stocks that pay market-beating dividend yields can give your annual performance some extra pop, but not every company with a high dividend yield deserves to be in your income portfolio. The dividend yield of some companies are high because their businesses are struggling. Rather than risking owning a high-yield/high-risk stock, income investors might be better off buying industry titans with solid balance sheets that are trading at reasonable valuations. For example, these three companies could be the perfect addition to income portfolios right now.
A forward P/E ratio of 11.3 and a 3.5% dividend yield makes International Business Machines Corporation (NYSE:IBM) too alluring for dividend investors to ignore, especially since it's knee-deep in transforming itself from a stodgy PC and networking company into a cloud, analytics, engagement, and security giant. IBM's not the only technology giant undergoing big changes that dividend investors ought to consider buying. Microsoft Corp. (NASDAQ:MSFT) is also transitioning itself into a cloud giant and its 2.5% dividend yield and forward P/E of less than 18 makes it a compelling buy, too. After suffering through years of slowing sales due to patent expiration on its multibillion-dollar cholesterol drug Lipitor, Pfizer, Inc.'s (NYSE:PFE) top and bottom lines are poised to head higher again.
Source: Motley Fool
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