When people learn that I am an income investor, the reaction is often a desire to discuss high-yield investments. The uninitiated commonly confuse income investing with high-yield investing. The two are not the same.
High-yield investing often carries a greater degree of risk than I am willing to accept. Recently, a reader alerted me to an article describing a 20-year study by the Schwab Center for Financial Research demonstrates that investments with the highest yields don't necessarily provide the highest returns and offers a safer way to implement a high-yield approach. Here are some key excerpts from the article:
Since the article was very Schwab specific, I tried to generalize the above screen. If you have a Schwab, please refer to the article for more specific instructions.
So, what does all this mean? If you are an income investor that enjoys trading instead of buy and hold, then this may be something you want to explore further. However, the 11.5% earned with this strategy vrs. the 10.73% for dividend stocks not in the highest yielding group hardly seems worth the effort.
For me, I will continue to focus on high-quality dividend stocks at lower, but growing, yields. However, for those looking to bump their yield a little, below are several Dividend Aristocrats and Achievers that are currently yielding more than 5%:
CenturyLink Inc. (CTL) - Aristocrat - Yield: 8.6%
Lilly Eli & Co. (LLY) - Aristocrat - Analysis -Yield: 6.0%
Integrys Energy Group Inc. (TEG) - Aristocrat - Yield: 7.8%
Consolidated Edison Inc. (ED) - Aristocrat - Yield: 5.8%
Progress Energy Inc. (PGN) - Achiever - Analysis - Yield: 6.5%
Realty Income Corp (O) - Achiever - Yield: 7.1%
Health Care Property Investors, Inc. (HCP) - Achiever - Yield: 6.8%
Cincinnati Financial Corp. (CINF) - Aristocrat - Yield: 6.2%
Leggett & Platt Inc. (LEG) - Aristocrat - Analysis - Yield: 5.7%
Pitney Bowes Inc. (PBI) - Aristocrat - Yield: 6.0%
AT&T Inc. (T) - Achiever - Yield: 6.2%
Black Hills Corp. (BKH) - Achiever - Yield: 5.8%
Capital City Bank Group (CCBG) - Achiever - Yield: 5.6%
Universal Health Realty Income Trust (UHT) - Achiever - Yield: 7.5%
This by no means is an endorsement of the above stocks. If you are looking for high-yields, you might lower your risk some by looking at a pool of stocks that have a long history of increasing their dividends.
Full Disclosure: Long CTL, LLY, TEG, ED, PGN, O, HCP . See a list of all my income holdings here.
(Photo: Steve Woods)
Related Articles:
A Safer Approach To High-Yield Dividend Stocks
Posted by D4L | Thursday, October 08, 2009 | commentary | 0 comments »________________________________________________________________
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