The search for yield has resulted in investors doing some downright crazy things.
It is the current ultra-low rate economic environment that has forced many investors to believe that high risk is a must to earn high yields on their investment portfolio.
This means that investors have been pushing the risk envelope by investing in high yielding REIT’s, questionable stocks, and other frankly risky instruments.
While risk is a prerequisite for winning in the stock market and there is nothing wrong with holding a few high-risk investments, high-risk assets SHOULD NOT make up the majority of your long-term portfolio!
The good news is that we have discovered 3 stocks that yield 8% or higher that are members of the respected S&P 500.
Being in the S&P 500 is a signal that the company is solid and established. As a refresher, a company needs to The committee selects the companies in the S&P 500 so they are representative of the industries in the United States economy. In order to be added to the index, a company must satisfy these liquidity-based size requirements.
The market capitalization must be greater than or equal to US$5.3 billion, and the annual dollar value traded to float-adjusted market capitalization is greater than 1.0
In addition, the minimum monthly trading volume of 250,000 shares in each of the six months leading up to the evaluation date must be maintained.
In addition, the securities must be publicly listed on either the NYSE (including NYSE Arca or NYSE MKT) or NASDAQ (NASDAQ Global Select Market, NASDAQ Select Market or the NASDAQ Capital Market).
Interesting, many of the high-yield but risky favorites are ineligible for inclusion in the index.
To put it bluntly, stocks in the S&P 500 are substantial companies that have been vetted at a basic level for inclusion.
No doubt risk still exists in these firms, but it is relatively less than other high dividend yielding stocks!
Combining the relative safety of the S&P 500 with high dividend paying stocks is a match made in heaven for your long term, dividend producing portfolio.
The catch is that very few S&P 500 stocks are high dividend payers!
Before we get to the three S&P 500 stocks that yield over 8%, let’s take a closer look at just why dividends are so critical for your long term, wealth building stock market portfolio.
Dividends are critical since they have accounted for 40%, that’s right almost ½, of the stock market’s total return over the last 85 years! Not to mention the fact that that dividend yielding stocks have outperformed the market substantially over time.
Dividends are a time honored method of returning capital to shareholders. Today, with companies sitting on ALL TIME RECORD cash hoards, dividends will only increase in popularity and amounts overall. You see, companies need to do something with all this extra cash. Solid successful companies give this money back to the shareholders in the form of dividends or share buyback programs.
To state it bluntly, this is the best time in history to be a stock dividend investor!
Among the major mistakes made by dividend investors, neglecting the The ex- dividend date is the most often made. It is the most critical date for dividend investors.
The ex-dividend date is the first day after a dividend is declared that the investor will not be entitled to collect the dividend.
This means that investors who wish to collect the dividend MUST purchase the stock prior to the ex-dividend date.
The 3 Highest Dividend Payers in the S&P 500
The first thing you need to understand about these three super dividend yields from the S&P 500 is that all the stocks are down big this year.
As you know, yield is a direct function of the share price. Right now, all three of these stocks are trading in the deep value zone and are quite compelling on the yield factor alone.
With that said, here are the stocks:
- Frontier Communications (NYSE:FTR)
Frontier Communications Corporation is a communications company. The Company is engaged in providing services to rural areas and small and medium-sized towns and cities in the United States.
It offers a range of voice, data and video services and products. The Company offers a portfolio of communications services for residential and business customers in each of its markets. It conducts business with both residential and business customers, and it provides the last mile of communications services to customers in these markets.
Frontier provides data and Internet services and wireless data services, basic local and long distance voice wireline services to residential and business customers in its service areas, network access to interexchange carriers for origination and termination of long distance voice and data traffic, sales of its own and third party video services, and sales of customer premise equipment.
Shares have been lifted due to a proposed deal for Frontier to purchase Verizon’s wireline operations in California, Florida, and Texas for $10.4 billion. The deal has been approved by the FCC but is still awaiting approval in California and Texas.
The CEO, Daniel McCarthy bullishly proclaimed, “By doubling our size, we will add scale and scope to our operations, strengthen our product and service offerings, and improve the customer experience. Our goal is to deliver the life-changing benefits of broadband to an additional 750,000 households at speeds of 25Mbps/2-3Mbps across the entire Frontier multi-state footprint, including California, Florida and Texas, by the end of 2020.”
Frontier currently pays a $0.42 cents annual dividend and yields 8.7%. However, despite the company being in the S&P 500 it is struggling.
- Kinder Morgan (NYSE:KMI)
This S&P 500 company yields 8% right now but some analysts are expecting this yield to jump into the low teens very soon.
Kinder Morgan, Inc. (KMI) is an energy infrastructure and energy company in North America.
The Company operates through six segments: Natural Gas Pipelines, CO2, Terminals, Products Pipelines, Kinder Morgan Canada and Other. The Natural Gas Pipelines segment includes interstate and intrastate pipelines and its liquefied natural gas (LNG) terminals.
The CO2 business segment produces, transports, and markets CO2. The Terminals segment includes the operations of its petroleum, chemical, ethanol and other liquids terminal facilities and all of its coal, petroleum coke, fertilizer, steel, ores and other dry-bulk material services facilities.
The Products Pipelines segment consists of refined petroleum products, crude oil and condensate, and NGL pipelines and associated terminals, Southeast terminals, and its transmix processing facilities.
The Kinder Morgan Canada segment includes its 100% owned and operated Trans Mountain pipeline system and a 25-mile Jet Fuel pipeline system.
The rout in commodity prices has knocked down KMI’s share price by 41% this year.
Interestingly, and great for dividend investors, Kinder Morgan, Inc. has increased its dividends every quarter this year.
CNBC reports that Kinder Morgan that this increase came despite the massive drop in the prices of the commodities it transports. That’s not necessarily the best use of capital, given the company’s demanding capital expenditure budget and ongoing equity financing needs, stated a Jeffries Analyst.
- Oneok (NYSE:OKE)
ONEOK, Inc. is another energy transportation company that pays an 8.1 dividend yield. Just like Kinder, shares have suffered this year due to commodity prices. Price has plunged 47% this year.
Oneok is the sole general partner of ONEOK Partners, L.P. (ONEOK Partners), a master limited partnership engaged in the gathering, processing, storage and transportation of natural gas in the United States. The Company operates through three segments: Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines.
The Natural Gas Gathering and Processing segment provides nondiscretionary services to producers, including gathering and processing of natural gas produced from crude oil and natural gas wells. The Natural Gas Liquids segment owns and operates facilities that gather, fractionate, treat and distribute natural gas liquids (NGLs), and store NGL products, primarily in Oklahoma, Kansas, Texas, New Mexico and the Rocky Mountain region.