If this year’s hit to dividend-paying sectors taught us anything, it’s that rising Treasury yields can be dangerous for income-producing stocks. That leaves investors in a bind. Do you by high-dividend payers and hope for the best or give up on income completely?
Bloomberg News Well, Morgan Stanley yesterday released a report that looks for stocks with a dividend yield of at least 3% but who’s fundamentals should allow it to hold up just fine, even if rates rise. Its analysts started by looking for stocks with payout ratios of less than 75%, low debt and net income compound annual return of at least 5%. They looked at the historical tendency of the stocks to Treasury rates, the S&P 500 and the Dow Jones US Select Dividend Index. They asked their analysts to recommend stocks with little near-term debt maturing, stocks that would benefit from an improving US economy and inflation protection features. And they came up with a list of 20.
Abbvie (ABBV)
Ameren Corp. (AEE)
Arthur J. Gallagher (AJG)
E.I. DuPont de Nemours & Co. (DD)
ENSCO (ESV)
Enterprise Products Partners LP (EPD)
General Mills (GIS)
H&R Block (HRB)
Hancock Holding (HBHC)
Kraft Foods Group (KRFT)
Lorillard (LO)
Magellan Midstream Partners LP (MMP)
MarkWest Energy Partners L P (MWE)
McDonald’s (MCD)
Microchip Technology (MCHP)
NextEra Energy (NEE)
Regency Centers (REG)
TELUS Corp. (TU)
West Corp. (WSTC)
Williams Companies (WMB)
The stocks with the lowest correlation include Hancock Holding, Telus, WestCorp and MarkWest.
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