The 5 Best Performing High Dividend Stocks In 2014

by Robert Hauver
We thought we’d take a different approach in this article, and look at high dividend stocks within the S&P 500 that are performing well in 2014, vs. those that are oversold and/or undervalued. Not surprisingly, 3 out of 5 of these top dividend stocks are from the Utilities and Healthcare sectors, which are the 2 top sectors year to date.
TOPDIVSTKS-PROFILE
Performance through 3/17/14: A Financial stock, AIV, is the top performer of this group so far in 2014, but, interestingly, made most of its gains in January and February, and is only up around 2% in March.
Garmin, (GRMN), a tech stock, has made all of its net gains over the past month.
The more defensive Utilities stocks, PEG and AEE, show a more balanced performance, both rising in January and February, in addition to the past trading month.
TOPDIVSTKS-PERF

Dividends: With its 4%-plus yield, we’ve added Public Enterprise Group, (PEG), to the Utilities section our High Dividend Stocks By Sector Tables. You’ll also find Lilly, (LLY), in the Healthcare section of the tables.
TOPDIVSTK-DIV

Options: 2 of these dividend paying stocks also have fairly high options yields – Garmin and Lilly. We’ve listed July Covered Call trades for both stocks below. Both stocks have ex-dividend dates for their next quarterly dividends, prior to the July call expiration, so you can effectively increase your overall yield substantially, via the combo of the dividend and option yields.
Garmin’s call option payout is nearly 5 times its dividend, and Lilly’s call option pays 4 times its dividend.
GRMN-LLY-CALLS
You can find more details on these and over 30 other trades in our free Covered Calls Table.
Both trades have call options which are enough above the stock’s share/price, to amply replace the dividend income, via price gains, if your shares get assigned prior to the ex-dividend date.
Here are the major income scenarios for the Garmin trade:
GRMN-CALLINC
Cash Secured Puts: Our Cash Secured Puts Table also lists July put trades for Garmin and Lilly, (along with over 30 other trades). These put option trades both have strike prices which are below these stocks’ current price/share, thereby achieving a lower breakeven:
TOPDIVSTK-PUT
Financials:
TOPDIVSTK-ROE
Valuations:
TOPDIV-PB

Disclosure: Author held no positions as of yet in any of the stocks mentioned in this article at the time of this writing.
Disclaimer: This article was written for informational purposes only. Author not responsible for any errors, omissions, or actions taken by third parties as a result of reading this article.

3 High Dividend Stocks Bucking The Spring Pullback

By Robert Hauver

The S&P 500 has pulled back approx. 4% since its early April highs, which begs the question, are there any dividend paying stocks that have beaten the market since then?  We took 3 dividend stocks from our High Dividend Stocks By Sector tables, and researched how they’ve done in all of the various rallies and pullbacks since last summer.

These 3 stocks have all held up better than the market in pullbacks, and have also participated in rallies.  Not surprisingly, these defensive dividend stocks hail from the Healthcare and Utilities sectors: NextEra Energy, (NEE), Xcel Energy, (XEL), and Eli Lilly Co., (LLY):

LLY-NEE-PERF-LONG

Click here to read more…

Disclosure: Author had no positions in any of the above stocks at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Author: Robert Hauver © 2012 Demar Marketing All Rights Reserved

2 Defensive Dividend Stocks Outperforming The S&P

By Robert Hauver

Looking to play defense in the market? As the market has vacillated between up and down months since July, income investors are seeking dividend paying stocks with less correlation-i.e., dividend stocks which are defensive during pullbacks, but still share in rallies. It has become more challenging to find such an animal, but they are out there. However, defensive stocks aren’t always the best stocks to buy for growth.  These two giant Healthcare dividend stocks, Lilly and Pfizer, have both outperformed the S&P in 2011, in both up and down markets:

LLY-pfe-perf

Performance-wise, LLY and PFE flip-flopped in the Sept. and Nov. pullbacks and the Oct. rally. Lilly just got a nice boost recently, after an analyst said that LLY’s anti-Alzheimer drug could double the share price, if proven to be effective, which he thought it had a 10-20% chance of.

Dividends:

LLY-PFE-DIVS

Financials: Lilly’ metrics outshine Pfizer’s, and also its Big Pharma peers.

LLY-PFE-ROE

Options: The put and call options trades listed in this article expire in April for LLY, and March for PFE.

Covered Calls: Although Lilly and Pfizer’s don’t have high option yields when compared to other stocks we’ve covered recently, such as CAT or CMI, both of the options trading strategies listed here give you a chance to significantly improve upon these stocks’ dividend yields over this 4-5 month period.

(You can find more details on these and more than 30 high yield covered calls in our Covered Calls Table.)

LLY-PFE-CALLS

Cash Secured Puts:  LLY’s put options offer more yield than PFE’s.  Since PFE and LLY have made 17% to 20%-plus gains year-to-date,  selling cash secured puts below the current stock prices might be the most conservative approach you could take in potentially accumulating shares. (Note: Put sellers don’t receive dividends.)

(There are more details on these and over 30 high yield options trades in our Cash Secured Puts Table.)

LLY-PFE-PUTS

EPS/Valuations: Due to issues with patent expirations, the future sales forecasts are sub-par for LLY and nearly flat for PFE. As we mentioned earlier though, there’s a trade-off between growth and defense in these stocks.

LLY-PFE-EPS

Disclosure: Author has no positions in LLY or PFE at the time of publication.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Author: Robert Hauver © 2011 Demar Marketing All Rights Reserved

Dividend Aristocrats: 3 Highest Dividend Paying Stocks Have Even Higher Options Yields

By Robert Hauver

The Dividend Aristocrats are often mentioned when researching dividend paying stocks, as being some of the most dependable dividend stocks, in terms of steady dividend growth.  This week, we looked at the 3 highest dividend paying stocks in this group: Century Link, (CTL), Pitney Bowes, (PBI), and ++Eli Lilly, (LLY), all of whom are listed in our High Dividend Stocks by Sector Tables.

++Correction: LLY was dropped from the Dividend Aristocrats for 2011. Cincinnati Financial, (CINF), currently is the 3rd highest dividend stock in the group.

CTL-PBI-LLY-2011-04-01

All of these firms should be able to maintain their dividend payouts, as they’ve done for the past 25 years – CTL has a dividend payout ratio of 93%, LLY has one of just 45%, and PBI has more than enough cash flow to continue it. *(See below).

CTL and Qwest Communications today completed their merger, creating the nation’s third largest telecommunications company in the United States. The combined company’s increased scale and financial strength will enable it to deliver a broader range of communications services to consumers and small businesses throughout the company’s 37-state service area and to business, wholesale and government customers nationwide via its 190,000 route-mile fiber network. (Source: Century Link website)  One of CTL’s main issues is the migration of land-line customers to cellphones, which they hope to combat through their Qwest merger.  They also are strong in rural areas, where competition isn’t as fierce.

PBI has negative equity listed on their balance sheet, thus no ROE and debt/equity figures. * PBI has a big load of debt, but, being a cash machine, they’re able to finance it easily. Their financing interest costs actually fell in 2010, vs. 2009, from $97.6 million to $88.3 million. Even after paying these interest charges, they earned $534.6 million pre-tax in 2010. However, their 2010 revenue did shrink to $5.43 billion, vs. $5.57 billion in 2009, and their 2010 EPS also fell, to $1.14, from $2.04 in 2009.

LLY grew their revenues 5.5% in 2010 to $23 billion, from $21.8 billion in 2009, and also grew their EPS by 8%, $4.74 vs. $4.42 in 2009.  The company expects total revenue growth will be flat to slightly increasing. The company anticipates that the impact of U.S. health care reform will lower 2011 revenue by $400 million to $500 million. 2011 revenue guidance assumes the company maintains its patent exclusivity for U.S. Strattera sales, and also assumes rapid and severe erosion of global Zyprexa sales after patent expirations in major markets, including the U.S. starting in October 2011, and the continued severe erosion of U.S. Gemzar sales. The company expects these reductions in revenue to be offset by sales growth of Alimta, Cialis, Cymbalta, Effient, Humalog and animal health products. Excluding the anticipated decline in Zyprexa and Gemzar sales outside of Japan, and the incremental impact of U.S. health care reform, the company would expect 2011 revenue to grow in the mid- to high-single digits. (Source: Lilly website)

PBI and LLY delivered positive earnings surprises in Q4 2010:

CTL-PBI-LLY-EARNGS-2011-04-01

Their P/E’s are well below their industry averages, but as you can see, these firms aren’t big earnings growth stories, with PBI and LLY in the midst of organizational streamlining that’ll take awhile to complete. LLY also has the issue of a growing its drug pipeline, in order to fight off patent expirations.

Here’s how the dividends and options compare for these 3 stocks:

Covered Calls:

CTL-LLY-CALLS-2011-04-01

As you can see, the call options for PBI and LLY greatly exceed their dividend amounts for this time period, by over 2 times. There’s also some assigned gains potential for PBI and CTL, which you can see in our Covered Calls Table.

Selling cash secured puts also gives you a much higher payout than these dividends:

CTL-LLY-PUTS-2011-04-01

There are more details on these and other put options trades in our Cash Secured Puts Table.

Concerning share performance, CTL  has gained the most in the past year, while PBI has gained more year-to-date:

CTL-LLY-SHAREPERF-2011-04-01

Disclosure: Author is long CTL shares

Disclaimer: This article is written for informational purposes only.

Lilly & Merck – Selling Puts vs. Dividends

By Robert Hauver

In this article we’ll compare projected dividends to selling long-term Put options for 2 well-known dividend paying stocks in the Healthcare section of our High Dividend Stocks by Sector tables:  Merck, (MRK), and Eli Lilly, (LLY).

LLY is trading today at around $35.56, and pays $1.96/share in dividends, giving it a 5.51% dividend yield.  MRK is currently at $37.66, and pays $1.52/share in dividends annually, which equals a 4.04% dividend yield.

This table compares January 2011 put yields to dividend yields for MRK and LLY:

Current Price Dividend Yield Put Yield Put Strike Price Dividend/Share Put Premium Put Breakeven 52-Week Lows
Eli Lilly (LLY) $35.56 5.51% 12.57% $35.00 $1.96 $4.40 $30.60 $27.21
Merck (MRK) $37.66 4.04% 12.71% $35.00 $1.52 $4.45 $30.55 $31.25

As the table illustrates, selling the Jan. 2011 $35 MRK put option would give you nearly 3 times the yield of MRK’s current dividend payout.

Other advantages of this strategy:

  1. You receive the put option premium within 3 days after the trade, as opposed to having to wait for the next 4 quarters for the dividend payments.
  2. Your breakeven cost is lower. In the MRK example, your $30.55 breakeven is below the 52-week low of $31.25.

Disadvantages:

  1. Taxes – Put sales are taxed as a short term gain, whereas qualified dividends are taxed at 15%, so this strategy is more beneficial the lower your personal tax rate is.
  2. Term – This is a 13-month strategy.  A lot could happen during that time, so you want to be sure that you’re bullish enough on a stock that you’d be comfortable owning it at your breakeven point if it gets put to you.  As usual, it comes down to effective valuation research that will give you a valid entry point.  Investors usually calculate what the dividend rate would be at the breakeven price, as one of many research points.

Our Covered Put table has shorter term put options listed that also compare dividends to put premiums.

Disclosure: No positions

Disclaimer: This article is written for informational purposes only.

The Top 4 Healthcare Dividend Stocks – Covered Call Trades – Nov. 6th, 2009

By Robert Hauver

Starting with picks from the Healthcare section of our High Dividend Stocks by Sector tables, we ran a screen for Healthcare stocks with the highest yields from a combination of the highest dividend yield and covered call options.

We came up with the following 4 firms:

Company

11/05/09 Price

Dividend/Share (pre-expiration)

Dividend %

Covered Call Expiration/ Strike Price

Covered Call Options/Premium

Covered Call %

Total Nominal Static Yields

Annualized Yields

Astra Zeneca (AZN)

$44.82

$1.50

3.35%

April $45

$2.60

5.80%

9.15%

21.95%

Merck (MRK)

$32.83

$0.76

2.31%

April $34

$1.80

5.48%

7.80%

18.71%

Lilly (LLY)

$34.39

$0.49

1.42%

April $35

$1.95

5.67%

7.10%

17.03%

Glaxo Smith Kline (GSK)

$40.33

$0.98

2.43%

May $42.50

$1.90

4.71%

7.14%

14.28%

Within this group, Astra Zeneca and Merck also appear to have the best combination of debt load, management effectiveness, and valuation ratios.  As always with high profile stocks, there may be many other contributing factors that will weigh upon these companies’ futures.  This is particularly true in the Healthcare industry, with the advent of a major healthcare reform bill in the U.S., plus periodic FDA drug reviews, and litigation that often move big pharma stocks’ prices.  In addition, this industry has been undergoing consolidation recently, as firms move to shore up their drug pipelines.

If you’re skeptical about the future of Healthcare stocks, but you still want to “nip at the edges” for profits, you might consider selling cash-secured puts against the ones your research pinpoints as the best stocks.

There are some current put yields on display for some of these and other sectors’ stocks in our Covered Puts Table .

Disclosure: No positions

Disclaimer: This article is written for informational purposes only.