Stocks producing income each month in the form of high dividend yields offer rocket fuel for a retirement portfolio or beating the market average, providing a major lift-off from low returns. With the S & P 500 treading water for 2010 at about 1% return on capital, not inflation adjusted, seeking high dividend yields instead of capital gains will be the key for positive investment returns. Carefully selecting a few of these high dividend yield stocks mentioned below could produce double digit investment gains while ignoring them could leave a portfolio with loses.
New Market Offerings for Stocks with High Dividends and Low Risk
Stocks with high dividend yields used to come from a few key sectors:
- Real Estate Investment Trusts or REITs.
- Energy companies such as oil and gas trusts.
- Utilities, though these are no longer a sure bet nor the highest dividend payers.
REITS are notoriously volatile and even risky for defaults. The risk level with REITS make them less attractive for later-in-life investments. Energy trusts are still powerful dividend providers, but they have significant volatility because of both political and market dynamics in the energy sector. Fortunately, investors seeking more secure, less volatile, and relatively dependable high dividend stocks can find new options that provide a sound base for a growing portfolio.
The investment landscape has changed dramatically since the days the responsible investment advisor almost had to put retired clients dutifully into utility stocks for secure high dividend yield stocks. Now options abound for obtaining consistent dividend yields over 8% with limited risk and low debt companies. Even energy trusts have had their lock on the highest yields offered usurped by new investment vehicles. These new stock investment choices with high dividends are often hybrid investment funds behaving like a mutual fund with the sophistication of a hedge fund.
Best of Dividend Income and Capital Growth Stocks
Examples of stocks delivering the high yields with low debt and low volatility include (June 17, 2010 figures):
- BlackRock Ecosolutions Investment Trust - 11.96 Dividend Yield
- ING Glbl Eqty Dividend & Premium Opportunity Fund - 13.31 Dividend Yield
- Eaton-Vance Tax Advantage Buy-Right Fund - 12.88 Dividend Yield
- Cornerstone Progressive Return Fund - 18.37 Dividend Yield
- Cohen & Steers Global Income Fund - 11.59 Dividend Yield
These high dividend paying funds are focused on producing ongoing income for investors and not as focused on capital gains. There is no guarantee that these out-sized yields will continue. There is no oil well producing these dividends, rather the investment managers are seeking the high dividends in a variety of investments across all financial instruments. Managers can make mistakes and miss big market moves both for and against the dividends.
Fortunately, investing for dividends instead of for capital gains affords a measure of security because dividend paying stocks must have positive returns and do not suffer from the popularity contest needed for capital gain increases. With these high dividends landing in an investors account every quarter, these stocks will win the most important popularity contest of all, making investment profits.
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