Citigroup's dividend yield is a lofty 7.69 percent, easily in the top ranks of S&P 500 companies. Problem is, the stock is down nearly 30 percent over the past 12 months. It's just one of many in traditionally high-dividend sectors that haven't been worth the risk lately.
Citigroup’s dividend yield is a lofty 7.69 percent, easily in the top ranks of S&P 500 companies. Problem is, the stock is down nearly 30 percent over the past 12 months. It’s just one of many in traditionally high-dividend sectors that haven’t been worth the risk lately.
Some industry groups sporting average dividend payouts of about 4 percent at the end of last year have suffered double-digit declines this year, including thrifts, regional banks and telecom services. Meanwhile, many industries with positive returns so far this year, such as trucking, oil and gas drilling, and biotechnology, pay out very little.
For safer dividend plays, Michael Kaye, director of index management at Standard & Poor’s, recommends consumer staples and health-care companies with a history of consistent dividends, such as Altria Group (MO), with a 6.3 percent yield, and Pfizer (PFE) with 6.9 percent.
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Stocks on the Standard & Poor’s “Dividend Aristocrats” list have been handily beating the market this year. The group is down 5 percent, compared with the 13 percent loss in the S&P 500 as of Friday. The Aristocrats include about 60 companies that have increased their dividends for at least 25 consecutive years.
Ralph Shive, manager of the 1st Source Monogram Income Equity fund (FMIEX), says he’s bullish on energy stocks like Hugoton Royalty Trust (HGT), a natural-gas holding company that yields 9 percent and is up nearly 25 percent this year. Shive also likes health-care stocks such as Pfizer, even though “we’ve lost some on price” it has steady dividend growth, he says. He also favors Eli Lilly & Co. (LLY) for its 4 percent yield and good cash flow.
Though his fund doesn’t own any, Shive says preferred shares of banks could be worth a gander for aggressive investors. “They’re trading like they’re dead. If you have conviction, the yields are there.”