Last week, we published what turned out to be a very popular post where we published an example of the “Ultimate Sustainable Dividend Portfolio” that featured high quality companies that did pay and increase dividends. It did end up generating a lot of interest and many of the comments and suggestions that we did end up getting was about including higher dividend payers. There is no doubt that finding high dividend yields can turn out to be a great proposition, especially if you have cash or access to reasonably cheap money. The big question of course when looking for such stocks is how to determine if these dividends will be paid out over the medium to long term. In other words, we are looking for sustainable high dividend yield stocks. I know, I know, sustainable is coming up very often these days but isn’t that the name of the game for passive income investing?
So today my quest starts here, I am expanding the universe of stocks to include the 3000 largest capitalized stocks in the US. What would make these dividend companies sustainable?
-A Low payout ratio (anything above 75% is too high in my opinion)
-Little debt (debt to market cap under 75%)
-Sales and earnings per share growth over 5 years
-Finally, we excluded companies that have not increased their dividend over 5 years. Dividend growth is not the priority here but we are looking for steady and reliable dividend payers.
That gave me a list of 20 seemingly very solid high dividend payers that already have a dividend yield over 4%. First off, no, I do not have any stocks that pay a 10% dividend yield on that list unfortunately. There are several high quality stocks that can be purchased though. Here are the ones I like the best
Safest 4%+ Dividend Yield Stock: Strayer Education Inc (STRA): 4.69%
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Safest 6%+ Dividend Yield Stock: AT&T (T): 6.01%
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Building a high quality portfolio with high yielding stocks would certainly be a much bigger challenge but I certainly think these 2 would be great ones to start out with.Any thoughts on those?