7 High-Dividend Stocks With Durable Distributions
The market's violent rebound since the March 23 lows has been a welcome relief for long-term shareholders and a boon for dip buyers. But one group of investors has actually been put out by the rally: income investors looking to put dry powder to work in high-dividend stocks.
As the S&P 500 has crashed and recovered, its yield has whipsawed. The blue-chip index yielded roughly 1.8% to start 2020, jumped all the way to 2.3% as of March, and has dipped back below 2%. That might not sound like much, but remember: That's the average among 500 large-cap companies. The swings across the broader stock market have been much more pronounced, and several high-yield dividend opportunities have disappeared as a result.
Several ... but not all.
Hundreds of high-dividend stocks still deliver payouts of more than 5%. The problem is that some of those dividends belong to distressed companies that might not be able to continue funding their ample cash distributions.
One way to protect yourself is to prioritize signs of dividend health, using from exchange-traded fund provider Reality Shares. DIVCON uses a five-tier rating to provide a snapshot of companies' dividend health. DIVCON 5 indicates the highest probability for a dividend increase, while DIVCON 1 signals the highest probability for a cut. Within each of these ratings is a composite score determined by free cash flow-to-dividend ratios, profit growth, stock buybacks (which companies can pull back on to fund a dividend in a pinch)
