13 ‘Dividend Aristocrat’ stocks with yields over 4% - MarketWatch

13 ‘Dividend Aristocrat’ stocks with yields over 4% - MarketWatch:



 "Digging further
We cannot predict if any of the companies will cut their dividends, and their inclusion among the High-Yield Dividend Aristocrats speaks for itself.

But what we can do is compare the current yields with the companies’ free cash flow yields to consider how easily they’re covering dividends and the likelihood of further increases.

A company’s free cash flow is its remaining cash flow after capital expenditures. For real estate investment trusts, we are using funds from operations instead, because this is the generally accepted measurement of a REIT’s cash flow available for dividends.

We can then compare the companies’ free cash flow yields for the past 12 months to their current yields, to see if there is any “headroom.”

Here are free cash flow yields calculated by FactSet (except for the REITs, as described above) for the 15 highest-yielding High-Yield Dividend Aristocrats:

Company Ticker Free cash flow yield - past 12 months Dividend yield ‘Headroom’



HCP Inc. HCP, -0.11% 9.46% 6.76% 2.69%



AT&T Inc. T, -0.21% 7.13% 5.65% 1.48%



Mercury General Corp. MCY, -0.20% 6.26% 4.92% 1.34%



Realty Income Corp. O, -0.54% 5.57% 4.72% 0.85%



National Retail Properties Inc. NNN, +0.05% 6.03% 4.70% 1.32%



Chevron Corp. CVX, +1.49% -6.25% 4.70% -10.95%



Questar Corp. STR, +0.59% 2.94% 4.57% -1.63%



Caterpillar Inc. CAT, +0.54% 8.58% 4.44% 4.14%



Consolidated Edison Inc. ED, -0.75% 2.56% 4.16% -1.60%



MDU Resources Group Inc. MDU, -2.12% -6.32% 4.15% -10.47%



Old Republic International Corp. ORI, -0.16% 13.98% 4.05% 9.93%



People’s United Financial Inc. PBCT, +0.36% 4.81% 4.05% 0.77%



Black Hills Corp. BKH, +0.65% -0.42% 4.02% -4.44%



Vectren Corp. VVC, +0.81% 1.63% 3.92% -2.29%



Emerson Electric Corp. EMR, +0.10% 7.66% 3.90% 3.76%



Sources: S&P Dow Jones Indices, FactSet





It’s important to keep in mind that this “backward-looking” comparison of cash flow yields and current dividend yields does not predict when cash flow will recover or whether dividends will go up or down. But it can give you additional insight into what effect temporary disruptions in markets really mean to a company.

You must also consider the direction of interest rates. REIT stock prices tend to slide, at least initially, when interest rates begin to rise. Are you really in it for the income? Can you afford to stay committed for many years, as the dividend income rolls in and hopefully rises? If so, REITs can be good investments for you, despite the inevitable seesawing price fluctuations."



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