Wednesday, June 22, 2011

11 Higher Yielding, Lower Risk Stocks To Perk Up Your Dividend Income

As a society we have grown accustom to wanting it all, including our investments. Specifically, many income investors want both high yield and low risk. A dividend stock with a high yield doesn’t mean much if the dividend is cut or eliminated, and the stock price declines significantly.  So can an investor find both higher yields and lower risks?

If your goal is to accumulate wealth for a comfortable retirement, then there is no risk-free path. Throughout time every angle has been tried and failed. Inherently, individual stocks will carry higher risk due to the lack of diversification when evaluated on a stand-alone basis.

Sometimes it is desirable to accept higher risk for a higher yield. Other times we may be accepting higher risk and are not being adequately compensated for the additional risk.

You can mitigate some of this risk by selecting solid dividend paying companies with a track record of increasing their dividends each year. Consider this list of higher-yielding (3.75% or greater), lower-risk (1-3 with one being the lowest risk) dividend stocks:

Diebold, Inc. (DBD)
Yield: 3.8% | Risk #: 1.25
Diebold, Inc. develops, makes, and services self-service transaction systems, electronic & physical security systems, and software used to equip bank facilities, voting terminals.

Middlesex Water Co. (MSEX)
Yield: 3.9% | Risk #: 1.25
Middlesex Water Co. primarily provides regulated water utility service in parts of New Jersey and Delaware, as well as operates wastewater systems and conducts municipal contract operations.

Nextera Energy, Inc. (NEE)
Yield: 3.9% | Risk #: 1.25
Nextera Energy, Inc. (formerly FPL Group) is the holding company for Florida Power & Light and NextEra Energy Resources.

Northwest Natural Gas Co. (NWN)
Yield: 3.9% | Risk #: 1.25
Northwest Natural Gas Co. provides service to some 590,000 residential, 61,000 commercial and 900 industrial sales customers in Oregon and southwestern Washington.

WGL Holdings Inc. (WGL)
Yield: 4.1% | Risk #: 1.25
WGL Holdings Inc. provides natural gas service in the Washington, DC, metropolitan area and surrounding regions, including Maryland and Virginia.

Kimberly-Clark Co. (KMB)
Yield: 4.2% | Risk #: 1.25
Kimberly Clark Corp. is a global consumer products company that produces tissue, personal care and health care. Its brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and Kimberly-Clark.

Consolidated Edison, Inc. (ED)
Yield: 4.5% | Risk #: 1.50
Consolidated Edison, Inc. is an electric and gas utility holding company that serves parts of New York, New Jersey and Pennsylvania.

Leggett & Platt, Inc. (LEG)
Yield: 4.6% | Risk #: 1.50
Leggett & Platt Inc makes a broad line of bedding and furniture components and other home, office and commercial furnishings, as well as diversified products for non-furnishings markets.

Black Hills Corporation (BKH)
Yield: 4.8% | Risk #: 1.25
Black Hills Corp. is a diversified South Dakota-based holding company that encompasses electric utility and integrated energy businesses.

Vectren Corporation (VVC)
Yield: 5.1% | Risk #: 1.50
Vectren Corp. delivers gas and/or electricity to more than one million utility customers in Indiana and Ohio, and offers other energy related products and services.

Cincinnati Financial Corp. (CINF)
Yield: 5.5% | Risk #: 1.25
Cincinnati Financial Corp. markets primarily property and casualty coverage. It also conducts life insurance and asset management operations.

For a detailed explanation of how I calculate risk, see Finding Low Risk Dividend Stocks.

A good investor will determine the desired outcome and invest in a way to achieve their goal with minimal risk. When it comes to investing your money, there is no escaping risk. Even investing in risk-free Treasuries, carries risk - you risk running out of money before you run out of life.

Full Disclosure: Long CINF, LEG, ED, KMB. See a list of all my income holdings here.

Related Articles
- Increasing Dividend Yield Part III: Preferred Stock
- Increasing Dividend Yield Part II: REITs
- 11 Dividend Stocks Providing Positive Feedback
- 38 Dividend Securities For A Well-Rounded Asset Allocation
- Five High-Yield Positive Return Investments
(Photo: sean carpenter)
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