Published: June 19, 2009
The
correct answer is
(A.) Verizon (VZ)It used to
be that dividend payers themselves
were the thing investors could be
sure of. Tucked in the shadow of
more aggressive and volatile Wall
Street darlings, these venerable
firms conducted their business,
generated solid cash flows, posted
their earnings and paid their
dividends. These companies all made
money the old-fashioned way. They
earned it. High-flying? No.
Dependable? Yes.
But last year was a tough year for
dividend payers. Sixty-one of the
companies in the S&P 500 Index cut
their dividends in 2008, equating to
$40.6 billion in lost dividend
income. But it's time to apply last
year's hard lessons and take a
clear-eyed look at risk, performance
strength, dividend coverage and,
lastly, potential return.
Starting with the safety of the Dow
30, Carla separated out companies
expected to show more than a 5%
earnings decline. She also kicked
out companies paying more in
dividends than they earned, and then
looked at each company's average
P/E, dividend growth rate and
average annual total returns for the
past five years. Verizon stood out
as the winner, earning $1.6 billion
against its $1.3 billion dividend
obligation for a payout ratio of
79.4%. As a telecommunications
provider, Verizon is an essential
service with high subscriber
loyalty, and its 6.3% yield has made
a positive impact on its total
returns. And that difference is
something we income investors can
take to the bank.
The hunt for the safest dividend is
just one of Carla Pasternak's
objectives. In her weekly
StreetAuthority newsletter,
Dividend Opportunities, Carla
looks for income-investing
opportunities around every corner
and in every crevice. Using
methodical analysis and insightful
expertise, Carla finds the best
income-producing securities and
provides an in-depth analysis for
you every month. To learn more about
Carla's picks, and to learn more
about Dividend Opportunities,
please visit this link.
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