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10 Top-Rated US Income Stocks

Which stocks do the professionals look to for income? Morningstar analysts examine the portfolios of the fund managers they consider to the best stock-pickers

Morningstar Equity Analysts 19 September, 2017 | 2:48PM

Which stocks to the professionals look to for income? Morningstar analysts have taken a magnifying glass to the portfolios of those fund managers they consider to the best stock-pickers.

Ultimate Stock-Pickers is a concept we've developed at Morningstar with one simple goal: to cross-check our stock research against the opinions of professional money managers. While the stock analysts at Morningstar spend the majority of their time hunting for quality companies trading at attractive valuations, we would be remiss if we failed to acknowledge the fact that a whole host of individuals outside of Morningstar are engaged in the very same effort.

When we screen for top dividend-paying stocks among the holdings of our Ultimate Stock-Pickers, we try to hone in on the highest-quality names that are currently held with conviction by our top US equity fund managers. We accomplish this by screening for holdings that are widely-held, by five or more of our top managers, are yielding more than the S&P 500, represent firms with wide or narrow economic moats – a built in advantage over their competitors, and have uncertainty ratings of either low or medium.

In our view, finding stocks that are yielding more than the benchmark index but that also operate in more stable industries - where there is less uncertainty surrounding their future cash flows and that have sustainable competitive advantages - should offer some downside protection for investors.

Healthcare, technology, and consumer defensive were the most frequently appearing sectors on our list of top 10 dividend-yielding stocks, with each space represented by two names. Wide-moat rated General Electric was the most undervalued name, followed by Wells Fargo. GE is currently trading at a 25% discount to our analyst’s fair value estimate.

General Electric (GE)

Yield: 3.92%

General Electric is a diversified manufacturer that operates seven separate businesses in its industrial segment: power, oil and gas, renewable energy, lighting, aviation, healthcare, and transportation. The company also provides specialty industrial financing through its GE Capital division.

Exxon Mobil (XOM)

Yield: 3.8%

ExxonMobil is an integrated oil and gas company that explores for, produces, and refines oil around the world. In 2016, it produced 2.1 million barrels of liquids and 10.1 billion cubic feet of natural gas per day.

Pfizer (PFE)

Yield: 3.54%

Pfizer is one of the world's largest pharmaceutical firms, with annual sales over $50 billion. Prescription drugs and vaccines account for the majority of sales. 

Philip Morris International (PM)

Yield: 3.58%

Philip Morris International is the world's third-largest tobacco company, behind China National Tobacco and BAT, following its consolidation of Reynolds American, and holds 28% of the global market, excluding China and the US. The firm owns seven of the leading 15 international brands.

Cisco Systems (CSCO)

Yield: 3.38%

Cisco Systems is the world's leading supplier of data networking equipment and software. Its products include routers, switches, access equipment, and security and network management software that allow data communication among dispersed computer networks. 

Omnicom Group (OMC)

Yield: 3.03%

Omnicom is the world’s second-largest ad holding company, based on annual revenue. The American firm's services, which include traditional and digital advertising and public relations, are provided worldwide, with over 85% of its revenue coming from more developed regions such as North America and Europe.

Wells Fargo & Co (WFC)

Yield: 2.9%

Wells Fargo is one of the four largest banks in the United States, rapidly approaching $2 trillion in balance sheet assets. The company is split into three segments for reporting purposes: community banking; wholesale banking; and wealth, brokerage, and retirement.

Intel Corp (INTC)

Yield: 2.88%

Intel is the world's largest chipmaker. It designs and manufactures microprocessors and platform solutions for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors.

Procter & Gamble (PG)

Yield: 2.92%

Since its founding in 1837, Procter & Gamble has become the world's largest consumer product manufacturer. It operates with a line-up of leading brands, including 21 that generate more than $1 billion in annual global sales such as Tide laundry detergent, Charmin toilet paper, Pantene shampoo, and Pampers diapers.

AbbVie (ABBV)

Yield: 2.92%

AbbVie is a pharmaceutical company with a strong exposure to immunology and oncology. The company's top drug, Humira, represents over half of the firm's current profits. The company was spun off from Abbott in early 2013.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
AbbVie Inc97.45 USD1.19
Cisco Systems Inc38.19 USD0.77
Exxon Mobil Corp83.03 USD0.16
General Electric Co17.82 USD1.02
Intel Corp44.56 USD3.01
Omnicom Group Inc74.41 USD1.79
Pfizer Inc37.20 USD2.03
Philip Morris International Inc109.68 USD1.86
Procter & Gamble Co91.89 USD0.98
Wells Fargo & Co59.87 USD1.10
About Author

Morningstar Equity Analysts  Morningstar stock and fund analysts cover 2,000 mutual funds, 2,100 equities, and 300 exchange-traded funds.