5 US Stocks that Pay a Dividend

Income investors should consider the American stock market for diversified returns. We highlight five attractive companies

Emma Wall 11 September, 2013 | 10:14AM
Facebook Twitter LinkedIn

Diversification is key in any successful investment portfolio – and when the US stock market has such juicy income offerings, you’d be foolish to ignore them.

Historically, US companies with excess cash preferred share buybacks to issuing dividends, meaning that they had little to offer a pure income investor. However this is no longer case and the S&P 500 now features plenty of stocks paying in excess of 3%.

Rebecca Young, the manager of the Neptune US Income fund said the US stock market offered income seekers more diversity than the FTSE 100.

"There are great dividend paying stocks across all sectors – I am not forced into the defensive utilities stocks which can be overvalued," she said. 

Using Morningstar analysis we examined some the most highly regarded US equity income funds, and picked out five stocks favoured by those fund managers.

Johnson & Johnson (JNJ)
Yield: 2.87%
Johnson & Johnson is the world's largest and most diverse health-care company. The stock has successfully grown its dividend at an average rate of 11% every year for the past decade – and over the past year the share price has increased nearly 40%.

Three divisions make up the company: pharmaceutical, medical devices and diagnostics, and consumer. While the pharmaceutical division currently represents close to a third of total sales, Morningstar analysts expect patent losses and the Synthes acquisition to reduce this proportion to approximately 28% during the next 10 years, with the device segment picking up the majority of the share.

Microsoft (MSFT)
Yield: 2.84%
Microsoft develops and sells software, hardware, and services. The company is organized into five business segments: Windows and Windows Live, Microsoft Business Division,  server and tools,  online services, and entertainment and devices. Microsoft Business Division is the largest component of revenue at 33% in fiscal 2012, with server and tools and Windows and Windows Live each contributing 25%, entertainment and devices 13%, and online services 3.9%.

Home Depot (HD)
Yield: 1.96%
Home Depot is the world's largest home-improvement specialty retailer, operating 2,260 warehouse-format stores throughout the United States, Canada, and Mexico. The company's stores offer products and services for home construction, renovation, remodelling, and maintenance. The firm is based in Atlanta and employs more than 300,000 people.

Exxon Mobil (XOM)
Yield: 2.73%
Exxon is an integrated oil and gas company that explores for, produces, and refines oil around the world. In 2012, it produced 2.2 million barrels of oil and 12.3 billion cubic feet of natural gas a day. At year-end 2012, reserves stood at 18.2 billion barrels of oil equivalent (plus 7.0 billion for equity companies), 51% of which are oil. The company is the world's largest refiner and one of the world's largest manufacturers of commodity and specialty chemicals.

General Electric Co (GE)
Yield: 3.1%
General Electric is a diversified manufacturer and is organized into four segments: technology infrastructure, energy infrastructure, home and business services, and capital services.

 

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.

Facebook Twitter LinkedIn

About Author

Emma Wall  is former Senior International Editor for Morningstar