On Monday, I published an important compilation of strong dividend stocks per sectors. In total, I listed 390 dividend stocks in 11 charts for both American and Canadian markets. When I first started to work on this article, I thought of listing all dividend stocks and simply classify them per sector. Then, I realized there were WAY too many stocks and it was pointless to bombard you with 1,000 stocks (even 390 is a big number!). In order to make a good list, I used the following metrics:

#1 Dividend yield between 2.50% and 7%I wanted to make sure we have interesting dividend stocks

#2 Payout ratio under 80%I wanted to make sure the companies can continue to pay their dividends

#3 Positive Dividend Growth for the past 3 AND 5 years  – Here again, a good sign the company is in sound financial shape

The main goal was to highlight solid dividend stocks and give you a few ideas at the beginning of this year. I received a few comments saying that my dividend lists don’t include high yield dividend stocks. Another reader even mentioned that he would like to see more lists of 10%+ dividend yield stocks instead of the list I provided showing stocks paying as low as 2.50%. After all, I even picked Disney (DIS) in my portfolio in 2013 when it paid about 1% dividend yield. You can guess I’m not too favorable regarding high yield dividend stocks. But since I’m a good guy, I decided to write a paper about the high yield dividend stocks and I’m giving away my favorite picks for high yield dividend payers at the bottom of this post.

 

HIGH YIELD DIVIDEND STOCKS DON’T SHOW THEIR REAL FACE RIGHT NOW

Some investors may disagree with me, but I don’t think it’s fair to consider how high yields are doing during a bull market. In fact, during a bull market, everybody is happy and stocks keep climbing. But what makes a for a bull or bear market?

It’s a combination of many things. Technically, we need companies showing strong sales and profits while economic indicators such as unemployment rate, consumer confidence, manufacturing index, etc will confirm that sales will continue to grow and profits will follow.

Following this premise, when you are in a bull market, there is a general aura of good news for all companies. This is why don’t see the real face of many stocks during this period since we are looking at them through rose-colored glasses.

This is what is happening with high yield dividend stocks. When you look at a stock paying over 5% in dividend yield in this current market when you can’t even make 3% on a 5yr GIC, there must be a red flag popping up to tell you there is a risk premium. The problem is you won’t feel the risk premium during a bull market as all stocks go up or are artificially maintained by this aura of good news.

Therefore, for several years, sales can be flat, dividend growth non-existent and dividend payout ratio very high (read over 100%) and nothing will pop on your screen. In fact, you will be very happy to receive a 10% distribution for a few years and you may even start thinking this is the way to go. The first red flag should be how the stock reacts to the current market. Last year is a great example to see if you are holding a high dividend yield stock that will plunge once the market slows down. Why? Because, it was probably the best year of the decade in terms of returns. The US market hit +30% in 2013. If your stock paying 8-9% dividend yield and barely finish the year in black, there is a problem. When the market is up by that much, you should expect all your stocks to go up. If some of them don’t, it’s because there is very bad news associated with them.

In 2013, would you prefer a stock that is up by 30% and pays a 3% dividend yield or a stock that is up 3% and pay a 10% yield? I would take the first stock in a heartbeat. But not because of the total return. That’s important but there is more to it. How do you think the second stock will react during a 15%-20% correction? There won’t be the good news aura anymore and this stock may flunk big time. On the other hand, the stock that was up during the bull market probably shows strong fundamentals that will help it weather a recession. The high dividend yield stock will probably show its true face including financial complications, dividend cuts and a big stock drop. In other words, the risk of buying high dividend yield is way higher than you think.

 

DOES IT MEAN ALL HIGH DIVIDEND YIELD STOCKS SHOULD BE BANNED FROM MY PORTFOLIO?

No, there are good stocks paying a high dividend yield. But in most cases, these high dividend yields are temporary. The best example I could think of was Seagate Technology (STX) a couple years ago. It was paying in the range of 6% dividend yield due to an important stock value drop. However, the company was able to get back on track and readjust. Today, the stock is now paying a 2.90% dividend yield and the value is up by 203% over the past two years.

But the classic high dividend yield looks more like RioCan (REI.UN) a Canadian REIT showing a negative return of -4.25% over two years (compared to +12.05% for the Canadian Index) and a dividend yield of 5.56% while the dividend payout hasn’t moved over the past 2 years. All that to say when there is a high yield; there is also something else hidden. However, if you look at companies carefully, it is possible to find strong companies that went through a rough time and show a great buying opportunity.

 

2014 BEST HIGH YIELD DIVIDEND STOCKS

Even though I’m not a big fan of high dividend payers, I’ve made an effort to dig further and find interesting companies that are worth a further look into their fundamentals. I’m sharing with you only a part of a better list (with additional metrics) that we maintain weekly at our premium dividend site; Dividend Stocks Rock. We have built a list where we look for relatively strong metrics combined with a higher dividend payment. The key was to find a balance between the risk of a high dividend yield stock and the strength of a stronger company with weaker payouts. Let me know what you think of our list!

 

Symbol
Name
Currency
Market Cap
Dividend Yield (TTM)
Payout Ratio (TTM)
Revenue (5 Year Growth)
AAR.UN.TOPure IndustrialCAD604.56886.9600113.592399.5485
ACNDFAscendas India TrustUSD478.02366.790090.15266.4698
AD.TOAlaris RoyaltyCAD815.18804.790085.869923.0380
ADCAgree RealtyUSD378.58025.7400106.42110.7555
AHGPAlliance HoldingsUSD3334.96775.8000118.515014.5113
AM.TOAutomodularCAD45.783810.170077.58183.0845
AMZKFAutomodularUSD42.291810.550077.38082.7863
ANHAnworth Mortgage AssetUSD617.34397.3100103.7731217.5741
APSAAlto PalermoUSD714.49948.210082.91767.1959
APUAmeriGas PartnersUSD3921.97457.9500102.42282.3801
ARCCAres CapitalUSD5020.24298.520072.733631.6889
ARLPAlliance Resource PartnerUSD2789.23556.230038.764014.5078
AW.UN.TOA&W Revenue Royalties IncCAD264.58586.440016.909422.4672
AWRRFA&W Revenue Royalties IncUSD241.59686.720013.722622.1130
AX.UN.TOArtis Real EstateCAD1913.61807.150046.862630.8720
BACHFBank Of ChinaUSD121429.58966.550039.517317.1198
BACHYBank Of ChinaUSD123830.26685.330039.517317.1198
BCEBCEUSD33122.85515.150089.42242.0922
BCE.TOBCECAD36249.70234.990090.67872.3883
BDT.TOBird ConstructionCAD570.57685.6600100.900713.9618
BGCPBGC PartnersUSD1324.37527.7700103.58709.6080
BKCCBlackRock Kelso CapitalUSD691.188411.1700113.061421.8732
BLXBanco LatinoamericanoUSD1002.76015.370053.45763.1426
BPLBuckeye PartnersUSD8060.29226.1400114.521653.0209
BSBRBanco Santander BrasilUSD20508.33535.240037.766128.5968
BTB.UN.TOBTB Real EstateCAD128.20678.820046.910234.4433
CAL.TOCaledonia Mining CorpCAD39.08848.000072.367649.5994
CALVFCaledonia Mining CorpUSD35.96147.990072.884649.1667
CAR.UN.TOCanadian Apartment ProperCAD2360.00915.320025.14387.0053
CDPYFCanadian Apartment ProperUSD2155.26185.520024.68566.6958
CET.TOCathedral Energy ServicesCAD173.69826.850097.38576.9658
CHE.UN.TOChemtrade LogisticsCAD850.13335.880099.139510.9579
CHR.A.TOChorus AviationCAD477.913811.540095.114814.1718
CHR.B.TOChorus AviationCAD476.688411.570095.114814.1718
CICHYChina Construction BankUSD180882.94265.000032.521519.6691
CMLEFCominar Real EstateUSD2165.26847.960033.406025.0629
CMOCapstead MortgageUSD1160.744510.2300112.554035.5901
COS.TOCanadian Oil SandsCAD9667.15357.020078.11061.4545
COSWFCanadian Oil SandsUSD8824.00337.350077.33441.1611
CPAMFCapitamall TrustUSD5094.28795.610063.694212.6112
CSE.TOCapstone InfrastructureCAD331.00618.400054.063223.8325
CTY.TOCalian TechnologiesCAD160.86955.150064.89473.7732
CUF.UN.TOCominar Real EstateCAD2323.15467.830033.950925.4256
CUP.U.TOCaribbean UtilitiesUSD314.90636.0800108.37527.0711
CUPUFCaribbean UtilitiesUSD317.22616.0300108.37527.0711
CWA.TOCoast WholesaleCAD37.22698.090057.34760.3004
CWP.VComWest Enterprise Corp.CAD19.162311.0500111.439193.3970
CWP.A.VComWest Enterprise Corp.CAD20.115110.5300111.439193.3970
CWT.UN.TOCalloway REITCAD2935.54996.09003.65737.1873
CWYUFCalloway REITUSD2685.87806.25002.94866.8774
CXWCorrections CorpUSD3956.22295.620088.26533.8594
CZNCCitizens and NorthernUSD247.93694.990053.07765.2281
D.UN.TODundee Real EstateCAD3096.84957.550036.540731.0649
DPMDCP Midstream PartnersUSD4352.43655.77005.422314.4095
DRETFDundee Real EstateUSD2831.34688.000036.261130.6859
DXDynex CapitalUSD440.874113.3300104.619849.5814
ECEcopetrolUSD72838.23057.930058.995028.0069
EGASGas NaturalUSD96.99185.820089.40909.5816
EPBEl Paso Pipeline PartnersUSD7454.05027.6000113.513568.8452
ESVEnscoUSD13054.86925.370034.270915.5412
FLYFly LeasingUSD680.31486.070039.342866.9779
FN.TOFirst National FinancialCAD1376.25186.030052.7946125.5154
FOJCFFortumUSD19544.07405.950069.79432.5958
FRCPRDFirst Republic Bank (SanUSD101051.44907.160014.807632.6604
FREVSFirst REITUSD121.486815.090057.95572.2240
FSCFifth Street financeUSD1294.471711.1800113.374642.1945
FUNCedar FairUSD2871.56145.4300107.04781.5992
FURWinthrop Realty TrustUSD408.86185.7900106.46417.1564
GAINGladstone InvestmentUSD214.45568.150054.58241.8277
GEOGeo GroupUSD2392.92336.6200120.27077.6135
GH.TOGamehostCAD343.94686.000081.81145.8480
GLNGGolar LNGUSD2855.01895.080015.018912.8026
GLPGlobal PartnersUSD1045.38026.3000100.728821.1349
HCPHCPUSD17333.75435.5300104.417315.9385
HMEHome PropertiesUSD3169.29735.0300100.98035.6886
HNZ.A.TOHNZCAD276.66445.210071.926611.6528
HNZ.B.TOHNZCAD276.53375.210071.926611.6528
HR.UN.TOH&R Real EstateCAD5700.05225.850077.21907.4472
HTCOHickory Tech CorpUSD172.21604.730094.33653.1805
HTGCHercules TechnologyUSD975.12727.850057.74375.4647
IAGIAMGoldUSD1427.31407.1400112.662319.7514
IDCBYIndustrial And CommercialUSD223664.42305.080036.990919.6875
IMG.TOIAMGoldCAD1559.12407.2700118.770320.0973
INE.TOInnergex Renewable EnergyCAD978.54965.6700103.075586.3468
INGXFInnergex Renewable EnergyUSD894.37335.8200103.562985.8079
IPOAFIndustrias PenolesUSD9899.56955.330040.090312.9361
KFNKKR Financial HoldingsUSD2650.42516.800063.16358.8051
KMP.TOKillam Properties IncCAD561.60015.630051.59379.1031
LTCLTC PropertiesUSD1224.30945.5400113.32064.6857
MAINMain Street CapitalUSD1378.00295.510070.087748.6418
MCQPFCapstone InfrastructureUSD302.26338.640053.244423.4743
MGRUFMorguard Real EstateUSD964.02936.020024.51705.5988
MKP.TOMCAN MortgageCAD269.21478.500082.941290.3892
MPWMedical Properties TrustUSD2024.49596.7000106.872319.7498
MRT.UN.TOMorguard Real EstateCAD1018.43505.860024.78035.9051
MXCYYMetsoUSD5994.56805.0800114.05011.5434
NBTFNB&T Financial GroupUSD68.20976.030095.08462.7757
NCTNewcastle InvestmentUSD1713.97586.8500101.240715.9515
NGLSTarga Resources PartnersUSD5480.40805.8000103.430228.7746
NHINational Health InvestorsUSD1626.85505.040070.53559.2982
NINOYNikonUSD7317.25526.280043.84632.1254
NLYAnnaly CapitalUSD9654.044711.780052.864433.3532
NPI.TONorthland PowerCAD2078.95306.780084.735414.4754
NPR.UN.TONorthern Property RealCAD908.06715.440024.59789.1574
NRCIBNational ResearchUSD829.87787.230092.127112.0525
NRPNatural Resources PartnerUSD1777.86288.6500105.453212.0160
NSNuStar EnergyUSD3863.92948.8300118.913532.1986
NYCBNew York Community BancorUSD7485.94715.890091.969813.1312
OLPOne Liberty PropertiesUSD324.64627.1300109.81333.2433
OLY.TOOlympia Financial GroupCAD102.32366.3200103.96498.1757
PAR.UN.TOPartners Real EstateCAD141.229711.310048.927546.9759
PDLIPDL BioPharmaUSD1229.62586.830033.221410.7371
PHX.TOPHX Energy ServicesCAD414.86806.0800108.541621.1625
PKI.TOParkland FuelCAD1273.63965.800027.837019.4803
PM.VPrism MedicalCAD42.94616.270079.120911.6751
PNNTPennant Park InvestmentUSD746.78719.970074.638726.5445
PSECProspect CapitalUSD3181.532811.8300109.832548.6514
RDS.ARoyal Dutch ShellUSD225049.12725.070035.21096.2475
REI.UN.TORiocan Real EstateCAD7637.45335.560047.75478.6706
RIOCFRiocan Real EstateUSD7028.53425.830046.79998.3563
RMM.UN.TORetrocom Mid-MarketCAD293.47739.530037.00218.6454
RSOResource CapitalUSD752.418613.58008.135720.7054
RYDAFRoyal Dutch ShellUSD226221.09665.040035.21096.2475
SDRLSeadrillUSD18763.69209.500068.229223.6041
SGUStar Gas PartnersUSD312.04966.080048.69892.4521
SIXSix Flags EntertainmentUSD3513.23585.090088.41192.5076
SMU.UN.TOSummit Industrial IncomeCAD109.95748.070026.46065.5752
SNPMFChina Petroleum & ChemicaUSD86841.13216.140025.288121.9828
SRV.UN.TOSIR Royalty IncomeCAD98.58507.5900104.33691.7315
SSWSeaspan CorporationUSD1472.79695.540028.941127.0984
SURVFSuntec Real EstateUSD2718.40166.140047.128514.6549
SUUIFSuperior PlusUSD1420.84795.1700119.52438.6861
TALTAL International GroupUSD1584.44835.980059.198811.4096
TBLEYTRACTEBELUSD9680.16686.260094.97046.9182
TCAPTriangle CapitalUSD775.82277.710070.822647.3066
TCPTC Pipelines LPUSD2900.11256.960072.55817.1428
TGHTextainer Group HoldingsUSD2044.52315.180046.667713.7484
TGPTeekay LNG PartnersUSD3003.87526.3600116.51387.7577
TICCTICC CapitalUSD547.128911.310091.430811.4174
TLPTransMontaigne PartnersUSD682.87686.1400107.38403.4840
TLTZYTele2 ABUSD5114.31247.310022.26721.4345
TMA.TOTrimac TransportationCAD150.64005.200064.8549121.6686
TNHTerra Nitrogen CompanyUSD2849.24645.250049.38164.1589
TPK.TOTen Peaks Coffee CompanyCAD23.02987.250087.743313.9626
TTAPFThai Tap Water SupplyUSD1177.05005.770076.121114.3253
TTWSFThai Tap Water SupplyUSD1077.30006.300076.121114.3253
WJX.TOWajaxCAD614.22596.920099.75034.2204
WPZWilliams PartnersUSD21453.18307.180078.378466.4558
YITYFYITUSD1601.28527.580025.46373.5477
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2 Comments   |  

2 Comments

January 15, 2014, 9:19 am

Thanks for this! I’ve experimented with high dividend stocks in my portfolio in the past. While I do agree that they can play a smaller part in a portfolio, I’ve decided to move away from them for the most part. I’m holding on to my positions that I have for now, but not adding any new capital to very high dividend payers.

January 17, 2014, 11:39 am

[…] My own list of Best High Yield Dividend Stocks […]

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