Dividend investing is popular again. Investors have taken to heart Jeremy Siegel’s studies, which show that higher-yielding stocks tend to offer greater returns over time than low- or no-yield stocks.
The highest dividend yields can be very tantalizing. As long as a stock yielding 15% doesn’t lose value, you’ll make 15% in one year! In more cases than not, however, an astronomical yield is a bad sign for a stock. Since dividend yields and stock prices move in opposite directions, a high yield usually means that investors have begun to worry about the business and driven down its stock price.
I ran a screen for the highest-yielding stocks, the only limitation I’ve set this time is that the dividend stocks must have a market cap greater than $500 million and must be a corporation, so no REITs or MLPs.
Here are the top 25 highest-yielding stocks the screen produced:
| Company Name | Market Cap (millions) | Dividend Yield | |
|---|---|---|---|
| 1 | BoiseBoise Inc. (NYSE:BZ) | $860.3 | 13.80% |
| 2 | SeaDrill Seadrill Ltd (NYSE:SDRL) | $17,629.6 | 12.00% |
| 3 | Windstream Corporation (NASDAQ:WIN) | $5,125.4 | 11.50% |
| 4 | Pitney Bowes Inc. (NYSE:PBI) | $2,750.4 | 11.10% |
| 5 | Great Lakes Dredge & Dock Corporation(NASDAQ:GLDD) | $580.3 | 10.40% |
| 6 | RR Donnelley & Sons Co (NASDAQ:RRD) | $1,900.8 | 10.10% |
| 7 | Vector Group Ltd (NYSE:VGR) | $1,442.9 | 10.10% |
| 8 | Wynn Resorts, Limited (NASDAQ:WYNN) | $11,700.5 | 9.87% |
| 9 | Ship Finance International Limited (NYSE:SFL) | $1,410.9 | 9.53% |
| 10 | Frontier Communications Corp (NASDAQ:FTR) | $4,092.9 | 9.52% |
| 11 | Consolidated Communications Holdings Inc (NASDAQ:CNSL) | $664.2 | 9.39% |
| 12 | National Presto Industries Inc. (NYSE:NPK) | $521.8 | 8.65% |
| 13 | PDL BioPharma Inc. (NASDAQ:PDLI) | $977.1 | 8.60% |
| 14 | SouFun Holdings Limited (ADR) (NYSE:SFUN) | $1,992.7 | 8.51% |
| 15 | First Financial Bancorp (NASDAQ:FFBC) | $896.4 | 7.90% |
| 16 | New York Community Bancorp, Inc. (NYSE:NYCB) | $5,909.6 | 7.41% |
| 17 |
| $1,704.1 | 7.40% |
| 18 | Linn Energy LLC (NASDAQ:LINE) | $1,349.4 | 7.37% |
| 19 | Costamare Inc (NYSE:CMRE) | $1,214.0 | 7.05% |
| 20 | Capitol Federal Financial, Inc. (NASDAQ:CFFN) | $1,813.3 | 6.89% |
| 21 | HCA Holdings Inc (NYSE:HCA) | $16,386.9 | 6.82% |
| 22 | VimpelCom Ltd (NYSE:VIP) | $19,611.6 | 6.77% |
| 23 | United Online, Inc (NASDAQ:UNTD) | $549.6 | 6.77% |
| 24 | Exelon Corporation. (NYSE:EXC) | $26,881.8 | 6.70% |
| 25 | Giant Interactive Group Inc (NYSE:GA) | $1,550.4 | 6.69% |
Source: S&P Capital IQ.
These stocks are a good place to start your research, but they’re not formal recommendations.
Let’s take a look at the top 3:
Boise Inc. (NYSE:BZ) is first with a trailing yield of 13.8%. Boise does not pay a regular dividend; 2012 was the third year in a row that the company paid a special dividend. In fact, in 2012 the company paid two special dividends: one of $0.48 per share and one of $0.72 per share. On the company’s most recent conference call, when asked about future dividends, Boise’s CEO reiterated the company’s track record of returning capital to shareholders but said he would not commit to anything until later in the year. While Boise could indeed continue to pay out large dividends, if you are looking for regular dividends, pass on Boise Inc. (NYSE:BZ)
Seadrill Ltd (NYSE:SDRL) is second with a trailing yield of 12%. This is also artificially high as the company accelerated its fiscal fourth-quarter dividend to December, which normally would have been paid in March, to allow investors to get the lower tax rate on dividends, which expired at the beginning of 2013.
The company owns offshore oil rigs that it rents out to energy companies. SeaDrill has made it a policy to steadily return cash to shareholders through dividends. The company does not pay a specific quarterly dividend — its dividend policy is “guided by earnings expectations, market prospects, current capital expenditure programs as well as investment opportunities.”
Seadrill Ltd (NYSE:SDRL) is in a great place competitively as it has some of the newest ultra-deepwater drillships among the drilling fleet. SeaDrill has also benefited from largely avoiding Brazil where its competitor Transocean (NYSE:RIG) is being sued for $20 billion over a relatively small oil spill. Seadrill Ltd (NYSE:SDRL) has just three rigs leased currently to Petrobras in Brazil and that may go down in the future as Petrobras just announced an oil rig lease freeze.
Overall, the company has a high debt load, but this is backed by great assets and long-term contracts. Dividend investors should take note.
Third is Windstream Corporation (NASDAQ:WIN) with a trailing yield of 11.5%. The company is a rural telecom that has been working to transition from a focus on residential clients to business clients. The company pays out a high 87% of its free cash flow as dividends. Investors have seen before with Frontier Communications and CenturyLink what happens to companies that cut their dividend. Fool analyst Dan Caplinger recently laid out 3 areas Windstream investors should watch, and I recommend anyone who is interested in Windstream Corporation (NASDAQ:WIN)should read it.
Foolish bottom line
Remember, these seemingly irresistible yields could be ticking time bombs, so do your own due diligence. Also, make sure you diversify your picks across various sectors. As investors relearn every decade or so, you never want to put all your eggs in one basket — no matter how tempting the dividends are.
The article The 25 Highest-Yielding Dividend Stocks in March originally appeared on Fool.com and is written by Dan Dzombak
Fool contributor Dan Dzombak owns shares of Frontier Communications. The Motley Fool recommends Exelon, Giant Interactive Group, and Seadrill. The Motley Fool owns shares of National Presto Industries, Seadrill, Transocean, and United Online.
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