Wall Street’s volatility is a huge cause for concern when your primary goal is to buy low and sell much higher. However, income investors with a long-term focus on regular dividend payments instead of share appreciation have much more to be cheerful about. That's because when share prices decline, dividend yields rise. (It's always important to check the quality of that dividend yield before you invest.)
That said, slumping prices have created yields of more than 6% in 10 top dividend payers in the S&P 500 index (.SPX) lately, and income investors should take a close look at these names as they position their portfolio for the New Year.
Altria is the company behind big U.S. cigarette brands like Marlboro, smokeless tobacco products including Copenhagen and Skoal, and wines under labels including Chateau Ste. Michelle. These products admittedly aren't the healthiest and struggle to find growth, but they certainly have strong baseline sales from loyal customers year after year. That reliable revenue fuels reliable dividends, with Altria recently increasing payouts in August from 80 cents to 84 cents per share. Longer term, Altria has a strong history of dividend payments, too, with at least one annual increase in its dividend for the last 50 consecutive years.
Macerich is a real estate investment trust, or REIT, that develops and manages malls. As of 2019, Macerich owned 51 million square feet of real estate in 47 regional shopping centers from Arizona to Chicago to the District of Columbia. Real estate is a capital-intensive business and the IRS allows companies like Macerich tax breaks if they are structured as trusts. That's good for MAC because it cuts operational costs, but it's also good for investors because 90% of taxable income must be returned to shareholders as dividends. As long as the shops make their rent payments on time, this REIT passes a big chunk on to shareholders.
Primarily a brick-and-mortar department store, Macy's boasts a strong enough brand and a rich history that has helped it fend off much of the e-commerce pressures that sunk other department stores in the last decade. Macy's admittedly is challenged when it comes to top line growth, however it remains comfortably profitable – and most importantly, its generous dividend will come in at less than 60% of its full-year earnings per share this year. That means income investors can be secure that the paydays will continue in 2020.
Occidental Petroleum Corp.
Occidental Petroleum is an oil and gas producer that operates in the United States, Middle East and South America. It produces crude oil and natural gas as well as manufacturing chemicals such as chlorine and various vinyls, plus the infrastructure to store and transport all these petroleum-related products. Obviously, OXY is tied to the ups and downs of energy prices since that's a big driver of its overall profit margins. But thankfully, crude oil prices have been relatively stable over the last six months – and as history shows, Occidental has exhibited management over the long term to protect and grow its generous dividend payments in any energy environment.
Helmerich & Payne
Another energy firm on this list that offers generous dividends even without the name recognition of “Big Oil,” Helmerich & Payne is an oil and gas service stock located in Tulsa, Oklahoma, and primarily provides drilling rigs to bigger firms. These include onshore oil and gas from wells that run from Colorado to West Virginia through some 300 land drilling rigs. However, HP also dabbles in international operations via 31 international land rigs and another eight offshore oil platforms overseas. As a key service provider, HP is a bit insulated from the ups and downs of crude oil prices since it is in many ways a rental firm. It just so happens what it rents are massive drilling platforms that are incredibly costly to manufacturer and manage – creating a wide moat for HP stock and its dividends.
Energy infrastructure company Williams is not a drilling or exploration firm that has to worry about finding new fields of oil or finding the best price for petroleum products in the market. Instead, Williams operates natural gas and oil services that include compression, processing and transportation. In other words, WMB is a kind of pass-through business for energy products. Producers bring their materials to Williams and then end-users and wholesalers will come to Williams for delivery of their products. It's an incredibly safe business – and with crude oil and natural gas volume remaining strong, it's been a profitable business for WMB investors to share in, too.
Iron Mountain began in the 1950s as a document storage company and recently moved into the digital age with information management and security offerings. Regular fees from clients fuel a revenue stream for IRM that supports a steady and growing dividend yield. While share prices haven't moved dramatically in the last five years, dividend payouts have surged from 27 cents quarterly in 2014 to almost 61 cents presently – growth of 126% in a short time.
Specialty retailer L Brands is the company behind lingerie purveyor Victoria's Secret, personal care store Bath & Body Works and several other brands including White Barn, PINK and others. Collectively, these subsidiaries add up to nearly 3,000 company-owned storefronts worldwide, from the U.S. to Europe and China. Like many retailers, LB has suffered thanks to the competition of an internet age; shares are off an ugly 80% or so in the last five years. However, its $1.20 per share in annual dividends is only around half of its total earnings per share – meaning this retailer can keep paying shareholders for many years to come, even if operations never materially improve.
With its share price falling nearly in half in 2018, asset manager Invesco has plenty of reasons to make investors nervous. But in 2019 its share price stabilized and the dividend may be juicy enough to attract aggressive investors. The challenge is IVZ offers exchange-traded funds that are quirky and more costly than mainstream offerings from Vanguard or Fidelity. That makes it hard for Invesco to attract investors in a volatile market and fuels concerns about how many funds investors will support. The firm’s dividend is less than half of total earnings per share, so if you have the nerve, IVZ may be worth the risk.
The telecom space is rough for smaller players, so in 2017 CenturyLink continued its acquisition push, buying Level 3 Communications for $25 billion and taking on a huge amount of debt. Wall Street remains concerned that the company can't pay down those loans and continue to invest in its business, and a dividend cut in 2019 was a big black eye. However, even after that reduction the yield is well above other stocks if you don't mind taking on the risk of this admittedly troubled S&P 500 component. After all, shares have trended up nearly 40% since their summer lows – so there are some investors that clearly think a turnaround is possible.