Interest rates are rising but still low. Dividend stocks with low risk and decent yield are one of Wall Street's most coveted prizes. So how would you like to know the names of five high quality CAN-SLIM stocks that pay at least double the S&P 500 index's yield?
It turns out those dividend stocks are in mutual funds run by expert investors who were discussing their own strategies for managing prominent equity-income funds on a panel at the recently completed Morningstar Investment Conference.
Many of their shareholders want the best of both worlds when it comes to total return. They want their portfolio — whether it's their retirement savings or taxable accounts — to grow when the market does. They also want income from those same securities.
Double-duty stocks like that rarely offer the sky-high price gains of zero-yield go-go tech stocks. They also rarely offer nosebleed yields, because the companies are financially too strong.
But they exist. The fact that many of these dividend stocks should be familiar to IBD readers is a bonus. Breaking down portfolios of the Morningstar panelists, we identified five stocks whose dividend yields are also at least double the yield from a typical S&P 500 index fund.
Dividend Stocks
For example, $366.3 billion Fidelity 500 Index Fund (FXAIX) offers a trailing 12-month (TTM) yield of 1.44%. Let's call that the typical yield for an S&P 500 index fund.
Yield from panelists' funds is around the S&P 500's as a whole. The $47.2 billion JPMorgan Equity Income Fund (HLIEX) offered a yield the past 12 months of 1.62%, going into Thursday. The $53.2 billion Vanguard Dividend Growth (VDIGX) offered a TTM of 1.51%. And the $36.2 Columbia Dividend Income Fund (LBSAX) is slightly behind, with a TTM yield of 1.38%.
But the panelists' funds also hold plenty of dividend stocks that yield much more.
Good News, Better News
So the good news is that you can find higher-yield stocks held by leading fund managers. Better yet, you can get that higher-yield job done while sticking just to stocks that also happen to have solid CAN-SLIM traits that IBD readers are familiar with.
Check out manager Don Kilbride's Vanguard Dividend Growth's top-10 holdings. One is beverage maker Coca-Cola, whose yield is 2.9%. Coke is a king among dividend stocks. It has raised its dividend 60 straight years.
It also has an "A" SMR Rating from IBD (which measures Sales, profit Margins and Return on equity) on a scale of A through E. Its "A" Rating means the stock scores in the top 20% of all stocks based on those gauges.
In addition, Coke has an 86 Composite Rating from IBD.
A Composite Rating of 86 means that a stock is in the top 14% of all stocks on a number of technical and fundamental factors, including both price performance and earnings. Watch for stocks that have 90-plus Composite Ratings and are forming bases or are in follow-on buy areas. That way, you spot the best-positioned stocks before they start big price runs. Look up a stock's Composite Rating at IBD Stock Checkup.
And, yes, you can find stocks with Composite Ratings of 90 or higher in these equity-income experts' funds. And some of their yields are indeed at least double the typical S&P 500 index fund's overall yield of 1.44%.
Vanguard Fund's Dividend Stocks
Outside his top 10, Kilbride owns drug maker Pfizer. Its yield is 3.2%. Its Composite Rating and SMR Rating are 99 and "A" respectively.
Pfizer makes a Covid-19 vaccine. It also makes Advil, Viagra, Xanax and Zoloft. Viagra is for treatment of erectile dysfunction. Xanax is for anxiety disorder. Zoloft is for major depressive disorder.
Columbia Dividend Income Fund
Morningstar panelist Scott Davis' Columbia Dividend Income Fund holds drug maker AbbVie. Its dividend yield is 3.8%. Its Composite Rating and SMR Rating are 94 and "A."
AbbVie's product lineup includes Humira and Rinvoq, for treatment of rheumatoid arthritis. Its Skyrizi is for treatment of moderate to severe plaque psoriasis.
Davis also owns oil exploration and production major Chevron in its top 10. Its yield is 3.4%. Its Composite Rating is a top 99. And its SMR is a best-possible "A."
Beyond the Columbia fund's top 10, Davis owns Exxon Mobil. Its yield is 3.9%. Its Composite Rating is a top-notch 99. Plus, its SMR is a solid-gold "A."
Dividend Hack
Clare Hart, whose JPMorgan Equity Income Fund also owns Chevron and Exxon Mobil among several energy stocks. At the Morningstar conference, Hart said that many energy companies have made themselves more popular as dividend stocks.
They've done that by making it easier to pay out high dividends. How? By offering variable dividends. Those consist of hefty bonus dividends on top of relatively modest base dividends. In a cash emergency, the companies are less likely to trim base dividends, which investors typically punish companies for doing.
Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about retirement planning and actively run portfolios that consistently outperform and rank among the best mutual funds.
