AT&T's plump dividend used to be like money in the bank. But now investors seeking income and safety might look elsewhere as Ma Bell sinks like a ton of lead.
Truist Financial, energy firm EOG Resources and Simon Property Group are among nine S&P 500 stocks with credit ratings of A- or better that also yield 5% or higher, says an Investor's Business Daily analysis of S&P Global Market Intelligence and MarketSmith.
True, that's below the 7.7% yield of AT&T. But all these S&P 500 stocks possess something AT&T does not. They're backed by companies with A- or better credit ratings from Standard & Poor's. That's at least two rungs higher than AT&T's BBB credit rating. And they're not facing allegations of laying miles of lead-sheathed cables for phone networks before the 1960s, requiring a costly cleanup.
Choose One: Safety Or Dividends
Finding S&P 500 companies with the highest yields usually brings a degree of risk. Not a single prime or high-grade rated S&P 500 company (rated from AAA to AA-) yields more than 5%. And all 10 of the top yielding S&P 500 companies sport ratings of BB- or lower.
If you're looking to own a AAA rated company like Microsoft or Johnson & Johnson, don't expect a top yield to go with it. Microsoft yields less than 1% and Johnson & Johnson less than 3%.
But you can still find better than S&P 500 yields from companies with higher credit ratings than AT&T without the looming lead-sheathing cleanup costs. Keep in mind, though, even some of these S&P 500 companies face their own liabilities.
Safer Than AT&T Big Dividends
Leading the pack of A- or higher rated companies with high yields is Truist. The bank holding company operating mostly in the South and mid-Atlantic yields a respectable 6.3%.
And it does this despite sporting a decent credit rating of A-. Make no mistake: The company is not growing. Analysts think adjusted profit per share at the bank will fall more than 17% this year and another nearly 2% in 2024. And that's why the stock is down 22.3% this year. But the side-effect of the falling stock price is the improved dividend yield.
Shares of Houston-based energy explorer, EOG Resources, are also down this year by 8.4%. And that partially explains why it's yielding 6.1%. And EOG's profits are seen sagging nearly 20% this year. But it's important to note that the company still carries a credit rating of A-, well above AT&T's.
Not all shares of A- rated and higher companies with decent dividends, though, are down. A good example is Simon Property Group, a property owner based in Indianapolis. Shares are up 3.5% this year as adjusted income per share is seen rising 12.5% this year. But on top of all that is a dividend yield of 6.1%.
That's not to say that a credit rating of A- or higher will protect you from all risk. It won't. Even Johnson & Johnson and 3M face important product liabilities. But they at least have higher ratings than AT&T and don't need to dig up decades worth of lead-lined cables.
And that counts for something.
Highest Yielding S&P 500 Stocks With A- Or Better Credit Ratings
| Company | Ticker | YTD | Yield | Credit rating |
|---|---|---|---|---|
| Truist Financial | -22.3% | 6.3% | A- | |
| EOG Resources | -8.4% | 6.1 | A- | |
| Simon Property Group | 3.5% | 6.1 | A- | |
| 3M | -15.2% | 5.8 | A- | |
| Prudential Financial | -7.0% | 5.4 | A | |
| U.S. Bancorp | -19.1% | 5.4 | A | |
| Philip Morris International | -2.2% | 5.1 | A- | |
| ConocoPhillips | -9.8% | 5.0 | A- | |
| Realty Income | -3.4% | 5.0 | A- |
