TheStreet.com Ratings: Best Large-Cap Dividend Stocks

Last Wednesday we published an article on tobacco stocks and the investment opportunity in Altria(MO Quote) for both growth and income investors.

On Thursday, Altria's management reiterated its intention to distribute 100% of its remaining shares of Kraft(KFT Quote) within 120 days of the Jan. 31, 2007 board meeting. It also spoke of new products, an improving environment in Europe, and untapped opportunities in China and emerging markets. The stock is up nicely after many rainy days for investors.

All of this good news begs the question: Are there other stocks that can reward shareholders for being patient through hard times?

We consulted our stock ratings model to find additional large-cap stocks that pay dividends and might be appropriate for a longer-term equity-income portfolio.

To make this very selective list, we set a minimum market capitalization of $10 billion. This filters out smaller, more volatile investments. Because we're looking for both income and growth, the stocks must have a dividend yield of over 2%. But the dividend yield cannot exceed the company's projected growth in earnings per share. Granted, this knocks out some high payout stocks, but it assures that management is focused on growing the business, not liquidating profits. No income trusts with their tax problems here.

The idea is that brand-name stocks with attractive cash dividends, solid earnings and good prospects for future growth can provide the foundation for a recession-resistant portfolio.

Finally, to qualify for this list, the stocks must have an overall rating of at least A-, meaning they are in the top 10% of all the stocks we rate. (Our stock rating model still views the stock market as attractive. As of Nov. 17, the distribution for the 5,959 stocks we rated was 38% buy, 31% hold and 31% sell, with a slightly positive upward bias for the overall market.)

Here, in order of their dividend yield, are the 16 stocks that fit this profile and meet our stable-value investment criteria.

Total-Return Giants
Ticker	Company name	Market Cap Bils	Div yield	PE	Rating
MO	Altria	$169.42	4.25%	14.39	A
BAC	Bank of America	246.87	4.08	11.06	A-
T	AT&T	127.52	4.02	12.94	A
SPI	Scottish Power	21.32	3.63	15.45	A-
AEP	American Electric	16.41	3.56	14.25	A-
D	Dominion Resources	28.73	3.39	14.13	A
WFC	Wells Fargo	123.8	3.05	13.36	A-
FE	FirstEnergy	18.83	3.05	14.22	A+
FPL	FPL	21.45	2.83	15.59	A-
BLS	Bellsouth	78.82	2.68	17.01	A-
ETR	Entergy	18.51	2.49	15.49	A
AZN	Astrazeneca	88.64	2.45	14.16	A-
LNC	Lincoln National	18.40	2.35	12.05	A+
WMI	Waste Management	20.61	2.28	19.41	A-
WYE	Wyeth	65.52	2.05	14.01	A-
EMR	Emerson Electric	35.7	2.03	15.5	A

It's no surprise that the list starts with a now familiar consumer stock, Altria. This company also gets high marks from our ratings model for sustained earnings, high solvency and low stock price volatility. Altria, along with another tobacco company, Reynolds American(RAI Quote), regularly appears on TheStreet.com Ratings' weekly Top 40 Best Large Cap Buy List.

Although Altria's total return to shareholders, including dividends, has lagged its industry peers, the company has announced a number of restructuring moves to put this lazy capital to work more effectively. Note that when you buy Altria shares you also get 88% of food company Kraft and 28% of the LSE-listed brewer SABMiller.

The company may also spin off 100% of its Philip Morris International operations to shareholders as a special dividend in the near future -- but not until the Kraft dividend is successfully completed.