Stocks to Augment a Fixed-Income Portfolio

Then there's McDonald's(MCD). With McDonald's, you get both solid and consistent earnings growth plus an excellent dividend yield. McDonald's is growing around the world, particularly in China. Earnings growth of 8% to 10% will occur for many years to come at the Golden Arches.

McDonald's is currently paying dividends of $2.20 per share annually, with a current yield of about 3%. The company has an excellent track record of raising its annual dividend, boosting it on an annual compounded rate of 26% for the last 10 years. I expect another dividend increase this fall. My best guess is that the dividend is boosted to a yield of about 3.5% at that time.

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I mentioned master limited partnerships earlier. A little more explanation is in order. MLPs are limited partnerships which are primarily engaged in oil and gas activities such as extraction, pipelines and transportation. There are some other MLPs that engage in private equity investment activities, such as Blackstone(BX). According to the tax law, MLPs are not taxed at the entity level as long as they distribute required distributions on a quarterly basis.

There are many MLPs available for investment, but to maintain a diversified approach to this sector and still receive an excellent payout, may I suggest the Kayne Anderson Energy Total Return Fund(KYE)? With a current dividend payout of 48 cents per quarter, on an annualized basis, the yield for KYE is about 7.90%.

Next, let's look at the electric utility companies. Regulated by governmental agencies, these companies are able to grow earnings upon approval of rate increases requests or as populations and commerce grow in their service areas. Personally, I have owned and reinvested dividends in utilities for well over 25 years.

My largest holdings are in Exelon(EXC), which yields about 5.25%, and Con Edison(ED), which yields about 5%. Exelon is the largest operator of nuclear power plants in the U.S. Con Edison's area of operation includes New York City and some surrounding suburbs, placing it in one of the largest service areas in the country.

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If you want to stay diversified, look at the Utility Sector SPDRs(XLU). You will get diversification but will have to settle for a lesser dividend yield of about 4.1%.

Finally, let me add Altria(MO) into the mix. Altria is known primarily as a cigarette manufacturer, but it manufactures other sin products as well, including smokeless tobacco, wine and beer.

OK, so Altria might not be the most socially responsible choice, but it is portfolio responsible. Great brand recognition drives strong sales and cash flow. Earnings growth is muted but consistent at 6% to 8% per annum. Altria's dividend is not likely to go up in smoke at an annual rate of approximately 6.2%.

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View my portfolio of Stocks to Augment a Fixed-Income Portfolio on Stockpickr.

-- Written by Scott Rothbort in Bolton Landing, N.Y.

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