This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

3 High-Yield Stocks That Could Easily Boost Dividends

Stocks in this article: BBL CA RDS.A

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Lisa Springer

NEW YORK ( StreetAuthority) -- Creating a list of high-yielding stocks is simple, but seasoned investors know that high yield alone is not a good reason to own a stock. That's because sometimes high-yield stocks report earnings that are too weak to sustain the current dividend.

If your goal is to build a portfolio that's able to deliver steady income through good times and bad, then you'll need to find high-yielding stocks with solid fundamentals, good earnings growth and a more conservative payout.

Companies with modest payouts have a higher safety margin and the ability to increase the dividend to maintain the payout during bad times, or even raise the payout during good times. This makes these stocks especially appealing. In fact, studies show high-yield stocks that also have low payout ratios deliver the best long-term returns.

With this in mind, I created a list of high-yield stocks with room to boost future payouts. I ran a screen for stocks yielding more than 3% while paying out less than 40% of earnings and at least five years of positive earnings growth.

Here are three high-yield champions that could easily afford to raise dividends.

1. BHP Billiton (BBL)

Yield: 3.7%

BHP Billiton is the world's top producer of major commodities such as aluminum, coal, copper, manganese, iron ore, uranium, nickel, silver and titanium minerals. These are all natural resources that have become increasingly scarce, so BHP is ideally positioned to benefit as rising demand pushes up prices.

BHP is quickly expanding. It plans to spend $80 billion in the next five years to boost output of iron ore, copper and coal. Last year, it acquired U.S. shale assets, making the company the world's 10th largest independent oil and gas producer as well. The company also has a major advantage in that most of its major assets are located in low-risk regions such as Australia, Canada and Europe.

BHP also has a strong balance sheet and exceptional annual cash flow -- $30 billion -- which exceeds total debt of $25 billion. This has earned BHP a debt rating of "A+" from ratings agency Standard & Poor's.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs