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5 Trending Dividend Payers

Stocks in this article: TSM CTL KRT PEP ITW

Thirteen analysts rate CenturyLink a buy or strong buy out of 18 analysts. The average analyst target price for CenturyLink is $45.23.

CenturyLink is in a classic bull trend. The moving averages are moving higher and shareholders are happy. Trend followers love this pattern and will hold a position until a technical break results in a signal to exit.

CenturyLink sure looks good by many indications, but I include this one to demonstrate what a "yield trap" looks like to those that don't fully do their homework.

The first red flag found is the expected earnings this year. CenturyLink is expected to earn about $2.52, but is paying $2.90 a year in dividends. Simple math lets us know something has to give.

Sometimes a shortfall is temporary as a result of an acquisition, and the company experiences nonrecurring expenses. After the dust settles, income bounces back up and the dividend party continues.

One of the concerns about CenturyLink is that even after adding in expected forward earnings, the dividend appears at risk. Companies have "onetime expenses" all the time. The company has a fat dividend, and if everything goes as planned the dividend will likely continue for some time. If the company hits a speed bump, the dividend will be in serious trouble. It's just not worth it when you have so many others to choose from.

TSM Revenue Chart TSM Revenue data by YCharts

Taiwan Semiconductor (TSM)

Background: Taiwan Semiconductor Manufacturer is the world's largest dedicated integrated circuit foundry. Taiwan Semiconductor trades an average of 8.5 million shares per day with a market cap of $76 billion.

52-Week Range: $11.26 - $16.15

Yield: 3.3%

Taiwan Semiconductor pays 40 cents per share in dividends. The dividend has grown by an average of 6.9% per year in the last five years. The dividend did dip in 2009, but quickly rebounded and is now as high as ever.

After testing the 200-day moving average a few times, the technical pattern is shaping up for another leg higher. It's a volatile industry though, and so investors will want to fasten their seatbelt with this one.

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