NEW YORK (
) - The 10 large-cap stocks rated A-minus or higher by
with the highest dividend yields are all trading close to consensus price targets, but that's no surprise with such solid financials and rich dividend yields.
Starting with companies with market capitalizations exceeding $5 billion rated A-minus (strong buy) or higher by
, we pared down the group to the 10 stocks with the highest forward dividend yields, based on the most recent quarterly payout. Not surprisingly, electric utilities and energy service companies dominate the list. Total returns assume reinvested dividends.
10. Bristol-Myers Squibb
Bristol-Meyers Squibb is a global pharmaceutical company headquartered in New York. Shares closed at $27.68 Thursday with one-year total return - assuming dividends are reinvested - of 31%. Based on a quarterly payout of 32 cents, the shares have a forward dividend yield of 4.62%.
The company reported second-quarter net earnings to common stockholders of $927 million, or 53 cents a share, up from $743 million, or 43 cents a share, the previous quarter but down from $983 million, or 49 cents a share, a year earlier, when results included $103 million or 5 cents a share from discontinued operations.
Net sales for the second quarter were $4.8 billion, up 2% from a year earlier. During the second quarter, the company also began a $3 billion share repurchase program.
The company has strong liquidity with a quick ratio of 1.80, showing a clear ability to cover short term cash needs. The ratio of debt to capital is 0.29.
Shares trade for 11.4 times earnings, which is higher than the P/E for other major pharmaceuticals including
which trades at 8.5 times earnings and
which is trading at 9.6 times earnings. Large-cap sector players trading at higher multiples include
which trades for 14.9 times earnings and
, which trades for 18.3 times earnings.
Out of 25 analysts covering Bristol-Meyers Squibb, 11 rate the shares a buy, while 11 recommend investors hold and three recommend selling the shares.
9. SCANA Corp.
of Cayce, S.C. generates and distributes electricity in South Carolina. The company also distributes natural gas in South Carolina and Georgia and also offers fiber optic communications services in three southern states.
Shares closed at $39.67 Thursday, returning 19% over the past year. Based on a quarterly payout of 47.5 cents, the shares have a forward dividend yield of 4.79%.
Second-quarter net income was $54 million, or 43 cents a share, declining from $127 million or $1.02 a share and down from income to common shareholders of $55 million a year earlier, or 45 cents a share. The company's earnings and revenue are cyclical, which is typical for a utility company, with the second quarter traditionally being the smallest and "comprising only 15 percent of our annual plan," according to Jimmy Addison, SCANA's chief financial officer.
The company's operating income for the second quarter was $137 million, up from $125 million a year earlier, and the slight earnings declined resulted from mainly from higher interest paid on borrowings and higher property taxes.
SCANA's ratio of debt to capital is 0.58.
The company has contracted with Westinghouse Electric and Stone & Webster to design and construct two nuclear electric generating units at the site of the Virgil C. Summer Nuclear station in Jenkinsville, S.C. According to a public filing, SCANA expects one unit enter services in 2016 and the other in 2019, resulting in "an increase of the Company's utility plant in service of approximately 58% over its 2009 level," adding that "Financing and managing the construction of these plants, together with continuing environmental construction projects, represents a significant challenge to the Company."
Shares trade for 13.7 times earnings.
Six out of nine analysts covering SCANA recommend buying the shares, while the other three have hold ratings.
8. The Southern Company
The Southern Company
of Atlanta, Ga. is an electric utility operating in the Southeast, also generating and selling power in the wholesale market. Shares closed at $37 Thursday, for a one-year total return of 23%. Based on a quarterly payout of 45.5 cents a share, the forward dividend yield is 4.92%.
Net income for the second quarter was $510.2 million or 61 cents a share, compared to $494.5 million or 60 cents a share the previous quarter and $478.6 million, or 60 cents a share, a year earlier.
Second-quarter operating revenue was $4.2 billion, increasing 8% year-over-year, which CEO David Ratcliffe attributed in part to "positive economic trends, particularly among our industrial and manufacturing customers."
The ratio of debt to capital is 0.55. All five of The Southern Company's subsidiary companies are in the midst of construction power generating facilities and estimated construction costs for 2010 total $4.9 billion.
The shares trade for 14.8 times earnings.
Out of 21 analysts covering the shares, 18 rate The Southern Company a hold, while two recommend buying and one recommends selling the shares.
7. Consolidated Edison
mainly provides electric and gas utility services in New York City, and also provides gas and electric services in Westchester County, New York and some areas in northeastern Pennsylvania. The shares closed at $48.09 Thursday, for a one-year total return of 24%. Based on a quarterly payout of 59.5 cents, the shares have a forward dividend yield of 4.95%.
Net income to common stockholders for the second quarter was $183 million or 64 cents per diluted share, compared to $226 million or 80 cents a share during the first quarter and $150 million or 55 cents a share a year earlier.
Second-quarter operating revenue was $3 billion, increasing 6% year-over-year.
The ratio of debt to capital is 0.51. The company estimates 2010 capital expenditures for utility construction will total $2.2 billion.
Shares trade for 14 times earnings.
Among 16 analysts covering the company, 1 recommends buying shares in ConEd, while 14 have hold ratings and 1 recommends selling the shares.
6. BCE, Inc.
of Verdun, Quebec, provides communication services mainly in Canada. The shares closed at $32.63 Thursday for a one-year total return of 41%. Based on the most recent quarterly payout of 44.4 cents, the forward dividend yield on the shares is 5.46%.
In Canadian dollars, second-quarter net earnings were $617 million or 78 cents a share, increasing from $608 million or 79 cents a share the previous quarter and $372 million or 45 cents a share a year earlier.
Operating revenue increased 3% year-over-year to $4.4 billion during the second quarter.
The company's quick ratio is 0.49 and its ratio of debt to capital is 0.39.
Shares trade for 11.8 times earnings.
Out of 12 analysts covering the shares, five rate BCE a buy, while six recommend holding and one recommends selling the shares.
5. Progress Energy (PGN)
of Raleigh, N.C. generates and distributes electricity in North Carolina, South Carolina, and Florida. Shares closed at $44.01 Thursday for a one-year total return of 19%. Based on a quarterly dividend payout of 62 cents, the shares have a forward yield of 5.64%.
Second-quarter net income was $180 million or 62 cents a share, compared to $190 million or 67 cents a share in the first quarter and 174 million or 62 cents a share during the second quarter of 2009.
Operating revenue for the second quarter was $2.4 billion, increasing 3% year-over-year, as sales increases from "one of the hottest Junes on record," according to CEO Bill Johnson, were partially offset by increased interest expense.
Progress Energy's ratio of debt to capital is 0.56. Total capital expenditures for 2009 were $2.5 billion.
The shares trade for 14.6 times earnings.
Among 19 analysts covering Progress Energy, 2 rate the shares buy and 17 recommend holding the shares.
4. Magellan Midstream Partners
Magellan Midstream Partners
of Tulsa, Okla. operates a pipeline system transporting oil products and liquefied petroleum gasses from Texas refineries to Colorado and several Midwest states.
As you might have guessed, Magellan Midstream Partners is a limited partnership. This means investors will receive a K-1, rather late in the tax season. That means you will fill out an extra form on your taxes, or maybe your accountant will. If you hold the shares within a tax-deferred IRA or IRA rollover account, don't ignore the K-1. You will still need to include the Scheadule K-1 form information on your tax return and may possibly need to pay income taxes on income passed through your partnership shares held within your IRA.
A major advantage of the pass-through of income to limited partners is that your portion of the company's expenses pass through as well, resulting in a lower tax rate.
Partnership units closed at $50.70 Friday for a one-year total return of 44%. Based on a median 12-month price target of $53.50 among analysts polled by Thomson Reuters, the units have 6% upside - the most for any among this group of 10 large cap dividend stocks.
Based on a quarterly payout of 73 cents, the partnership units have a forward yield of 5.78%.
Limited partners' interest in net income was $102.5 million for the second quarter or 96 cents per unit, increasing from $64.5 million or 60 cents per unit the previous quarter and $14.6 million or 37 per unit in the second quarter of 2009, when there were many fewer L.P. units
Second-quarter revenue more than doubled to $423.1 million. CEO Don Wellendorf said "record financial results" resulted from "increased volumes and rates in both our petroleum products pipeline and petroleum products terminals segments, as well as timing of mark-to-market adjustments related to our commodity-related activities."
The company's ratio of debt to capital is 0.59. For 2010, the company expects to make capital expenditures for expansion totaling $565 million.
The partnership units trade for 18 times earnings.
Out of 15 analysts covering Magellan Midstream Partners, 9 have buy ratings and 6 recommend holding the partnership units.
3. Kinder Morgan Energy Partners
Kinder Morgan Energy Partners
of Houston, Texas, operates pipelines delivering natural gas and various fuels and also operates gas storage facilities and owns and operates ten oil wells. Limited partnership units closed at $68.53 Thursday, for a one-year total return of 34%. Based on the most recent quarterly dividend payout of $1.09, the units had a forward dividend yield of 6.36%.
Limited partners' interest in net income for the second quarter was $268.7 million or 88 cents per unit, compared to a loss of $23.9 million, or 8 cents per unit, in the first quarter and net income of $91 million, or 33 cents per unit, during the second quarter of 2009.
During the second quarter, KMP paid $206 million to settle a number of rate challenges dating back to 1992 and payout to the limited partners were unaffected essentially because the general partner agreed to take a smaller distribution of the company's earnings. The general partner's interest in net income for the second quarter was $92.5 million, down from $249.2 million the previous quarter and $232.8 million a year earlier.
The company's ratio of debt to capital is 0.63. Kinder Morgan Energy Partners forecasts discretionary capital expenditures totaling $824.8 for 2010.
The units trade for 46 times earnings.
Out of 16 analysts covering Kinder Morgan Energy Partners, 6 have buy ratings while 10 recommend holding the shares.
A member of the writer's family holds Kinder Morgan Partnership units.
2. CenturyLink, Inc.
of Monroe, La. provides telecom services throughout the United States. Shares closed at $38.75 Thursday for a one-year total return of 29%. Based on a quarterly payout of 72.5 cents, the shares have a forward dividend yield of 7.48%.
Second-quarter net income attributable to common shareholders was $238.8 million or 79 cents a share, increasing from $252.6 million or 84 cents a share the previous quarter and $69 million or 68 cents a share a year earlier.
Second-quarter operating revenue increased to $1.8 billion from $634.5 million a year earlier, reflecting the acquisition of Embarq Corporation in July 2009. Embarq had been spun-off from
in 2006. The acquisition brought CenturyLink 5.4 million access lines and 1.5 million high-speed internet customers in 18 states, according to the company.
CenturyLink's ratio of debt to capital is 0.45.
The shares trade for 13.2 times earnings.
Out of 16 analysts covering CenturyLink, 9 have buy ratings, five recommend holding and 2 recommend selling the shares.
1. Enbridge Energy Partners
Enbridge Energy Partners
is headquartered in Houston, Texas and operates oil and gas pipelines, storage facilities and processing plants. Limited partnership units closed at $54.56 Thursday, for a one-year total return of 30%.
Based on the most recent quarterly dividend payout of $1.028, the units had a forward dividend yield of 7.54%. This is the highest forward yield among this group of ten companies.
The company reported net income allocable to limited partner interests of $120.3 million of $1.02 per partnership unit for the second quarter, increasing from $99.2 million or 84 cents per unit the previous quarter and $102.9 million or 88 cents per unit a year earlier.
Second-quarter operating revenue increased 34% year-over-year to $1.7 billion, with Terrance McGill -- the president of the Partnership's management company - saying "record earnings for the second quarter were primarily driven by strong performance in our Liquids segment and the continued benefits of our cost containment measures implemented in 2009."
The company's ratio of debt to capital is 0.54. Enbridge Energy Partners estimates total capital expenditures for 2010 will be $900 million.
The limited partnership units trade for 16 times earnings.
Out of 12 analysts covering the company, 3 rate Enbridge Energy Partners a buy, while 7 have hold ratings and 2 recommend selling the partnership units.
5 Highest-Rated Mid-Cap Stocks >>
Written by Philip van Doorn in Jupiter, Fla.
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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.