10 Large-Caps With Highest Dividend Yields

Windstream, Altria and Pitney Bowes rank among the highest-yielding large-cap companies.
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BOSTON (TheStreet) -- Stocks slid yesterday after a report showed U.S. manufacturing weakened, though they recovered to close little changed. Treasuries rallied, demonstrating the attractiveness of income investments. Here are the 10 highest-yielding S&P 500 Index components, which offer big dividends and a margin of safety because of their size. They are ordered by dividend yield, from great to greatest.

10.

Progress Energy

(PGN)

is an electric utility operating in North Carolina, South Carolina and Florida. Since 2007, it has grown revenue 1.9% annually, on average. Its dividend grew by a cent over that span. The company is scheduled to report second-quarter earnings Aug. 6. First-quarter net income increased 4.4%, to $190 million, or 67 cents a share, as revenue ascended 3.8%. Progress pays a 62-cent quarterly dividend, translating to a yield of 6.1%. Of analysts covering the stock, 17% rank it "buy" and 83% rate it "hold." None rank it "sell."

9.

Pitney Bowes

(PBI) - Get Report

sells mail-processing equipment. It will release second-quarter numbers Aug. 2. First-quarter profit fell 24%, to $79 million, or 40 cents a share, as revenue declined 2.2%. The operating margin remained steady at 17%. Pitney Bowes trades at a price-to-projected-earnings ratio of 9.3, a 51% discount to its peer average. Its 0.8 PEG ratio -- a measure of value relative to predicted long-run growth -- signals a 20% discount to fair value. Half of the analysts covering Pitney advise buying its shares, which yield 6.2%.

8.

Reynolds American

(RAI)

makes cigarettes, including the Camel brand. During the past three years, Reynolds has grown earnings per share 2.2% annually, on average. The company will announce its second-quarter performance July 21. First-quarter profit multiplied to $82 million, or $1.02 a share, from $8 million, or 3 cents a share, a year earlier. Revenue advanced 3.4%. Reynolds sells for a PEG ratio of 0.3, a 70% discount to fair value. Of researchers following Reynolds, 38% advise buying its shares, which yield 6.5%, with a payout ratio of 83%.

7.

Pepco Holdings

(POM)

is an electric utility in Washington, D.C., and Maryland. Since 2007, it has boosted net sales 1.9% a year, on average. First-quarter profit decreased 20%, to $36 million, or 16 cents a share, as revenue declined 6.4%. The operating margin extended to 6.4% from 5.6%. Pepco trades at a price-to-book ratio of 0.9 and a price-to-sales ratio of 0.4, reflecting discounts of 40% and 69% to industry averages. It's expensive based on projected earnings and cash flow. Roughly 40% of analysts covering Pepco rate its stock "buy."

6.

Altria Group

(MO) - Get Report

sells cigarettes, wine and other tobacco products in the U.S. Its stock has plummeted 33% a year since 2007, underperforming U.S. indices. Altria is due to release second-quarter numbers July 20. First-quarter profit increased 38%, to $813 million, or 39 cents a share, as revenue inched up 3.6%. Altria trades at a PEG ratio of 0.6, a 40% discount to fair value, and a forward earnings multiple of 11, a 16% discount to the tobacco industry average. Of analysts covering Altria, 60% rank its stock a "buy." A median target of $23.20 suggests 9% of upside.

5.

AT&T

(T) - Get Report

is an integrated telecom company. During the past three years, AT&T has grown revenue 17% annually, on average. But its stock fell an average of 15% a year over that time frame. AT&T is scheduled to report second-quarter results July 22. First-quarter profit tumbled 21%, to $2.5 billion, or 42 cents a share, as revenue inched up 0.3%. The operating margin inched up to 20% from 19%. AT&T sells for a price-to-projected-earnings ratio of 10, a 27% discount to its peer average. The shares offer a lofty dividend yield of 6.7%, with a payout ratio of 83%.

4.

Verizon

(VZ) - Get Report

is the largest domestic telecom company. Since 2007, it has boosted net sales 6.5% a year. Its stock dropped 14% a year over that time horizon. Verizon is due to announce its second-quarter performance July 23. First-quarter profit plummeted 75%, to $409 million, or 14 cents a share, as revenue inched up 1.2%. The operating margin declined to 18% from 19%. Verizon trades at a PEG ratio of 0.5, a 50% discount to fair value. Of analysts covering the stock, 38% rank it a "buy." It yields 7.1%, with an excessive payout ratio of 229%.

3.

CenturyLink

(CTL) - Get Report

, formerly

CenturyTel

, is a telecom focused on rural areas and midsized cities. The company was created through the merger of CenturyTel and

Embarq

last year. In April, management announced a stock-for-stock merger with

Qwest

(Q)

. The company is scheduled to report second-quarter results Aug. 4. First-quarter profit nearly quadrupled to $253 million, or 84 cents, as revenue tripled. CenturyLink sells for a PEG ratio of 0.4, a 60% discount to fair value. Its shares currently yield 8.4%, with a payout ratio of 103%.

2.

Windstream

(WIN) - Get Report

, like CenturyLink, is a rural-focused telecom. Its stock has advanced 42% in the past 12 months, beating indices, but has dropped 8.1% a year since 2007. First-quarter profit decreased 16%, to $74 million, or 17 cents a share, as revenue gained 12%. The operating margin tightened to 32% from 33%. The stock trades at a forward earnings multiple of 13, on par with peers. It's expensive based on book value. Windstream pays a quarterly dividend of 25 cents, equaling an annual yield of 8.8%. It recently completed its acquisition of

Iowa Telecom

.

1.

Frontier Communications

(FTR) - Get Report

is another rural-focused telecom. Its stock has fallen 6.6% this year. The company will report second-quarter results Aug. 4. First-quarter profit increased 17%, to $43 million, or 14 cents a share, as revenue declined 3.4%. The operating margin widened to 33% from 26%. Frontier trades at a premium to telecom peers based on projected earnings and book value. Frontier pays a 75-cent annual dividend, translating to a yield of over 10%. Its trailing payout ratio of 244% indicates that distributions aren't being funded by earnings alone.

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