5 High-Yield Stocks With Bullish Price Trends

NEW YORK (TheStreet) -- Who doesn't enjoy receiving statements with dividend income every month? I know I look forward to collecting dividends with capturing strategies or with longer-term holds.

If collecting big dividends was as easy as buying the highest-yielding stocks we would all be rich and holding a drink in our hand on the beach (not to mention how crowded the beach would be).

Fortunately, there are methods to filter out many of the dogs with fleas, and zero in on the Best in Show.

I start by examining stocks I already either trade or follow and have a large dividend. I add in a screen for large-yield stocks and add the ones that meet the following criteria:
  • A stock must be highly liquid, and trade with a small bid-ask spread to avoid slippage
  • The company must have a history of dividend payments and increases in payments
  • The company needs to demonstrate the ability to continue paying the current dividend or more
  • The stock chart must be in a bullish uptrend; there is no point in looking for an oversized yield if the shares are expected to drop as much or more in the next year

How does a dividend investor exploit the following list of dividend stock guidance? This should be your starting point, not an end-all for your research.

Make sure the industry and the company are a match for your investment objectives. Use your current professional knowledge as applicable to garner a market edge when entering or exiting a position.

Waste Management (WM)

Background: Waste Management provides integrated waste management services in North America and internationally. In North America, the company provides solid waste management services including collection, transfer, recycling and resource recovery services, and disposal services. Waste Management, Inc. trades an average of 5.4 million shares per day with a market cap of $15.9 billion.

Yield: 4.15%

Analyst opinion is mixed with a bearish overtone. It appears the market doesn't agree with the analysts on this one.

The mean fiscal year estimate price-to-earnings ratio is 15.8, based on earnings of $2.16 per share this year.

WM Payout Ratio TTM Chart WM Payout Ratio TTM data by YCharts

Shareholders receive $1.42 annually in dividend payments. Over the last five years, the dividend has grown by an average of 9.1% per year, almost as fast as the garbage piles up in my son's room.

Shares are slowly but steadily climbing in the last 30 days. Shares are now 2.5% higher than last month. Based on technical analyst the chart is breaking out of recent resistance and appears ready to test the next level of resistance near $36. The moving averages are either moving higher or rounding higher.

Revenue reported was $13.38 billion in 2011, compared to $12.52 billion in 2010. The bottom line also has rising earnings year-over-year of $961 million during 2011, compared to $953.00 million in 2010.

With short interest above 5%, investors will want to monitor changes to know if short sellers turn up the warning signals. Otherwise, the current 5.7% of the float short is relatively small and not a major concern.

CenturyLink, Inc. (CTL)

Background: CenturyLink is a telecommunications company that provides broadband, voice and wireless services to consumers and businesses in the United States. The company trades an average of 5.8 million shares per day with a market cap of $25.9 billion.

Book Value: $33.22 Yield: 6.89%

CenturyLink is a unique one. The earnings are not expected to keep up with the large current dividend. I include CenturyLink as a stock example that looks good on many facets, but also is a possible yield trap. Insiders and Institutions are selling in the last six months, and the dividend is higher than the expected earnings this year and next.

The company appears to have a bright future and they are making money, just maybe not enough money. The large debt relative to cash indicates the company may have a challenge to maintain the dividend. If the Board cuts the dividend, the shares will likely take a large hit.

From a technical perspective, the widely followed 50-day moving average above the slower moving 200-day moving average is bullish. With the high made recently, the chart moves from the bottom left to the upper right, and investors can't ask for much more than that.

CTL Payout Ratio TTM Chart CTL Payout Ratio TTM data by YCharts

Or maybe it can. Over the last five years, the dividend has grown 63.3% per year. The company currently pays $2.90 in dividends for a yield of 6.89%. At the same time, if growth in earnings doesn't surpass analysts' estimates a dividend cut is a real possibility.

The mean fiscal year estimate price-to-earnings ratio is 17, based on earnings of $2.47 per share this year.

The company currently pays $2.90 in dividends for a yield of 6.9%. Examining the history of a company is a great way to understand what to expect moving forward, The average dividend in the last three years was $2.87. Over the last five years, the dividend has grown by an average of 63.3% per year.

The Southern Company (SO)

Background: Southern Energy acquires, develops, builds, owns and operates power production and delivery facilities and provides a broad range of energy-related services to utilities and industrial companies around the world. The company was founded in 1945 and is headquartered in Atlanta, Georgia. The Southern Company trades an average of 7.2 million shares per day with a market cap of $41.6 billion.

Yield: 4.09%

From a technical perspective, the chart on Southern looks strong. The widely followed 50-day moving average is trending nicely above the 200-day moving average and solidly bullish.

The mean fiscal year estimate price-to-earnings ratio is 18.2, based on earnings of $2.65 per share this year. Shares have moved higher in the last month, with a 3.6% improvement.

Investors are receiving $1.96 in dividends for a yield of 4.07%. Reviewing the last three years of dividends, the average yearly dividend declared was $1.80. Even more impressive than a 4% yield is the fact that, in the last five years, the dividend has grown an average of 4.1% per year.

Almost zero desire by short-sellers to short this stock. Short interest is a nonfactor at a rate of 1% of the float.

Seagate Technology (STX)

Background: Seagate is the worldwide leader in the design, manufacture and marketing of hard disc drives. The company was founded in 1979 and is headquartered in Dublin, Ireland. Seagate trades an average of 12 million shares per day with a market cap of $12.9 billion.

Yield: 4.23%

Right now, Seagate has seven buy recommendations out of 19 analysts covering the company. In the last month, the stock has really moved higher with a 19.5% increase. (See Seagate's Earnings Weren't That Bad.)

From a technical perspective, Seagate's chart looks just the way we want it. The 60- and 90-day moving averages are trending nicely above the 200-day average. Seagate is in a classic bull trend. Trend followers will likely hold a position as long as the chart pattern continues.

The mean fiscal year estimate price-to-earnings ratio is under 10, based on earnings of $7.87 per share this year. What this means is that the market isn't pricing in any growth despite Seagate's performance.

The average payment they have distributed to shareholders per year is 35 cents per share. Over the last five years, the dividend has grown by an average of 17.7% per year.

Short-sellers are reeling in pain. The current proportion sold short based on the float is 8.2%.

Seagate is one of my favorite picks right now. Seagate recently raised the dividend, which I rate as a very positive indication all is well. They are market leaders, and despite hard drive softness expected in the PC market, Seagate is focused on the higher margin enterprise subspace in storage.

Merck & Co. (MRK)

Background: Merck is a global pharmaceutical company. Merck discovers, develops, manufactures and markets vaccines and medicines. The company devotes extensive efforts to increase access to medicines through far-reaching programs that not only donate Merck medicines but help deliver them to the people who need them.

Merck also publishes unbiased health information as a not-for-profit service. The company was founded in 1891 and is headquartered in Whitehouse Station, N.J. Merck trades an average of 15.7 million shares per day with a market cap of $134.7 billion.

Yield: 3.79%

Overall, analysts like this company. Currently, two-thirds of analysts following Merck rate it as a buy or strong buy. While perhaps, not as meaningful, zero analysts rate it as a sell. Typically I like to see a yield of at least 4% as a starting point. Merck is an exception due to the other strong metrics.

TheStreet's Jim Cramer writes about Merck and a few others in Here Comes the End Game. (You need a Real Money Pro account to read, but Cramer's analysis makes it worthwhile.)

From a technical perspective, the chart on Merck looks great, especially if you already own it. The 60-day moving average (some use a 50-day) is above the 200-day moving average, which is bullish and the first thing I look for.

Merck is in a classic strong bullish trend. The widely followed 50- and 200-day 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.

The trailing 12-month price-to-earnings ratio is 11.2, the mean fiscal year estimate price-to-earnings ratio is 11.6, based on earnings of $3.81 per share this year.

This stock currently has an annualized dividend of $1.68, yielding 3.8%. Examining past dividend payments of a company is a great way to help understand what should be expected moving forward. In the last three years, the average total dividends paid per year were $1.53.

For the same fiscal period year over year, revenue has improved to $48.05 billion in fiscal 2011 compared to $45.99 billion in 2010. The bottom line has rising earnings year-over-year of $6.26 billion during fiscal 2011 compared to $859.00 million in 2010.

Short-sellers have almost zero interest in shorting this stock. Short interest hardly moves the needle at 1% of the float. MRK Revenue Chart MRK Revenue data by YCharts

I use Zacks.com, WSJ.com, Tradestation, and Reuters for my data. PE is generally adjusted PE based on an average number of shares.

At the time of publication the author did not hold a position in any stock mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

More from Opinion

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Trump Blinks on China Trade War That's Looking Harder to Win

Trump Blinks on China Trade War That's Looking Harder to Win

Monday Madness: GE, China, and Micron

Monday Madness: GE, China, and Micron

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

How Technology Will Unleash the Legal Marijuana Industry's Growth Potential

How Technology Will Unleash the Legal Marijuana Industry's Growth Potential