5 High-Yielding Companies in a Strong Bull Trend

NEW YORK ( TheStreet) -- Other than the Fountain of Youth, the most desired investor delight is to find high-yielding stocks in a strong bullish trend. Nothing lights up a portfolio statement like unrealized gains and received dividends.

Finding the right stocks with an attractive yield can at times challenge even the best of investors. The last thing anyone wants to do is invest in a stock that is about to lower its dividend. With careful research of industries, payout ratios, technical analysis and a lot of time reading SEC filings, you can move the odds more in your favor.

Or you can read through this short list of what I consider the "sweet spot" in dividends right now.

To make the cut, stocks must meet the following major considerations:
  • 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 high-yield guidance? This should be your starting point, not an end-all for your research.

Your best asset as an investor is the knowledge you have in the industry you work in. When choosing between equities, always pick the one in the industry you best understand. Sticking with what you know may be boring at times but, remember, when it comes to making money, profits are always exciting.

JNJ Earnings Per Share Growth Chart JNJ Earnings Per Share Growth data by YCharts

Johnson & Johnson (JNJ)

Background: Johnson & Johnson is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. The company's worldwide business is divided into three segments: consumer, pharmaceutical and professional. Johnson & Johnson trades an average of 9.1 million shares per day with a market cap of $186.2 billion.

52-Week Range: $60.83 to $69.75

Yield: 3.6%

I like J&J as a dividend holding or for capital appreciation. I like the brands J&J has along with the strong profits and dividend growth history.

J&J also is trading in what I consider a buying dip right now. After topping over $69 a share a couple of weeks ago, the shares are trading under $68. Just under $67 a share is technical support, so if you're willing to take a "wait and see" approach, placing a buy near $67 may turn into a bragging rights type of buy.

The stock has a lot of room to continue higher. The mean fiscal year estimate price-to-earnings ratio is 13.4, based on earnings of $5.06 per share this year. J&J pays $2.44 for a payout ratio under 50%. In a nutshell, the earnings multiple is letting you know the market isn't pricing in a premium for the company. Maybe their possible mistake is your gain because J&J's dividend has grown by an average of 9.1% per year.

Not everyone agrees that J&J is a good bet. The current proportion sold short based on the float is 6.8%. While not too extreme, the short interest is interestingly high for such a big and well-known company. So far the shorts have suffered a lot of pain. Their exit will help lift the stock price higher.

JNJ Dividend Yield Chart JNJ Dividend Yield data by YCharts

PG Earnings Per Share Growth Chart PG Earnings Per Share Growth data by YCharts

Procter & Gamble (PG)

Background: Procter & Gamble manufactures and markets a broad range of consumer products in many countries throughout the world. Products fall into five business segments: fabric and home care, paper, beauty care, health care, and food and beverage. Today, P&G markets more than 250 products to more than 5 billion consumers in 130 countries. P&G trades an average of 9.8 million shares per day with a market cap of $183.6 billion.

52-Week Range: $59.07 to $67.95

Yield: 3.36%

After a significant dip in price, which brought its moving averages lower, PG has shown resiliency as it bounces back. The low price on the chart during June coincided with a Tom DeMark TDCombo 13 market timing indication of a bottom.

Even after accounting for the early summer drop in price, P&G has appreciated more than 10% in the last year, and the average analyst target price for PG is $68.85.

The market is pricing in a higher-than-average growth premium for P&G but still well within reasonable levels. I generally start to shy away from earnings multiples above 20. However, at 17.2, potential investors don't have to feel they are about to become bagholders.

Shareholders receive $2.25 annually in dividend payments, making the yield very attractive at 3.36%. Over the last five years, the dividend has grown by an average of 10.8% per year. The dividend growth rate surely makes P&G attractive as a long-term core holding.

How about the short interest? Short-sellers are not interested in betting against this one. Short interest is a nonfactor at a rate of 0.7% of the float.

PG Dividend Yield Chart PG Dividend Yield data by YCharts

T Earnings Per Share Growth Chart T Earnings Per Share Growth data by YCharts

AT&T (T)

Background: AT&T is a premier communications holding company. Its subsidiaries and affiliates, AT&T operating companies, are the providers of AT&T services in the U.S. and around the world. AT&T trades an average of 20 million shares per day with a market cap of $217.9 billion.

52-Week Range: $27.29 to $38.28

Yield: 4.74%

Overall, I like the stock AT&T even if I don't care for the company much. I don't let my personal opinion impact upon my investing choices unless I believe it demonstrates a companywide problem. The market I live in provides basically one choice for phone service and two for Internet.

As a result of a near-monopoly and low population density, AT&T has enjoyed a "take it or leave it" approach with customer service. It's better than when I was a kid, but not by much.

At least the chart has great customer service written all over it. The moving averages are trending higher, and Ma Bell is in a strong bull trend. In recent days the price has come in a small amount setting up a buying dip. Based on analyst estimates for earnings of $2.40 per share this year, the price-to-earnings ratio is 15.5.

This stock currently has an annualized dividend of $1.76. Over the last five years, the dividend has grown by an average of 5.3% per year.

Short-sellers are next to impossible to find. Short interest is very low; I only include it to demonstrate that smart money is not betting against this company. One percent of the float is short based on the last reported numbers.

T Dividend Yield Chart T Dividend Yield data by YCharts

GE Earnings Per Share Growth Chart GE Earnings Per Share Growth data by YCharts

General Electric (GE)

Background: General Electric is one of the largest and most diversified industrial corporations in the world. GE is engaged in developing, manufacturing and marketing a wide variety of products for the generation, transmission, distribution, control and utilization of electricity. GE trades an average of 31.1 million shares per day with a market cap of $222.3 billion.

52-Week Range: $14.02 to $21.19

Yield: 3.24%

GE's moving averages are moving from the bottom left to the upper right, and that's about all one can ask for. It's a nice, steady climb, void of emotion and hysteria. After a rough couple of years during the financial crisis, GE is back and even GE Capital is firing on all cylinders. I like GE a lot and used to own it as a core dividend holding. I expect I will again soon.

The mean fiscal year estimate price-to-earnings ratio is 13.5, based on earnings of $1.55 per share this year. Basically there is zero growth priced in, and while GE may tread water until the global economy recovers, at least you're not paying a premium to wait.

The company currently pays 68 cents per share in dividends and averaged 56 cents per share a year over the last three years.

Short-sellers are not interested in betting against this one. Short interest is a nonfactor at a rate of 0.8% of the float.

GE Dividend Yield Chart GE Dividend Yield data by YCharts

MRK Earnings Per Share Growth Chart MRK Earnings Per Share Growth data by YCharts

Merck (MRK)

Background: Merck is a global research-driven pharmaceutical company. The company was founded in 1891 and is headquartered in Whitehouse Station, N.J. Merck trades an average of 9.1 million shares per day with a market cap of $131.8 billion.

52-Week Range: $30.54 to $45.17

Yield: 3.88%

Merck makes the list because the numbers and the chart qualify it for inclusion. Merck is the only one here that I wouldn't purchase at this time. Obamacare is clearly going to be an unmitigated nuclear meltdown of a disaster to the health-care industry, employment and the economy.

It's not just Obamacare, but what changes will likely happen after everyone figures out it has the same impact as Medicare without the Ponzi scheme of lots of workers paying for a few users (up to about now anyway).

Big changes in coverage and or much higher taxes will need to happen to keep the program afloat. Don't expect it to take long for the market (probably longer for Washington) to figure out there is no Santa handing out free health care. It's too bad, too, as Merck would be a top pick for me otherwise.

The market isn't pricing in any growth for Merck either. The price-to-earnings ratio is 11.4, based on estimated earnings of $3.81 per share this year. Shareholders receive $1.68 annually in dividend payments. Over the last five years, the dividend has grown by an average of 0.5% per year.

Unsurprisingly at this price, short-sellers are not interested in betting against this one. Short interest is a nonfactor at a rate of 0.9% of the float. Merck is a cash cow selling at a low earnings multiple I would not want to short it either. Just keep in mind there is a reason why the earnings multiple is the lowest one listed here.

MRK Dividend Yield Chart MRK Dividend Yield 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 does not hold a position in any stock mentioned.

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

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