Buy-Rated High Yield Stocks

NEW YORK (TheStreet) -- Many investors find buying stocks while the market is near all-time highs daunting to say the least. Obvious bargains are harder to come by. However, we can use the momentum to our advantage. I don't suggest finding stocks that will continue higher is a task to be taken lightly, but with the right approach, and well thought out risk control, outsized profit potential is available for those able to see through the fog and move forward.

Most would also agree that finding the time to scan and filter thousands of stocks to discover investments worth your attention is far from easy. There's a fine line between hero and zero; a line we all desperately want to stay on the correct side of.

I try to make your search easier by researching companies that I want to own in my longer term accounts. Historically, dividend paying stocks outperform nondividend payers, so that's where my focus is.

Companies cited in my last article highlighting rising dividend stars performed well. Of course, a rising tide lifts all boats, and so I am careful about how comfortable I should be. Here are the highlights on the returns, not including dividend payments:

Using the closing price on the day of the article and the closing price Monday, we can review the results:
  • AT&T (T) up 5.26%
  • Johnson & Johnson (JNJ) up 14.75%
  • U.S. Bancorp (USB) up 3.25%
  • Seagate (STX) up 16.65%

For about three months' time, the results are definitely acceptable. I need to emphasize that the overall market was higher and by comparison, the SPDR S&P 500 ( SPY) was up 6.91%. It's not a true apples-to-apples comparison, because the dividend yield from the above stocks is higher than the average of the S&P 500, but we can see they outperformed the major benchmark index.

I remain bullish on Johnson & Johnson, but the chart is telling me it's time to take some off the table. I don't know that JNJ won't go higher, and indeed, often the biggest move is the last move; however, trees don't grow into the sky and stocks don't go straight up for long.

The odds are in your favor if you either take some gains or hedge your position and sell in the money calls against some of your shares.

Here is my new list of stocks that are high yielding and rising dividend payers. The truth is, any dividend paying stock is almost a high yielding stock compared to allowing your money to sit in cash, but these are what I consider the cream of the crop at this time. AMAT Dividend Yield Chart AMAT Dividend Yield data by YCharts

Applied Materials

Background: Applied Materials provides equipment, services and software to the semiconductor, flat panel display, solar photovoltaic and related industries worldwide. The company's Silicon Systems Group segment makes equipment to fabricate semiconductor chips or integrated circuits.

52 Week Range: $9.95 to $13.99

Book Value: $5.95

Price To Book: 2.3

Earnings Payout Percentage: 75%

Applied Materials currently has an annualized dividend of 40 cents, yielding 3%. The payout rate is higher than I would normally allow, but next year's average earnings estimate of $1.06 brings the payout rate less than 40%. I consider a payout rate under 50% forward earnings to be relatively safe.

While I am bullish, analyst opinion is mixed. Most of the analysts surveyed don't believe a buy or a sell is currently warranted. Today, Applied Materials has seven buy recommendations out of 17 analysts covering the company, eight holds, and two recommend selling. The stock appreciated 8% in the last year, and the average analyst target price is $14.38.

Short sellers are not excited about the prospect of a price fall. The last reported short interest is only 1.3% of the average trading float.

Blackstone ( BX)

Background: The Blackstone Group provides alternative asset management and financial advisory services worldwide. Founded in 1985, it is headquartered in New York.

52 Week Range: $11.13 to $21.09

Book Value: $9.83

Earnings Payout Percentage: 3%

Blackstone pays 72 cents annually in dividend payments. The yield based on a recent price is 8.5%.

Shares are modestly higher from a month ago and are near support on the weekly chart. Blackstone is making news with a possible control of Multi-Corp ( MULI) after buying more than half of Muli's corporate debt. This could give Blackstone additional exposure in Europe. BX Dividend Yield Chart BX Dividend Yield data by YCharts

Blackstone reportedly paid a significant discount for the debt that may soon fall in default after Multi advised lenders that they would miss interest payments.

Blackstone has made even greater news with proposals to buy Dell ( DELL) in competition with Michael Dell and Silver Lake Management LLC's attempt to take Dell private.

From a technical analysis viewpoint, I want to see Blackstone pull in and give us a buying dip before entering. A price near or slightly less than $19 a share is where I would want to focus on adding Blackstone shares to your portfolio.

At the time of writing and from the latest short interest report, the short interest is minor and not a cause of distraction. The small amount of short interest is 2.6%. BX Payout Ratio TTM Chart BX Payout Ratio TTM data by YCharts
GE Dividend Yield Chart GE Dividend Yield data by YCharts

General Electric ( GE)

Background: General Electric is one of the largest and most diversified industrial corporations in the world. GE develops, makes and markets electricity generation, transmission, distribution, control and utilization products.

52 Week Range: $18.02 to $23.90

Book Value: $11.82

Earnings Payout Percentage: 2%

Investors are receiving 76 cents in dividends for a yield of 3.3%.

While not the worst it could have been for current investors, the shares still lost about 4% in the last month. I consider the recent drop in price to open up the window for new investors to come in and current investors to add. On the other hand, shares have really appreciated from a year ago, gaining 16%, and the average analyst target price is $25.53.

I have written many bullish articles about GE because it's a stock that continues to make my short list of stocks to buy and hold.

GE was an original Dow Industrials component more than a 100 years ago, I won't be the least bit surprised to find out it makes it another 100 years (hopefully we figure out how to extend our lives that long by then)

Almost zero desire by short sellers to move against this stock. Short interest hardly moves the needle with only 0.8% of the float. GE Payout Ratio TTM Chart GE Payout Ratio TTM data by YCharts

At the time of publication the author held no positions in any of the stocks mentioned.

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

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